SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
-----------
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
Commission file number 1-10447
CABOT OIL & GAS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-3072771
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
15375 Memorial Drive, Houston, Texas 77079
(Address of principal executive offices including Zip Code)
(281) 589-4600
(Registrant's telephone number)
No Change
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
As of April 30, 1997, there were 22,864,686 shares of Class A Common
Stock, Par Value $.10 Per Share, outstanding.
<PAGE>
CABOT OIL & GAS CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Part I. Financial Information Page
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Statement of Operations for the Three Months
Ended March 31, 1997 and 1996.................................................................... 3
Condensed Consolidated Balance Sheet at March 31, 1997 and December 31, 1996....................... 4
Condensed Consolidated Statement of Cash Flows for the Three Months
Ended March 31, 1997 and 1996.................................................................... 5
Notes to Condensed Consolidated Financial Statements............................................... 6
Independent Certified Public Accountants' Report on Review of
Interim Financial Information.................................................................... 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................................................... 9
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K............................................................. 15
Signature .............................................................................................. 16
</TABLE>
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<PAGE>
CABOT OIL & GAS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1996
<S> <C> <C>
NET OPERATING REVENUES
Natural Gas Production..................................................... $ 47,185 $ 33,608
Crude Oil & Condensate..................................................... 3,204 2,659
Brokered Natural Gas Margin................................................ 497 2,090
Other...................................................................... 1,906 2,841
-------- --------
52,792 41,198
OPERATING EXPENSES
Direct Operations.......................................................... 7,069 6,822
Exploration................................................................ 3,627 2,353
Depreciation, Depletion and Amortization................................... 10,504 9,753
Impairment of Unproved Properties.......................................... 723 705
General and Administrative................................................. 4,156 3,737
Taxes Other Than Income.................................................... 4,082 3,404
------- --------
30,161 26,774
Gain on Sale of Assets........................................................ 83 1,505
--------- --------
INCOME FROM OPERATIONS........................................................ 22,714 15,929
Interest Expense.............................................................. 4,561 4,849
------- --------
Income Before Income Taxes.................................................... 18,153 11,080
Income Tax Expense............................................................ 7,069 4,431
------- --------
NET INCOME.................................................................... 11,084 6,649
Dividend Requirement on Preferred Stock....................................... 1,391 1,391
------- --------
Net Income Available to Common Stockholders................................... $ 9,693 $ 5,258
======= ========
Earnings Per Share Available to Common........................................ $ 0.42 $ 0.23
======== =========
Average Common Shares Outstanding............................................. 22,855 22,793
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
-3-
<PAGE>
CABOT OIL & GAS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
<S> <C> <C>
Current Assets
Cash and Cash Equivalents.................................................. $ 5,822 $ 1,367
Accounts Receivable........................................................ 39,653 67,810
Inventories................................................................ 5,156 8,797
Other...................................................................... 1,788 1,663
-------- --------
Total Current Assets..................................................... 52,419 79,637
Properties and Equipment (Successful Efforts Method).......................... 480,683 480,511
Other Assets.................................................................. 685 1,193
-------- --------
$ 533,787 $ 561,341
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable........................................................... $ 39,392 $ 56,338
Accrued Liabilities........................................................ 16,425 16,279
-------- --------
Total Current Liabilities................................................ 55,817 72,617
Long-Term Debt................................................................ 222,000 248,000
Deferred Income Taxes......................................................... 75,982 69,427
Other Liabilities............................................................. 10,116 10,593
Stockholders' Equity
Preferred Stock:
Authorized--5,000,000 Shares of $.10 Par Value
Issued and Outstanding - $3.125 Cumulative Convertible
Preferred; $50 Stated Value; 692,439 Shares in 1997 and 1996 - 6%
Convertible Redeemable Preferred; $50
Stated Value; 1,134,000 Shares in 1997 and 1996........................ 183 183
Common Stock:
Authorized--40,000,000 Shares of $.10 Par Value
Issued and Outstanding--22,865,078 Shares and
22,847,345 Shares in 1997 and 1996, Respectively....................... 2,286 2,284
Additional Paid-in Capital................................................. 243,672 243,283
Accumulated Deficit........................................................ (76,268) (85,046)
-------- --------
Total Stockholders' Equity............................................... 169,873 160,704
-------- --------
$ 533,787 $ 561,341
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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<PAGE>
CABOT OIL & GAS CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income............................................................... $ 11,084 $ 6,649
