Third Quarter 2020 Results...2020/10/29 · CABOT OIL & GAS CORPORATION Third Quarter 2020 Results CABOT OIL & GAS CORPORATION see the light March 1-2, 2020 October 29, 2020 2 This

CABOT OIL & GAS CORPORATION

Third Quarter 2020 Results


see the light

March 1-2, 2020

October 29, 2020


Forward-Looking Statements and Other Disclosures

2

This presentation 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, the continuing effects of the COVID-19 pandemic and the impact thereof on the Company’s business, financial condition and results of operations, the availability of cash on hand and other sources of liquidity to fund our capital expenditures, the repayment of our debt maturities and our dividends, actions by, or disputes among or between, the Organization of Petroleum Exporting Countries and other producer countries, 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, pipeline projects, 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 Company's most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q 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.

This presentation may contain certain terms, such as resource potential, risked or unrisked resources, potential locations, risked or unrisked locations, EUR (estimated ultimate recovery) and other similar terms that describe estimates of potentially recoverable hydrocarbons that the SEC rules prohibit from being included in filings with the SEC. These estimates are by their nature more speculative than estimates of proved, probable and possible reserves and may not constitute “reserves” within the meaning of SEC rules and accordingly, are subject to substantially greater risk of being actually realized. These estimates are based on the Company’s existing models and internal estimates. Actual locations drilled and quantities that may be ultimately recovered from the Company’s interests could differ substantially. Factors affecting ultimate recovery include the scope of the Company’s ongoing drilling program, which will be directly affected by the availability of capital, drilling and production costs, availably of drilling services and equipment, drilling results, lease expirations, transportation constraints, regulatory approvals, actual drilling results, including geological and mechanical factors affecting recovery rates, and other factors. These estimates may change significantly as development of the Company’s assets provide additional data. Investors are urged to consider carefully the disclosures and risk factors about Cabot’s reserves in the Form 10‐K and other reports on file with the SEC.

This presentation also refers to Discretionary Cash Flow, EBITDAX, Free Cash Flow, Adjusted Net Income (Loss), Return on Capital Employed (ROCE), Net Debt calculations and ratios and Finding and Development Costs. These non-GAAP financial measures are not alternatives to GAAP measures, and should not be considered in isolation or as an alternative for analysis of the Company’s results as reported under GAAP. For additional disclosure regarding such non-GAAP measures, including definitions of these terms and reconciliations to the most directly comparable GAAP measures, please refer to Cabot’s most recent earnings release at www.cabotog.com and the Company’s related 8-K on file with the SEC.

http://www.cabotog.com/


Third Quarter 2020 Highlights

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• Daily production of 2,406 Mmcfe per day, within the Company’s guidance range, despite price-related curtailments in September

• All operating expenses were in-line or below guidance ranges for the quarter

• Delivered a cash flow breakeven program during the quarter, despite a 26% reduction in realized prices year-over-year

• Repaid $87 million of senior notes that matured in July 2020

• Announced positive results for five 2020 Upper Marcellus wells, which are currently exceeding the 2.7 Bcf per thousand lateral feet EUR reported at year-end for Cabot’s 2018 / 2019 Upper Marcellus wells

• Issued inaugural Sustainability Accounting Standards Board (SASB) report

Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures1 Includes direct operations, transportation and gathering, taxes other than income, exploration, DD&A, general and administrative, and interest expense

