Quarterly / Earnings Reports | Second Quarter (2Q) Update | Financial Results | Capital Markets | Capital Expenditure | Drilling Activity

Cabot Oil & Gas Second Quarter 2021 Results

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Cabot Oil & Gas Corp. reported financial and operating results for the second quarter of 2021.

Q2 2021 Highlights:

• Net income of $30.5 million (or $0.08 per share); adjusted net income (non-GAAP) of $105.5 million (or $0.26 per share)
• EBITDAX (non-GAAP) of $245.1 million
• Net cash provided by operating activities of $178.9 million; discretionary cash flow (non-GAAP) of $215.4 million; free cash flow (non-GAAP) of $64.1 million
• Return on capital employed (ROCE) (non-GAAP) for the trailing 12 months of 13.0 percent
• Net debt to trailing 12 months EBITDAX ratio (non-GAAP) of 0.9x; net debt to adjusted capitalization ratio (non-GAAP) of 27.9 percent
• Announced transformational merger with Cimarex Energy Co. ("Cimarex"), creating a premier, diversified, free cash flow-focused energy company

Financial Results

Second quarter 2021 daily production was 2,205 million cubic feet equivalent (Mmcfe) per day (100 percent natural gas). Production for the second quarter of 2021 was one percent below the production guidance range due to longer than anticipated maintenance downtime at a third-party compressor station and modest operational delays during the quarter that pushed the timing of certain wells brought on production to later in the second quarter and into the first part of the third quarter of 2021. During the second quarter of 2021, the Company drilled 28.0 net wells, completed 24.1 net wells, and placed 22.1 net wells on production.

Second quarter 2021 net income was $30.5 million, or $0.08 per share, compared to $30.4 million, or $0.08 per share, in the prior-year period. Second quarter 2021 adjusted net income (non-GAAP) was $105.5 million, or $0.26 per share, compared to $18.0 million, or $0.05 per share, in the prior-year period. Second quarter 2021 EBITDAX (non-GAAP) was $245.1 million, compared to $136.9 million in the prior-year period.

Second quarter 2021 net cash provided by operating activities was $178.9 million, compared to $136.4 million in the prior-year period. Second quarter 2021 discretionary cash flow (non-GAAP) was $215.4 million, compared to $119.2 million in the prior-year period. Second quarter 2021 free cash flow (non-GAAP) was $64.1 million, compared to ($63.3) million in the prior-year period.

Second quarter 2021 natural gas price realizations, including the impact of derivatives, were $2.05 per thousand cubic feet (Mcf), an increase of 35 percent compared to the prior-year period. Excluding the impact of derivatives, second quarter 2021 natural gas price realizations represented a $0.78 discount to NYMEX settlement prices compared to a $0.30 discount in the prior-year period. The increase in corporate differentials in the second quarter of 2021 was primarily due to the impact of higher NYMEX prices relative to the Company's fixed-price sales agreements and, to a lesser extent, wider in-basin differentials resulting from transitory pipeline maintenance projects and outages across the Appalachian Basin during the quarter.

Second quarter 2021 operating expenses (including interest expense) decreased to $1.41 per thousand cubic feet equivalent (Mcfe), a two percent improvement compared to the prior-year period. Excluding $6.2 million of merger-related costs during the second quarter of 2021, operating expenses per Mcfe improved by four percent compared to the prior-year period.

Cabot incurred a total of $166.0 million of capital expenditures in the second quarter of 2021, including $161.2 million of drilling and facilities capital, $1.8 million of leasehold acquisition capital, and $3.0 million of other capital. Capital expenditures for the second quarter were in line with the Company's prior guidance for higher activity levels during the quarter, in which Cabot drilled five more wells and completed 121 more stages than forecasted as a result of continued efficiency gains in its operations. See the supplemental table at the end of this press release reconciling the capital expenditures during the second quarter of 2021.

Year-to-Date 2021 Financial Results

Daily equivalent production for the six-month period ended June 30, 2021 was 2,245 Mmcfe per day (100 percent natural gas). During the six-month period ended June 30, 2021, the Company drilled 53.1 net wells, completed 37.1 net wells, and placed 43.1 net wells on production.

Natural gas price realizations, including the impact of derivatives, were $2.18 per Mcf for the six-month period ended June 30, 2021, an increase of 35 percent compared to the prior-year period. For the six-month period ended June 30, 2021, operating expenses (including interest expense) decreased to $1.43 per Mcfe, a one percent improvement compared to the prior-year period.

For the six-month period ended June 30, 2021, net income was $156.8 million, or $0.39 per share, compared to $84.3 million, or $0.21 per share, in the prior-year period. Adjusted net income (non-GAAP) for the six-month period ended June 30, 2021 was $255.4 million, or $0.64 per share, compared to $72.0 million, or $0.18 per share, in the prior-year period. EBITDAX (non-GAAP) for the six-month period ended June 30, 2021 was $545.5 million, compared to $325.8 million in the prior-year period.

For the six-month period ended June 30, 2021, net cash provided by operating activities was $469.5 million, compared to $341.3 million in the prior-year period. Discretionary cash flow (non-GAAP) for the six-month period ended June 30, 2021 was $476.7 million, compared to $317.7 million in the prior-year period. Free cash flow (non-GAAP) for the six-month period ended June 30, 2021 was $201.7 million, compared to ($13.5) million in the prior-year period.

Cabot incurred a total of $290.1 million of capital expenditures during the six-month period ended June 30, 2021, including $284.2 million of drilling and facilities capital, $2.4 million of leasehold acquisition capital, and $3.4 million of other capital.

Financial Position and Liquidity

As of June 30, 2021, Cabot had total debt of $1.0 billion and cash on hand of $158.1 million. The Company's net debt to adjusted capitalization ratio (non-GAAP) and net debt to trailing 12 months EBITDAX ratio (non-GAAP) were 27.9 percent and 0.9x, respectively, compared to 31.0 percent and 1.4x as of December 31, 2020.

Cabot plans to repay its $100.0 million tranche of 3.24% senior notes that mature in September 2021.

Standalone Q3 and Full-Year 2021 Guidance

Cabot today reaffirmed its standalone guidance for 2021. The Company's standalone operating plan for the year is expected to deliver an average net production rate of 2,350 Mmcfe per day from a capital program of $530 to $540 million. Cabot has also provided its standalone third quarter 2021 production guidance range of 2,275 to 2,325 Mmcfe per day.