COG
$18.81
Cabot Oil & Gas
$.16
.86%
Earnings Details
2nd Quarter June 2019
Friday, July 26, 2019 6:30:00 AM
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Summary

Cabot Oil & Gas Reports In-line

Cabot Oil & Gas (COG) reported 2nd Quarter June 2019 earnings of $0.35 per share on revenue of $534.1 million. The consensus earnings estimate was $0.31 per share on revenue of $499.7 million. The Earnings Whisper number was $0.35 per share. Revenue grew 17.8% on a year-over-year basis.

Cabot Oil & Gas Corp is an independent oil and gas company engaged in the development and exploration of oil and gas properties located in North America.

Results
Reported Earnings
$0.35
Earnings Whisper
$0.35
Consensus Estimate
$0.31
Reported Revenue
$534.1 Mil
Revenue Estimate
$499.7 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Cabot Oil & Gas Corporation Reports Second Quarter 2019 Results, Expands Share Repurchase Program Authorization

HOUSTON, July 26, 2019 /PRNewswire/ -- Cabot Oil & Gas Corporation (NYSE: COG) ("Cabot" or the "Company") today reported financial and operating results for the second quarter of 2019.

"During the quarter, Cabot successfully executed on its strategic plan of delivering a combination of positive free cash flow generation, improved return on capital employed, and disciplined growth in per share metrics, while continuing to return capital to shareholders through a combination of dividends and opportunistic share repurchases," stated Dan O. Dinges, Chairman, President and Chief Executive Officer. "Our success for the quarter was achieved despite NYMEX natural gas prices retreating to the lowest levels the industry has experienced since the second quarter of 2016, further highlighting Cabot's ability to deliver strong financial results throughout the natural gas price cycle."

Second Quarter 2019 Highlights

  • Net income of $181.0 million (or $0.43 per share); adjusted net income (non-GAAP) of $150.6 million (or $0.36 per share)
  • Net cash provided by operating activities of $326.7 million; discretionary cash flow (non-GAAP) of $301.9 million
  • Free cash flow (non-GAAP) of $72.7 million
  • Return on capital employed (ROCE) (non-GAAP) for the trailing twelve months of 23.5 percent
  • Returned $163.4 million of capital to shareholders through dividends and share repurchases
  • Daily equivalent production of 2,349 million cubic feet equivalent (Mmcfe) per day, an increase of 24 percent relative to the prior-year period
  • Improved operating expenses per unit to $1.41 per thousand cubic feet equivalent (Mcfe), a 24 percent reduction relative to the prior-year period

See the supplemental tables at the end of this press release for a reconciliation of non-GAAP measures including adjusted net income, discretionary cash flow, EBITDAX, free cash flow, net debt to adjusted capitalization ratio, and ROCE.

Second Quarter 2019 Financial Results

Second quarter 2019 daily equivalent production was 2,349 Mmcfe per day (100 percent natural gas), meeting the high-end of the Company's guidance range and representing a 24 percent increase relative to the second quarter of 2018.

Second quarter 2019 net income was $181.0 million, or $0.43 per share, compared to net income of $42.4 million, or $0.09 per share, in the prior-year period. Second quarter 2019 adjusted net income (non-GAAP) was $150.6 million, or $0.36 per share, compared to adjusted net income of $57.9 million, or $0.13 per share, in the prior-year period. Second quarter 2019 EBITDAX (non-GAAP) was $311.1 million, compared to $232.1 million in the prior-year period.

Second quarter 2019 net cash provided by operating activities was $326.7 million, compared to $273.9 million in the prior-year period. Second quarter 2019 discretionary cash flow (non-GAAP) was $301.9 million, compared to $196.5 million in the prior-year period. Second quarter 2019 free cash flow (non-GAAP) was $72.7 million, compared to a free cash flow deficit of $62.0 million in the prior-year period.

Second quarter 2019 natural gas price realizations, including the impact of derivatives, were $2.27 per thousand cubic feet (Mcf), an increase of six percent compared to the prior-year period. Excluding the impact of derivatives, second quarter 2019 natural gas price realizations were $2.20 per Mcf, representing a $0.44 discount to NYMEX settlement prices compared to a $0.68 discount in the prior-year period.

