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Cabot Oil (COG) Q1 Earnings Top, Revenues Miss, Dividend Up

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Cabot Oil & Gas Corporation’s fist-quarter 2021 net income per share — adjusted for special items — of 38 cents beat the Zacks Consensus Estimate of 35 cents as well as the year-ago quarter’s earnings of 14 cents. Better-than-expected results can be attributed to a year-over-year increase in realized natural gas prices and reined-in costs.

The company’s quarterly revenues of $459.68 million missed the Zacks Consensus Estimate of $487 million due to year-over-year decrease in the production volumes. However, the top line increased 19.1% from the prior-year sales of $386 million.

Production, Prices, Costs & Drilling Statistics

In the quarter under review, Cabot’s overall production summed 205.8Bcfe comprising 100% natural gas. The figure dropped 4.3% from the prior-year volume of 215Bcfe. 

Average realized natural gas price (excluding hedges) rose to $2.30 per thousand cubic feet from the year-ago quarter’s $1.72.

Total operating expenses were $284.3 million, down 5.25% from the figure reported in first-quarter 2020. The depreciation and amortization costs fell 6% year over year to $94.15 million.

Notably, total average unit costs decreased to $1.44 per thousand cubic feet equivalent (Mcfe) from the year-ago figure of $1.46.

Cabot drilled 28 wells and completed 14 wells during the quarter.

Cabot Oil & Gas Corporation Price, Consensus and EPS Surprise

Cabot Oil & Gas Corporation Price, Consensus and EPS Surprise

Cabot Oil & Gas Corporation price-consensus-eps-surprise-chart | Cabot Oil & Gas Corporation Quote

Financial Position

Operating cash flows were $290.5 million (up 41.8% year over year) while capital expenditures totaled $123.6 million (down 16.9%). As of Mar 31, 2021, the company had cash and cash equivalents worth $173.7 million and total debt of $946.1 million with debt-to-capitalization of 29.1%.

Management also informed that the board of directors approved a hike in quarterly dividend payment. The new dividend of 11 cents is upped 10% from the prior dividend of 10 cents, payable May 27, 2021 to all its shareholders of record as of May 13, 2021. This hike marks Cabot's sixth dividend increase since May 2017.

In the last reported quarter, the company announced its updated capital return framework, which involves the enforcement of a "base plus supplemental" dividend approach. Based on this, Cabot intends to continue funding its regular quarterly base dividend on the company's common stock and supplement the same with annual supplemental cash dividends to attain its minimum capital return target of 50% of its annual free cash flow.

Notably, any extra free cash flow generated above the minimum capital return target will be availed to strengthen the company’s balance sheet, additional supplemental dividends or opportunistic share repurchases, subject to market conditions.

Guidance

For the second quarter of 2021, Cabot projects its net production outlook in the range of 2,225-2,275 million cubic feet equivalent a day (Mmcfe).

For 2021, this Houston-based company reiterates its production guidance of 2,350 Mmcfe per day from an expected capital program of $530-$540 million. 

Zacks Rank & Key Picks

Cabot currently carries a Zacks Rank #5 (Strong Sell).

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