Cabot Oil & Gas Corporation (NYSE:COG) Q2 2020 Earnings Conference Call - Final Transcript

Jul 31, 2020 • 09:30 am ET


Cabot Oil & Gas Corporation (NYSE:COG) Q2 2020 Earnings Conference Call - Final Transcript


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Good day, and welcome to the Cabot Oil and Gas Second Quarter 2020 Earnings Conference Call. [Operator Instructions] [Operator Instructions].

At this time, I'd like to turn the conference over to Dan Dinges, Chairman, President and Chief Executive Officer. Please go ahead.

Dan Dinges

Thank you, Allison, and good morning to all. Thank you for joining us today for Cabot's Second Quarter 2020 Earnings Call. As a reminder, on this call, we will make forward-looking statements based on our current expectations. Additionally, some of our comments will reference non-GAAP financial measures. Forward-looking statements and other disclaimers as well as reconciliations to the most directly comparable GAAP financial measures were provided in yesterday's earning release. Despite the ongoing global pandemics impact on natural gas demand during the second quarter, which contributed to the lowest average quarterly NYMEX price since the third quarter of 1995, Cabot was still able to generate positive net income of $30.4 million or $0.08 per share.

These results demonstrate our uniquely advantaged low-cost structure that we have continued to improve upon year after year, allowing us to deliver profitability and positive returns on capital even the very trough of the natural gas price cycle, which is where we believe we are today. While we are seeing green shoots emerging in the natural gas market, which I will get into in more detail later in the call, I want to commend our team for delivering another profitable quarter in the face of the recent headwinds across our industry. Operationally, our team delivered another strong quarter with our daily production of 2.229 Bcf per day, exceeding the high end of our guidance range. Our realized prices before the impact of derivatives represents a $0.30 differential to NYMEX, which is in line with the low end of our full year guidance range and is a significant improvement relative to a $0.44 differential in the prior year comparable period.

Additionally, all of our operating expenses were in line with or below our guidance ranges for the quarter, demonstrating our continued focus on cost control. In the second quarter, we generated our first quarterly free cash flow deficit since the second quarter of 2018, but it's the only our second free cash flow deficit in the last 17 quarters, given the historically low natural gas price environment during the first half of this year, in addition to the combination of our first half weighted capital program and a second half weighted production profile. Our plan for 2020 was expected to generate a slight free cash flow deficit during the first six months of the year before turning to a free cash flow positive program in the second half of the year. Ultimately, at the current strip, we still expect our capital program for the year to be fully funded within cash flow and to generate enough free cash flow to cover the majority of our regular dividend.

Our balance sheet remains exceptionally strong with a net debt to trailing 12 months EBITDAX ratio of 1.2