Second quarter 2019 operating expenses (including financing) decreased to $1.41 per Mcfe, a 24 percent improvement compared to the prior-year period. The decrease in operating expenses per unit was primarily driven by a reduction in exploration expenses, in addition to improvements in direct operations; taxes other than income; depreciation, depletion, and amortization; general and administrative; and interest expense.

Cabot incurred a total of $220.4 million of capital expenditures in the second quarter of 2019 including $213.1 million of drilling and facilities capital, $2.6 million of leasehold acquisition capital, and $4.7 million of other capital. Additionally, the Company contributed $3.3 million to its equity method pipeline investments. See the supplemental table at the end of this press release reconciling the capital expenditures during the second quarter of 2019.

Year-To-Date 2019 Financial Results

Daily equivalent production for the six-month period ended June 30, 2019 was 2,313 Mmcfe per day (100 percent natural gas), representing a 22 percent increase relative to the prior-year period.

For the six-month period ended June 30, 2019, net income was $443.8 million, or $1.05 per share, compared to net income of $159.7 million, or $0.35 per share, for the prior-year period. Adjusted net income (non-GAAP) was $458.4 million, or $1.08 per share, compared to adjusted net income of $186.4 million, or $0.41 per share, for the prior-year period. EBITDAX (non-GAAP) for the six-month period ended June 30, 2019 was $824.7 million, compared to $510.7 million for the prior-year period.

For the six-month period ended June 30, 2019, net cash provided by operating activities was $911.9 million, compared to $546.7 million for the prior-year period. Discretionary cash flow (non-GAAP) for the six-month period ended June 30, 2019 was $807.7 million, compared to $476.8 million for the prior-year period. Free cash flow (non-GAAP) was $381.1 million for the six-month period ended June 30, 2019, compared to $26.6 million for the prior-year period. ROCE (non-GAAP) improved to 23.5 percent for the trailing twelve months ended June 30, 2019, compared to 8.5 percent for the trailing twelve months ended June 30, 2018.

Natural gas price realizations, including the impact of derivatives, were $2.80 per Mcf for the six-month period ended June 30, 2019, an increase of 22 percent compared to the prior-year period. 

For the six-month period ended June 30, 2019, operating expenses (including financing) decreased to $1.45 per Mcfe, a 16 percent improvement compared to the prior-year period. The decrease in operating expenses per unit was primarily driven by a reduction in exploration expenses, in addition to improvements in direct operations; taxes other than income; depreciation, depletion, and amortization; general and administrative; and interest expense.

Cabot incurred a total of $424.7 million of capital expenditures during the six-month period ended June 30, 2019 including $415.4 million of drilling and facilities capital; $3.3 million of leasehold acquisition capital; and $6.0 million of other capital. Additionally, the Company contributed $5.1 million to its equity method pipeline investments during the six-month period ended June 30, 2019.  See the supplemental table at the end of this press release reconciling the capital expenditures during the six-month period ended June 30, 2019.

Share Repurchase Program Update

During the second quarter of 2019, Cabot repurchased 5.1 million shares at a weighted-average share price of $24.63. Since reactivating the share repurchase program in the second quarter of 2017, Cabot has reduced its shares outstanding by over 10 percent to 418.4 million shares.

Additionally, the Board of Directors has authorized an increase in the Company's share repurchase program by 25.0 million shares, bringing the current remaining authorization to 31.5 million shares (or approximately eight percent of its current shares outstanding). All purchases will be made in accordance with applicable securities laws from time to time in open market or private transactions, depending on market conditions, and may be discontinued at any time. "Cabot remains committed to returning a minimum of 50 percent of its annual free cash flow to shareholders in any given year, while also preserving cash on the balance sheet to support continued opportunistic returns of capital, even in the lows of the natural gas price cycle," noted Dinges. "Our outlook for continued positive free cash flow generation provides us confidence that we will remain an industry leader in returning capital to shareholders."