Adjustment to Reconcile Net Income To Cash
Provided by Operating Activities:
Depletion, Depreciation and Amortization............................. 10,504 9,753
Impairment of Undeveloped Leasehold.................................. 723 705
Deferred Income Taxes................................................ 6,555 4,297
(Gain) Loss on Sale of Assets........................................ (83) (1,505)
Exploration Expense.................................................. 3,627 2,353
Other, Net........................................................... 33 42
Changes in Assets and Liabilities:
Accounts Receivable.................................................. 28,157 (11,838)
Inventories.......................................................... 3,641 1,483
Other Current Assets................................................. (125) 549
Other Assets......................................................... 508 (24)
Accounts Payable and Accrued Liabilities............................. (16,920) 3,064
Other Liabilities.................................................... (283) 554
------- -------
Net Cash Provided by Operating Activities.......................... 47,421 16,082
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Expenditures..................................................... (11,582) (14,337)
Proceeds from Sale of Assets............................................. 303 4,468
Exploration Expense...................................................... (3,627) (2,353)
------- -------
Net Cash Used by Investing Activities.............................. (14,906) (12,222)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Sale of Common Stock..................................................... 246 165
Decrease in Debt......................................................... (26,000) (1,000)
Dividends Paid........................................................... (2,306) (2,303)
------- -------
Net Cash Used by Financing Activities.............................. (28,060) (3,138)
------- -------
Net Increase in Cash and Cash Equivalents................................... 4,455 722
Cash and Cash Equivalents, Beginning of Period.............................. 1,367 3,029
------- -------
Cash and Cash Equivalents, End of Period.................................... $ 5,822 $ 3,751
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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<PAGE>
CABOT OIL & GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. FINANCIAL STATEMENT PRESENTATION
During interim periods, the Company follows the accounting policies set
forth in its Annual Report to Stockholders and its Report on Form 10-K filed
with the Securities and Exchange Commission. Users of financial information
produced for interim periods are encouraged to refer to the footnotes contained
in the Annual Report to Stockholders when reviewing interim financial results.
In the opinion of management, the accompanying interim financial statements
contain all material adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation.
2. PROPERTIES AND EQUIPMENT
Properties and equipment are comprised of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
(in thousands)
<S> <C> <C>
Unproved oil and gas properties....................................... $ 15,514 $ 15,746
Proved oil and gas properties......................................... 822,778 811,726
Gathering and pipeline systems........................................ 150,929 150,910
Land, building and improvements....................................... 5,240 5,221
Other................................................................. 16,107 16,028
--------- ---------
1,010,568 999,631
Accumulated depreciation, depletion and amortization.................. (529,885) (519,120)
--------- ---------
$ 480,683 $ 480,511
========= =========
</TABLE>
3. ADDITIONAL BALANCE SHEET INFORMATION
Certain balance sheet amounts are comprised of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
(in thousands)
<S> <C> <C>
Accounts Receivable
Trade accounts.................................................... $ 34,883 $ 63,458
Other accounts.................................................... 5,399 5,021
------- -------
40,282 68,479
Allowance for doubtful accounts................................... (629) (669)
-------- -------
$ 39,653 $ 67,810
======= =======
Accounts Payable
Trade accounts.................................................... $ 9,889 $ 12,277
Natural gas purchases............................................. 7,138 20,726
Royalty and other owners.......................................... 11,930 13,469
Capital costs..................................................... 4,642 5,409
Dividends payable................................................. 1,391 1,391
Taxes other than income........................................... 1,053 1,170
Other accounts.................................................... 3,349 1,896
------- -------
$ 39,392 $ 56,338
======= =======
</TABLE>
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<PAGE>
CABOT OIL & GAS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - continued
3. ADDITIONAL BALANCE SHEET INFORMATION, continued
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
(in thousands)
<S> <C> <C>
Accrued Liabilities
Employee benefits................................................. $ 2,882 $ 4,432
Taxes other than income........................................... 7,896 8,407
Interest payable.................................................. 3,998 2,188
Other accrued..................................................... 1,649 1,252
------- --------
$ 16,425 $ 16,279
======= =======
Other Liabilities
Postretirement benefits other than pension........................ $ 1,659 $ 1,853
Accrued pension cost.............................................. 4,149 4,022
Taxes other than income and other................................. 4,308 4,718
------- -------
$ 10,116 $ 10,593
======= =======
</TABLE>
4. LONG-TERM DEBT
At March 31, 1997, the Company had borrowed $142 million against an
available credit line of $235 million. The available credit line is subject to
adjustment from time-to-time on the basis of the projected present value (as
determined by a petroleum engineer's report incorporating certain assumptions
provided by the lender) of estimated future net cash flows from proved oil and
gas reserves and other assets. The revolving term under this credit facility
presently ends in June 1998 and is subject to renewal.