Q32020

Q2 2020

Q3 2019

Equivalent Production (Mmcfe/d) 2,406 2,229 2,399

Realized Gas Price (Incl. Hedges) ($/Mcf) $1.57 $1.52 $2.11

Realized Gas Price (Excl. Hedges) ($/Mcf) $1.51 $1.42 $1.89

Net Income ($mm) ($15.0) $30.4 $90.4

Adjusted Net Income (non-GAAP) ($mm) $37.3 $18.0 $119.7

Discretionary Cash Flow (non-GAAP) ($mm) $146.9 $119.2 $275.5

Free Cash Flow (non-GAAP) ($mm) ($0.3) ($63.3) $72.4

EBITDAX (non-GAAP) ($mm) $163.7 $136.9 $283.6

Operating Expenses1 ($/Mcfe) $1.41 $1.44 $1.43

LTM Net Debt / EBITDAX (non-GAAP) 1.5x 1.2x 0.7x

TTM ROCE (non-GAAP) 8.2% 10.3% 25.2%


Cabot Oil & Gas Strategy

4

Focus on Financial Returns

Demonstrate Continued Cost Control

Maintain Financial Strength

Generate Positive Free Cash Flow

Return Capital to Shareholders

Increase Our Proved Reserve Base

• Generate financial returns that exceed our cost of capital by focusing on disciplined capital investment and maintaining a low cost structure

• TTM Q3 2020 ROCE of 8.2%

• Low cost structure provides a competitive advantage, especially in a low natural gas price environment

• Q3 2020 operating expenses per unit (including interest expense and G&A) of $1.41 per Mcfe

• Net debt / LTM EBITDAX of 1.5x as of 9/30/2020

• Repaid $87.0 million of senior notes that matured in July 2020

• 2020 program is expected to generate free cash flow for the fifth consecutive year and fund the majority of the Company’s dividend1

• Minimum annual return of capital target of at least 50% of free cash flow

• Reduced weighted-average shares outstanding by 14% and increased dividend five times since 2017

• Increased proved reserves by 11% in 2019 to 12.9 Tcfe at an all-sources F&D cost of $0.36 per Mcfe

• Over two decades of remaining Marcellus drilling locations across ~173,000 net acres in the core of the dry gas window in Northeast Pennsylvania

Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures1 Based on the current NYMEX futures curve as of October 26, 2020


2020 and Preliminary 2021 Capital Program & Outlook

2020 Outlook• Cabot’s 2020 maintenance capital program of $575 million is expected to deliver

an average net production rate of 2,325 – 2,340 Mmcfe per day (including the impact of previously announced price-related production curtailments)

– Fourth quarter 2020 production guidance of 2,300 – 2,350 Mmcfe per day

• Program includes ~70 net wells drilled, completed, and placed on production

• Based on the current NYMEX futures curve1, Cabot expects its 2020 capital program to be fully funded within cash flow and to generate enough free cash flow to cover the majority of its dividend, despite the expectation for the lowest annual NYMEX price since 1995

Preliminary 2021 Outlook• For 2021, Cabot’s preliminary production guidance of 2,350 Mmcfe per day is

based on a capital program of $530 - $540 million, representing a seven percent reduction in capital spending year-over-year at the midpoint of the range

• Based on the current NYMEX futures curve1, the Company’s preliminary 2021 program is expected to deliver a significant expansion of free cash flow and ROCE, while deleveraging the balance sheet below the target leverage ratio of 1.0x

• Formal guidance will be issued in Q1 2021

2020 Capital Program$575 million

Drilling / Completions / FacilitiesOther Program Capital2 92%

8%

51 NYMEX futures curve and market capitalization as of October 26, 20202 Includes production equipment, lease acquisition, corporate, and GasSearch Drilling (GDS) capital

Preliminary 2021 Capital Program$530 - $540 million

Drilling / Completions / FacilitiesOther Program Capital2 91%

9%


Free Cash Flow ($mm)

6Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures1 NYMEX futures curve as of October 26, 2020

$57

$155

$297

$563

2016 2017 2018 2019 2020E

Average NYMEX Price($/Mmbtu) $3.11 $3.09 $2.63

• Expect to deliver positive free cash flow for the fifth consecutive year in 2020, despite the lowest expected NYMEX prices since 1995

• Anticipate a significant expansion of free cash flow in 2021 driven primarily by higher price realizations and reduced capital spending

• Continue to target a minimum annual return of capital of at least 50% of free cash flow

• Prioritization for the deployment of free cash flow in 2021:– Funding the regular quarterly dividend

– Repayment of 2021 debt maturities

– Additional opportunistic returns of capital to shareholders

~$2.101$2.46


Return on Capital Employed (ROCE)

7

(1.0%)