Financial Position and Liquidity

As of June 30, 2019, Cabot had total debt of $1.2 billion and cash on hand of $241.4 million. The Company's net debt-to-adjusted capitalization ratio and net debt-to-trailing twelve months EBITDAX ratio were 29.4 percent and 0.6x, respectively, compared to 37.0 percent and 1.0x as of December 31, 2018.  The Company currently has no debt outstanding under its credit facility, resulting in over $1.7 billion of liquidity.

Third Quarter and Full-Year 2019 Guidance Update

Cabot has provided its third quarter 2019 production guidance range of 2,360 to 2,410 Mmcfe per day. The Company has also adjusted its 2019 production growth guidance to a range of 16 to 18 percent (24 to 26 percent on a debt-adjusted per share basis) due in large part to a change in the operating plan resulting from a unique opportunity to acquire acreage adjacent to an eight-well pad, allowing the Company to increase the total lateral footage on the pad by approximately 28,000 feet (increasing the average lateral length per well from 8,950 feet to 12,450 feet). "This increase in lateral lengths will improve the capital efficiency and economics of the pad; however, the longer cycle time will result in a delay in the wells being placed on production, pushing out the production contribution from this pad to late December or early January," said Dinges.

Cabot has updated its 2019 capital budget to a range of $800 million to $820 million to reflect the incremental drilling and completion activity on the previously referenced eight-well pad and an increase in drilling activity for the year by four net wells resulting from continued efficiency gains on the Company's three fully-contracted drilling rigs.

Additionally, the Company has updated its NYMEX price assumption range for 2019 to reflect a tighter band of expected outcomes resulting from seven months of actual NYMEX settlements year-to-date. The Company has provided updated guidance on its estimated key financial metrics based on this NYMEX price assumption range in the table below.

Estimated 2019 Key Financial Metrics (1)


$2.60 NYMEX


$2.70 NYMEX


$2.80 NYMEX

Adjusted Earnings Per Share Growth (%)


38% - 42%


45% - 49%


52% - 56%

Free Cash Flow ($mm)


$500 - $525


$550 - $575


$600 - $625

Return on Capital Employed (%)


20% - 22%


21% - 23%


22% - 24%


(1) Includes the impact of derivative instruments

For further disclosure on Cabot's expected third quarter 2019 natural gas pricing exposure by index and cost guidance, please see the current Guidance slide in the Investor Relations section of the Company's website.

Preliminary Full-Year 2020 Guidance

Cabot has provided its preliminary 2020 production growth guidance of five percent (seven to eight percent on a debt-adjusted per share basis). This production growth is based on a preliminary capital budget range of $700 million to $725 million. The Company's 2020 program is expected to deliver $375 million to $400 million of free cash flow at a $2.50 NYMEX price and $525 million to $550 million of free cash flow at a $2.75 NYMEX price. "Based on our current outlook for the natural gas market, we believe a strategy that focuses on maximizing free cash flow generation through a reduction in capital spending and production growth will create the most value for our shareholders," explained Dinges. "This strategy, which is underpinned by disciplined capital allocation, will allow the Company to sustainably deliver a combination of free cash flow generation, high return on capital employed, consistent return of capital to shareholders, low leverage, and growth in production and reserves per share."

Conference Call Webcast

A conference call is scheduled for Friday, July 26, 2019, at 9:30 a.m. Eastern Time to discuss second quarter 2019 financial and operating results. To access the live audio webcast, please visit the Investor Relations section of the Company's website. A replay of the call will also be available on the Company's website.

Cabot Oil & Gas Corporation, headquartered in Houston, Texas, is a leading independent natural gas producer with its entire resource base located in the continental United States. For additional information, visit the Company's website at www.cabotog.com.

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The statements regarding future financial and operating performance and results, returns to shareholders, strategic pursuits and goals, market prices, future hedging and risk management activities, and other statements that are not historical facts contained in this report are forward-looking statements. The words "expect", "project", "estimate", "believe", "anticipate", "intend", "budget", "plan", "forecast", "outlook", "predict", "may", "should", "could", "will" and similar expressions are also intended to identify forward-looking statements. Such statements involve risks and uncertainties, including, but not limited to, market factors, market prices (including geographic basis differentials) of natural gas and crude oil, results of future drilling and marketing activity, future production and costs, legislative and regulatory initiatives, electronic, cyber or physical security breaches and other factors detailed herein and in our other Securities and Exchange Commission (SEC) filings. See "Risk Factors" in Item 1A of the Form 10-K and subsequent public filings for additional information about these risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated.  Any forward-looking statement speaks only as of the date on which such statement is made, and the Company does not undertake any obligation to correct or update any forward-looking statement, whether as the result of new information, future events or otherwise, except as required by applicable law.