5. ACCOUNTING FOR LONG-LIVED ASSETS
The Company adopted SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" in 1995. If the
Company determines that an impairment event has occurred, through either adverse
changes or a periodic review, the impairment is made on an economic unit basis.
The Company performs a periodic review of all fields to determine if an
impairment event has occurred.
-7-
<PAGE>
Independent Certified Public Accountants' Report on Review of Interim
Financial Information
To the Board of Directors and Shareholders
Cabot Oil & Gas Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
Cabot Oil & Gas Corporation as of March 31, 1997, and the related condensed
consolidated statements of operations and cash flows for the three month period
ended March 31, 1997 and 1996. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying consolidated financial statements for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1996, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year then ended (not presented herein); and, in our report dated
March 7, 1997, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
accompanying condensed consolidated balance sheet as of December 31, 1996, is
fairly stated in all material respects, in relation to the consolidated
financial statements from which it has been derived.
Coopers & Lybrand L.L.P.
Houston, Texas
May 13, 1997
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following review of operations for the first quarters of 1997 and
1996 should be read in conjunction with the Condensed Consolidated Financial
Statements of the Company and the Notes thereto included elsewhere in this Form
10-Q and with the Consolidated Financial Statements, Notes and Management's
Discussion and Analysis included in the Company's Form 10-K for the year ended
December 31, 1996.
Overview
In addition to the substantial up swing in gas prices, the 6% increase in
production to 16.0 Bcfe also contributed to the first quarter performance of
1997 with record earnings. Operating cash flows were also up significantly,
increasing $31.3 million over the same quarter in 1996. Cash flows from
operations funded (1) the $15.2 million of capital and exploration expenditures
and (2) a $26.0 million reduction in outstanding debt.
The Company drilled 17.6 net wells with a success rate of 83% compared to
35.8 net wells and a 91% success rate in the first quarter of 1996. In 1997 the
Company plans to drill 157 net wells and spend $79 million in capital and
exploration expenditures compared to 154 net wells and $73 million of capital
and exploration expenditures in 1996.
Natural gas production was 15.1 Bcf, up 0.9 Bcf compared to the 1996
first quarter. This production increase was due primarily to new production
brought on by the expanded drilling program of 154 net wells in 1996 compared to
only 55 net wells drilled in 1995 and to an average of 135 net wells per year
over the previous five years.
The Company's strategic pursuits are sensitive to energy commodity
prices, particularly the price of natural gas. While gas prices in most regions
of the U.S. were up sharply in January of 1997, gas prices dropped markedly in
February and March of 1997, demonstrating significant price volatility in the
first quarter of 1997. Consequently, there is considerable uncertainty about gas
prices for the remainder of this year and beyond.
The Company remains focused on the following goals established in 1995
and believes that progress toward these goals is appropriate in the current
industry environment, enabling the Company to pursue its strategic objectives
over the long term.
(*) Increase cash flows, using a balance of increased production and
reduced costs. Significant progress has been made toward this goal,
and the Company expects to be profitable in 1997 if the Henry Hub
average price is $1.80 or more, assuming a traditional correlation
between Henry Hub prices and prices realized by the Company in its
regional markets.
(*) Maintain reserves per share while increasing production to protect
long-term shareholder value. An aggressive 1997 drilling program is
designed to result in 1997 production exceeding 1996, while reserves
are also expected to increase.