FOR MORE INFORMATION CONTACT
Matt Kerin (281) 589-4642

OPERATING DATA



Quarter Ended
June 30,


Six Months Ended
June 30,


2019


2018


2019


2018

PRODUCTION VOLUMES








Natural gas (Bcf)

213.8



172.4



418.6



337.0


Crude oil and condensate (Mbbl)







754.0


Natural gas liquids (NGLs) (Mbbl)







75.1


Equivalent production (Bcfe)

213.8



172.4



418.6



342.0


Daily equivalent production (Mmcfe/day)

2,349



1,895



2,313



1,890










AVERAGE SALES PRICE








Natural gas, including hedges ($/Mcf)

$

2.27



$

2.15



$

2.80



$

2.29


Natural gas, excluding hedges ($/Mcf)

$

2.20



$

2.11



$

2.64



$

2.30


Crude oil and condensate, including hedges ($/Bbl)

$



$



$



$

63.68


Crude oil and condensate, excluding hedges ($/Bbl)

$



$



$



$

64.68


NGL ($/Bbl)

$



$



$



$

21.49










AVERAGE UNIT COSTS ($/Mcfe)








Direct operations

$

0.08



$

0.09



$

0.09



$

0.10


Transportation and gathering

0.66



0.66



0.67



0.66


Taxes other than income

0.02



0.03



0.02



0.04


Exploration

0.02



0.32



0.03



0.17


Depreciation, depletion and amortization

0.45



0.49



0.45



0.49


General and administrative (excluding stock-based compensation)

0.08



0.09



0.08



0.10


Stock-based compensation

0.03



0.03



0.05



0.03


Interest expense

0.07



0.14



0.06



0.13



$

1.41



$

1.85



$

1.45



$

1.72


















WELLS DRILLED (1)








Gross

24



24



49



39


Net

24.0



24.0



49.0



39.0










WELLS COMPLETED (1)








Gross

28



23



42



34


Net

28.0



23.0



42.0



34.0















(1)

Wells drilled represents wells drilled to total depth during the period. Wells completed includes wells completed during the period, regardless of when they were drilled.

 

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)



Quarter Ended
June 30,


Six Months Ended
June 30,

(In thousands, except per share amounts)

2019


2018


2019


2018

OPERATING REVENUES








   Natural gas

$

470,482



$

364,660



$

1,103,656



$

776,768


   Crude oil and condensate







48,722


   Gain (loss) on derivative instruments

63,649



(3,668)



71,906



1,909


   Brokered natural gas



92,576





97,526


   Other

(14)



(121)



236



1,749



534,117



453,447



1,175,798



926,674


OPERATING EXPENSES








Direct operations

18,093



15,657



36,427



35,727


Transportation and gathering

141,689



114,189



279,022



226,314


Brokered natural gas



80,082





85,032


Taxes other than income

3,640



5,392



9,487



12,582


Exploration

4,504



54,500



10,548



58,117


Depreciation, depletion and amortization

96,147



84,910



188,405



167,038


General and administrative (excluding stock-based compensation)

16,168



15,533



32,126



34,146


Stock-based compensation(1)

6,721



5,695



21,853



11,142



286,962



375,958



577,868



630,098


Earnings (loss) on equity method investments

3,650



(4)



7,334



(998)


Gain (loss) on sale of assets



544



(1,500)



(40,505)


INCOME FROM OPERATIONS

250,805



78,029



603,764



255,073


Interest expense, net

14,567



23,328



26,748



43,386


Other expense

143



118



287



232


Income before income taxes

236,095



54,583



576,729



211,455


Income tax expense

55,086



12,152



132,957



51,793


NET INCOME

$

181,009



$

42,431



$

443,772



$

159,662


Earnings per share - Basic

$

0.43



$

0.09



$

1.05



$

0.35


Weighted-average common shares outstanding

422,141



451,055



422,626



455,361
















(1)

Includes the impact of our performance share awards and restricted stock.

 

CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)


(In thousands)

June 30,
2019


December 31,
2018

ASSETS




Current assets

$

631,330



$

544,545


Properties and equipment, net (Successful efforts method)

3,699,575



3,463,606


Other assets

232,824



190,678



$

4,563,729



$

4,198,829






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities

$

234,026



$

287,264


Long-term debt, net

1,219,555



1,226,104


Deferred income taxes

611,163



458,597


Other liabilities

154,181



138,705


Stockholders' equity

2,344,804



2,088,159



$

4,563,729



$

4,198,829


 

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)



Quarter Ended
June 30,


Six Months Ended
June 30,

(In thousands)

2019


2018


2019


2018

CASH FLOWS FROM OPERATING ACTIVITIES








  Net income

$

181,009



$

42,431



$

443,772



$

159,662


Deferred income tax expense

64,645



2,689



152,647



66,976


(Gain) loss on sale of assets



(544)



1,500



40,505


Exploratory dry hole cost

3



51,145



16



51,085


Gain on derivative instruments

(63,649)



3,668



(71,906)



(1,909)


Net cash received (paid) in settlement of derivative instruments

15,397



5,819



68,377



(20,312)


Income charges not requiring cash

104,477



91,289



213,343



180,790


Changes in assets and liabilities

24,768



77,403



104,188



69,863


Net cash provided by operating activities

326,650



273,900



911,937



546,660










CASH FLOWS FROM INVESTING ACTIVITIES








Capital expenditures

(225,850)



(231,014)



(421,500)



(387,271)


Proceeds from sale of assets



323



2,346



646,868


Investment in equity method investments

(3,303)



(27,487)



(5,131)



(62,905)


Distribution of investment from equity method investments

758





758




Net cash (used in) provided by investing activities

(228,395)



(258,178)



(423,527)



196,692










CASH FLOWS FROM FINANCING ACTIVITIES








Net borrowings (repayments) of debt





(7,000)




Treasury stock repurchases

(125,260)



(212,520)



(156,638)



(419,654)


Dividends paid

(38,092)



(27,071)



(67,697)



(54,718)


Tax withholdings on vesting of stock awards

(987)



(65)



(10,557)



(8,033)


Capitalized debt issuance costs

(7,411)





(7,411)




Net cash used in financing activities

(171,750)



(239,656)



(249,303)



(482,405)










Net (decrease) increase in cash and cash equivalents

$

(73,495)



$

(223,934)



$

239,107



$

260,947


Explanation and Reconciliation of Non-GAAP Financial Measures

We report our financial results in accordance with accounting principles generally accepted in the United States (GAAP). However, we believe certain non-GAAP performance measures may provide financial statement users with additional meaningful comparisons between current results, the results of our peers and of prior periods. In addition, we believe these measures are used by analysts and others in the valuation, rating and investment recommendations of companies within the oil and natural gas exploration and production industry. See the reconciliations throughout this release of GAAP financial measures to non-GAAP financial measures for the periods indicated.

We have also included herein certain forward-looking non-GAAP financial measures. Due to the forward-looking nature of these non-GAAP financial measures, we cannot reliably predict certain of the necessary components of the most directly comparable forward-looking GAAP measures, such as future impairments and future changes in capital. Accordingly, we are unable to present a quantitative reconciliation of such forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures. Reconciling items in future periods could be significant.

Reconciliation of Net Income to Adjusted Net Income and Adjusted Earnings Per Share

Adjusted Net Income and Adjusted Earnings per Share are presented based on our belief that these non-GAAP measures enable a user of the financial information to understand the impact of these items on reported results. Additionally, this presentation provides a beneficial comparison to similarly adjusted measurements of prior periods. Adjusted Net Income and Adjusted Earnings per Share are not measures of financial performance under GAAP and should not be considered as alternatives to net income and earnings per share, as defined by GAAP.