(*) Reduce debt as a percentage of total capitalization without diluting
existing shareholder value. To achieve this goal, project returns
will be compared with the marginal cost of debt when deciding whether
to reinvest or pay down debt. Other financing alternatives will also
be reviewed.
The preceding paragraphs, discussing the Company's strategic pursuits and
goals, contains forward-looking information. See Forward-Looking Information on
page 14.
-9-
<PAGE>
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings per Share ("SFAS
128") and Statement of Financial Accounting Standards No. 129, Disclosure of
Information about Capital Structure ("SFAS 129"). These statements will be
adopted by the Company effective December 31, 1997. SFAS 128 simplifies the
computation of earnings per share by replacing primary and fully diluted
presentations with the new basic and diluted disclosures. SFAS 129 establishes
standards for disclosing information about an entity's capital structure. The
Company has not determined the impact of these pronouncements on its financial
statements.
Financial Condition
Capital Resources and Liquidity
The Company's capital resources consist primarily of cash flows from its
oil and gas properties and asset-based borrowing supported by its oil and gas
reserves. The Company's level of earnings and cash flows depend on many factors,
including the price of oil and natural gas and its ability to control and reduce
costs. Demand for oil and gas has historically been subject to seasonal
influences characterized by peak demand and higher prices in the winter heating
season. Natural gas prices and demand were up significantly in January but
trended down in February and March due to milder than normal winter heating in
the first quarter of 1997.
The primary source of cash for the Company during the first quarter of
1997 was from funds generated from operations. Primary uses of cash were funds
used in operations, exploration and development expenditures, repayment of debt
and dividends.
The Company had a net cash inflow of $4.5 million in the first quarter of
1997. Net cash inflow from operating and financing activities totalled $19.3
million in the current quarter, sufficiently funding the $15.2 million of
capital and exploration expenditures.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1996
(in millions)
<S> <C> <C>
Cash Flows Provided by Operating Activities............................... $ 47.4 $ 16.1
====== ======
</TABLE>
Cash flows from operating activities in the 1997 first quarter were higher
by $31.3 million compared to the corresponding quarter of 1996 primarily due to
higher natural gas prices and favorable changes in working capital.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1996
(in millions)
<S> <C> <C>
Cash Flows Used by Investing Activities................................... $ 14.9 $ 12.2
====== =====
</TABLE>
Cash flows used by investing activities in the first quarters of 1997 and
1996 were substantially attributable to capital and exploration expenditures of
$15.2 million and $16.7 million, respectively. Proceeds from the sale of certain
oil and gas properties in the first quarters of 1997 and 1996 were $0.3 million
and $4.5 million, respectively.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1996
(in millions)
<S> <C> <C>
Cash Flows Used by Financing Activities................................... $ 28.1 $ 3.1
===== ======
</TABLE>
-10-
<PAGE>
Cash flows used by financing activities were primarily debt reductions under
the Company's revolving credit facility and dividend payments.
Under the Company's revolving credit facility, the available credit line,
currently $235 million, is subject to adjustment on the basis of the projected
present value of estimated future net cash flows from proved oil and gas
reserves and other assets. The revolving term of the credit facility runs to
June 1998. Management believes that the Company's has the ability to finance, if
necessary, its capital requirements, including acquisitions.
The Company's 1997 debt service is projected to be approximately $18.3
million. No principal payments are due in 1997.
Capitalization information on the Company is as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
(in millions)
<S> <C> <C>
Long-Term Debt............................................................ $ 222.0 $ 248.0
Stockholders' Equity
Common Stock.......................................................... 78.6 69.4
Preferred Stock....................................................... 91.3 91.3
------ -----
Total ............................................................. 169.9 160.7
----- -----
Total Capitalization...................................................... $ 391.9 $ 408.7
===== =====
Debt to Capitalization.................................................... 56.7% 60.7%
</TABLE>
Capital and Exploration Expenditures
The following table presents major components of capital and exploration
expenditures:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1996
(in millions)
<S> <C> <C>
Capital Expenditures
Drilling and Facilities.......................................... $ 10.2 $ 11.5
Leasehold Acquisitions........................................... 1.1 0.4
Pipeline and Gathering .......................................... 0.2 0.2
Other............................................................ 0.1 0.2
----- ------
11.6 12.3
----- ------
Proved Property Acquisitions..................................... -- 2.0
Exploration Expenses................................................... 3.6 2.4
------ ------
Total............................................................ $ 15.2 $ 16.7
====== ======
</TABLE>
Total capital and exploration expenditures in the first quarter of 1997
decreased $1.5 million compared to the same quarter of 1996, primarily due to
weather related delays that slowed drilling activity.