Quarter Ended
June 30,


Six Months Ended
June 30,

(In thousands, except per share amounts)

2019


2018


2019


2018

As reported - net income

$

181,009



$

42,431



$

443,772



$

159,662


Reversal of selected items:








(Gain) loss on sale of assets



(544)



1,500



40,505


(Gain) loss on derivative instruments(1)

(48,252)



9,487



(3,529)



(22,221)


Stock-based compensation expense

6,721



5,695



21,853



11,142


Severance expense

2,124



28



2,124



28


Interest expense related to income tax reserves



5,517



(3,052)



5,517


Tax effect on selected items

8,998



(4,751)



(4,315)



(8,232)


Adjusted net income

$

150,600



$

57,863



$

458,353



$

186,401


As reported - earnings per share

$

0.43



$

0.09



$

1.05



$

0.35


Per share impact of selected items

(0.07)



0.04



0.03



0.06


Adjusted earnings per share

$

0.36



$

0.13



$

1.08



$

0.41


Weighted-average common shares outstanding

422,141



451,055



422,626



455,361















(1)

This amount represents the non-cash mark-to-market changes of our commodity derivative instruments recorded in Gain (loss) on derivative instruments in the Condensed Consolidated Statement of Operations.

Return on Capital Employed

Return on Capital Employed (ROCE) is defined as adjusted net income (defined above) plus after-tax net interest expense divided by average capital employed, which is defined as total debt plus stockholders' equity. ROCE is presented based on our belief that this non-GAAP measure is useful information to investors when comparing our profitability and the efficiency with which we have employed capital over time relative to other companies. ROCE is not a measure of financial performance under GAAP and should not be considered an alternative to net income.



Twelve Months Ended June 30,

(In thousands)


2019


2018

Interest expense, net


$

56,563



$

84,127


Interest expense related to income tax reserves (1)


5,453



(5,517)


Tax benefit


(14,274)



(23,966)


After-tax interest expense, net (A)


47,742



54,644







As reported - net income


841,153



132,808


Adjustments to as reported - net income, net of tax


(38,088)



145,012


Adjusted net income (B)


803,065



277,820







Adjusted net income before interest expense, net (A + B)


$

850,807



$

332,464







Total debt - beginning of twelve month period


$

1,522,572



$

1,521,211


Stockholders' equity - beginning of twelve month period


2,154,174



2,642,031


Capital employed - beginning of twelve month period


3,676,746



4,163,242







Total debt - end of twelve month period


1,219,555



1,522,572


Stockholders' equity - end of twelve month period


2,344,804



2,154,174


Capital employed - end of twelve month period


3,564,359



3,676,746







Average capital employed (C)


$

3,620,553



$

3,919,994







Return on average capital employed (ROCE) (A+B) / C


23.5

%


8.5

%









(1)

Interest expense related to income tax reserves is included in the adjustments to as reported - net income, net of tax.

Discretionary Cash Flow and Free Cash Flow Calculation and Reconciliation

Discretionary Cash Flow is defined as net cash provided by operating activities excluding changes in assets and liabilities. Discretionary Cash Flow is widely accepted as a financial indicator of an oil and gas company's ability to generate cash which is used to internally fund exploration and development activities, pay dividends and service debt. Discretionary Cash Flow is presented based on our belief that this non-GAAP measure is useful information to investors when comparing our cash flows with the cash flows of other companies that use the full cost method of accounting for oil and gas producing activities or have different financing and capital structures or tax rates. Discretionary Cash Flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating activities, as defined by GAAP, or as a measure of liquidity, or an alternative to net income.

Free Cash Flow is defined as Discretionary Cash Flow (defined above) less capital expenditures and investment in equity method investments. Free Cash Flow is an indicator of a company's ability to generate cash flow after spending the money required to maintain or expand its asset base. Free Cash Flow is presented based on our belief that this non-GAAP measure is useful information to investors when comparing our cash flows with the cash flows of other companies. Free Cash Flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating activities, as defined by GAAP, or as a measure of liquidity, or an alternative to net income.