The Company generally funds most of its capital and exploration activities,
excluding oil and gas property acquisitions, with cash generated from
operations, and budgets such capital expenditures based upon projected cash
flows, exclusive of acquisitions.
The Company has a $79.2 million capital and exploration expenditures budget
for 1997 which includes $54.0 million for drilling and facilities, $14.9 million
for exploration expenses and $1.2 million for proved property acquisitions.
Compared to 1996 capital and exploration expenditures, the 1997 budgeted
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<PAGE>
expenditures are up 15%. The Company plans to drill 157 net wells in 1997
compared with 154 net wells drilled in 1996.
During the first quarter of 1997, the Company paid dividends of $0.9
million on the Common Stock and $1.4 million in aggregate on the $3.125
convertible preferred stock and 6% convertible redeemable preferred stock. A
regular dividend of $0.04 per share of Common Stock was declared for the quarter
ending June 30, 1997, to be paid May 30, 1997 to shareholders of record as of
May 16, 1997.
Conclusion
The Company's financial results depend upon many factors, particularly the
price of natural gas, and its ability to market gas on economically attractive
terms. While the Company's natural gas prices rose sharply in January and
trended down in February and March of 1997, the average produced natural gas
sales price received in the first quarter of 1997 was up 32% over the first
quarter in 1996. The volatility of natural gas prices in recent years remains
prevalent in 1997 with wide price swings in day-to-day trading on the Nymex
futures market. Given this continued price volatility, management cannot predict
with certainty what pricing levels will be for the remainder of 1997. Because
future cash flows are subject to such variables, there can be no assurance that
the Company's operations will provide cash sufficient to fully fund its capital
expenditures if prices should return to the depressed levels of 1995.
While the Company's 1997 plans include a significant increase in capital
spending, potentially negative changes in industry conditions might require the
Company to adjust its 1997 spending plan to ensure the availability of capital,
including, among other things, reductions in capital expenditures or common
stock dividends.
The Company believes its capital resources, supplemented, if necessary,
with external financing, are adequate to meet its capital requirements.
The preceding paragraph contains forward-looking information. See
Forward-Looking Information on page 14.
-12-
<PAGE>
Results of Operations
For the purpose of reviewing the Company's results of operations, "Net
Income" is defined as net income available to common shareholders.
Selected Financial and Operating Data
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1997 1996
(in millions, except where noted)
<S> <C> <C>
Net Operating Revenues...................................................... $ 52.8 $ 41.2
Operating Expenses.......................................................... 30.2 26.8
Operating Income............................................................ 22.7 15.9
Interest Expense............................................................ 4.6 4.8
Net Income.................................................................. 9.7 5.3
Earnings Per Share.......................................................... $ 0.42 $ 0.23
Natural Gas Production (Bcf)
Appalachia............................................................. 6.6 6.7
West................................................................... 8.5 7.5
----- -----
Total Company.......................................................... 15.1 14.2
===== =====
Natural Gas Production Sales Prices ($/Mcf)
Appalachia............................................................. $ 3.71 $ 3.00
West................................................................... $ 2.66 $ 1.81
Total Company.......................................................... $ 3.12 $ 2.37
Crude/Condensate
Volume (MBbl).......................................................... 142 136
Price $/Bbl............................................................ $ 22.59 $ 19.55
Brokered Natural Gas Margin
Volume (Bcf)........................................................... 9.1 9.4
Margin $/Mcf........................................................... $ 0.05 $ 0.22
</TABLE>
First Quarters of 1997 and 1996 Compared
Net Income and Revenues. The Company reported net income in the first
quarter 1997 of $9.7 million, or $0.42 per share. During the corresponding
quarter of 1996, the Company reported net income of $5.3 million, or $0.23 per
share. Operating income and operating revenues increased $6.8 million and $11.6
million, respectively. Natural gas made up 89%, or $47.2 million, of net
operating revenue. The increase in net operating revenues was driven primarily
by a 32% increase in the average natural gas price, and in part by a 6% increase
in natural gas production as discussed below. Net income and operating income
were similarly impacted by the increase in the average natural gas price.
Natural gas production volume in the Appalachian Region was virtually
unchanged at 6.6 Bcf. Natural gas production volume in the Western Region was up
1.0 Bcf to 8.5 Bcf due primarily to new production brought on by drilling in
1996.
The average Appalachian natural gas production sales price increased $0.71
per Mcf, or 24%, to $3.71, increasing net operating revenues by $4.7 million on
6.6 Bcf of production. In the Western Region, the
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<PAGE>
average natural gas production sales price increased $0.85 per Mcf, or 47%, to
$2.66, increasing net operating revenues by $7.2 million on 8.5 Bcf of
production. The overall weighted average natural gas production sales price
increased $0.75 per Mcf, or 32%, to $3.12.
Crude oil and condensate sales volumes were up 6 MBbl, or 4%, to 142 MBbl
while crude oil prices increased $3.04 per Bbl, or 16%, to $22.59, increasing
net operating revenues by approximately $0.4 million.
The brokered natural gas margin decreased $1.6 million to $0.5 million
primarily due to a $0.17 per Mcf decrease in the net margin to $0.05 per Mcf.
Brokered gas market conditions in the first quarter of 1996 were exceptionally
good. While market conditions in the first quarter of 1997 were less favorable
than normal, they were more comparable to the first quarter of 1995 with
a $0.07 per Mcf margin.
Other net operating revenues decreased $0.9 million to $1.9 million due
primarily to net miscellaneous revenues in the first quarter of 1996 related to
a contract settlement.
Costs and Expenses. Total costs and expenses from recurring operations
increased $3.4 million, or 13%, due primarily to the following:
(*) Exploration expense increased $1.3 million, or 54%, due to the dry
hole expenses related to the expanded exploration activity in the
drilling program for 1997.
(*) Depreciation, depletion, amortization and impairment expense
increased $0.8 million, or 7%, due to the increase in equivalent
production.
(*) Taxes other than income increased $0.7 million, or 20%, due to the
increase in natural gas production revenues.
(*) General and administrative expenses increased $0.4 million, or 11%,
due to the timing of certain compensation expenses which were accrued
later in 1996.
Interest expense declined $0.3 million due to decreases in bank debt.
Income tax expense was up $2.6 million due to the comparable increase in
earnings before income tax.
* * *
Forward-Looking Information
The statements regarding future financial performance and results and the
other statements which are not historical facts contained in this report are
forward-looking statements. The words "expect," "project," "estimate,"
"predict," 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 regional
basis differentials) of natural gas and oil, results of future drilling and
marketing activity, future production and costs and other factors detailed
herein and in the Company's other Securities and Exchange Commission filings.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual outcomes may vary materially from
those indicated.
-14-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
15.1 -- Awareness letter of independent accountants.
27 -- Article 5. Financial Data Schedule for First Quarter
1997 Form 10-Q
(b) Reports on Form 8-K
None
-15-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CABOT OIL & GAS CORPORATION
(Registrant)
By: /s/ Ray R. Seegmiller
---------------------------
May 13, 1997 Ray R. Seegmiller, Executive Vice
President and Chief Operating Officer
(Principal Financial Officer and
Officer Duly Authorized to Sign
on Behalf of the Registrant)
-16-
<PAGE>
EXHIBIT 15.1
Coopers & Lybrand L.L.P. Awareness Letter
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D. C. 20549
Re: Cabot Oil & Gas Corporation
Registration Statements on Form S-8
We are aware that our report dated May 13, 1997 on our review of the interim
consolidated financial information of Cabot Oil & Gas Corporation for the three
month period ended March 31, 1997 and 1996 and included in this Form 10-Q is
incorporated by reference in the Company's registration statements on Form S-8
filed with the Securities and Exchange Commission on June 23, 1990, November 1,
1993 and May 20, 1994. Pursuant to Rule 436(c) under the Securities Act of 1933,
this report should not be considered a part of the registration statement
prepared or certified by us within the meanings of Section 7 and 11 of the Act.
Coopers & Lybrand L.L.P.
Houston, Texas
May 13, 1997
-17-
<PAGE>
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