Quarter Ended
June 30,


Six Months Ended
June 30,

(In thousands)


2019


2018


2019


2018

Net cash provided by operating activities


$

326,650



$

273,900



$

911,937



$

546,660


Changes in assets and liabilities


(24,768)



(77,403)



(104,188)



(69,863)


Discretionary cash flow


301,882



196,497



807,749



476,797


Capital expenditures


(225,850)



(231,014)



(421,500)



(387,271)


Investment in equity method investments


(3,303)



(27,487)



(5,131)



(62,905)


Free cash flow


$

72,729



$

(62,004)



$

381,118



$

26,621


EBITDAX Calculation and Reconciliation

EBITDAX is defined as net income plus interest expense, other expense, income tax expense, depreciation, depletion and amortization (including impairments), exploration expense, gain and loss on sale of assets, non-cash gain and loss on derivative instruments, earnings and loss on equity method investments, cash distributions received from equity method investments, and stock-based compensation expense. EBITDAX is presented based on our belief that this non-GAAP measure is useful information to investors when evaluating our ability to internally fund exploration and development activities and to service or incur debt without regard to financial or capital structure. EBITDAX is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating activities or net income, as defined by GAAP, or as a measure of liquidity.


Quarter Ended
June 30,


Six Months Ended
June 30,

(In thousands)

2019


2018


2019


2018

Net income

$

181,009



$

42,431



$

443,772



$

159,662


Plus (less):








Interest expense, net

14,567



23,328



26,748



43,386


Other expense

143



118



287



232


Income tax expense

55,086



12,152



132,957



51,793


Depreciation, depletion and amortization

96,147



84,910



188,405



167,038


Exploration

4,504



54,500



10,548



58,117


(Gain) loss on sale of assets



(544)



1,500



40,505


Non-cash (gain) loss on derivative instruments

(48,252)



9,487



(3,529)



(22,221)


(Earnings) loss on equity method investments

(3,650)



4



(7,334)



998


Equity method investment distributions

4,779





9,508




Stock-based compensation

6,721



5,695



21,853



11,142


EBITDAX

$

311,054



$

232,081



$

824,715



$

510,652


Net Debt Reconciliation

The total debt to total capitalization ratio is calculated by dividing total debt by the sum of total debt and total stockholders' equity. This ratio is a measurement which is presented in our annual and interim filings and we believe this ratio is useful to investors in determining our leverage. Net Debt is calculated by subtracting cash and cash equivalents from total debt. Net Debt and the Net Debt to Adjusted Capitalization ratio are non-GAAP measures which we believe are also useful to investors since we have the ability to and may decide to use a portion of our cash and cash equivalents to retire debt. Additionally, as we may incur additional expenditures without increasing debt, it is appropriate to apply cash and cash equivalents to debt in calculating the Net Debt to Adjusted Capitalization ratio.

(In thousands)

June 30,
2019


December 31,
2018

Total debt

$

1,219,555



$

1,226,104


Stockholders' equity

2,344,804



2,088,159


Total capitalization

$

3,564,359



$

3,314,263






Total debt

$

1,219,555



$

1,226,104


Less: Cash and cash equivalents

(241,394)



(2,287)


Net debt

$

978,161



$

1,223,817






Net debt

$

978,161



$

1,223,817


Stockholders' equity

2,344,804



2,088,159


Total adjusted capitalization

$

3,322,965



$

3,311,976






Total debt to total capitalization ratio

34.2

%


37.0

%

Less: Impact of cash and cash equivalents

4.8

%


%

Net debt to adjusted capitalization ratio

29.4

%


37.0

%

 

Capital Expenditures




Quarter Ended
June 30,


Six Months Ended
June 30,

(In thousands)


2019


2018


2019


2018

Cash paid for capital expenditures


$

225,850



$

231,014



$

421,500



$

387,271


Change in accrued capital costs


(5,466)



(17,308)



3,168



(6,275)


Exploratory dry hole cost


(3)



(51,145)



(16)



(51,085)


Capital expenditures


$

220,381



$

162,561



$

424,652



$

329,911


 

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SOURCE Cabot Oil & Gas Corporation