7.3%

15.9%

22.2%

2016 2017 2018 2019 2020E

Average NYMEX Price($/Mmbtu)

• Focused on generating financial returns that exceed our cost of capital through the commodity price cycle

• Targeting a significant expansion of ROCE in 2021 resulting from higher anticipated price realizations

$3.11 $3.09 $2.63 ~$2.101$2.46

Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures1 NYMEX futures curve as of October 26, 2020


Net Debt / EBITDAX

8

1.8x

1.0x 1.0x

0.7x

2016 2017 2018 2019 2020E

Average NYMEX Price($/Mmbtu)

• Target leverage ratio of 1.0x through the commodity price cycle• Anticipate a significant reduction in our leverage ratio in 2021, resulting from

higher anticipated realized prices and lower absolute debt levels

$3.11 $3.09 $2.63 ~$2.101$2.46

Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures1 NYMEX futures curve as of October 26, 2020


Unit Costs ($/Mcfe)

91 Excludes DD&A, stock-based compensation, non-cash interest expense associated with income tax reserves, amortization of deferred financing cost and dry hole cost

$2.17 $2.02$1.76

$1.44

2016 2017 2018 2019 2020E

$1.16 $1.13$1.00 $0.93

2016 2017 2018 2019 2020E

Cash Operating Expenses1

All-In Operating Expenses (Including Non-Cash Expenses)

• Industry-leading cost structure supports profitability and financial returns even in the trough of the commodity price cycle


Commitment to Sustainability

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Climate Change / GHG Emissions

• Net Production: 100% onshore U.S natural gas• GHG emissions intensity: 3.12 metric tons CO2e

per thousand barrels of oil equivalent, among the most efficient compared to U.S. domestic producers

• Zero flared hydrocarbons

Environmental, Health and Safety Management

• 100% of water recovered in drilling, completions and production operations recycled

• Zero freshwater consumed from regions with high or extremely high baseline water stress

• 100% hydraulically fractured wells for which there is public disclosure of all fracturing fluid chemicals used

• Zero hydrocarbon spills

• October 2020 36-month OSHA Total Recordable Incidence Rate (TRIR) of 0.25

• Management comprised of 22% female and 18% ethnically diverse team members

• Partnered with Susquehanna County Career & Technology Center to construct commercial drivers’ license school to combat shortage of licensed commercial drivers

• $1.5 million pledged to end hunger in Northeastern Pennsylvania

• Majority voting• Annual director elections• One share one vote• No supermajority provisions• No poison pill• 3/3/20/20 proxy access• Right to act by written consent• Good board composition

• Steadily refreshed board• 22% women from the oil and gas sector• Two board committees overseeing ESG

performance and disclosures• Strong pay for performance alignment

• Rigorous stock ownership guidelines• Consistent, strong say-on-pay support• Long-term and short-term incentives are

100% performance-based

Environmental Social Governance

Inaugural Sustainability Accounting Standards Board (SASB) Report can be found at www.cabotog.com/corporate-responsibility

CABOT OIL & GAS CORPORATION 11

Appendix


2020 and Preliminary 2021 Guidance

(1) Based on forward curves as of October 26, 2020(2) Excluding exploratory dry hole costs; includes exploration administration expense and geophysical expenses

• 2020E production guidance: 2,325 - 2,340 Mmcfe per day

Q4 2020E production guidance: 2,300 – 2,350 Mmcfe per day

• 2020E capital guidance: $575 million

• 2020E weighted-average natural gas price differential1: ($0.35) to ($0.40) per Mcf

• 2020E wells drilled, completed, and placed on production: ~70 net wells

• 2020E income tax rate guidance: 23% - 24%

• 2020E deferred tax rate guidance1: 135% - 145%

Q4 2020E Natural Gas Price Exposure By IndexNYMEX (less $0.50) 25%

Fixed Price (~$3.00) 22%

Transco Z6 NNY (less $0.65) 18%

TGP Z4 –300 Leg 9%

Power Pricing 9%

Leidy Line 7%

Dominion 5%

Millennium 3%

Algonquin (less $0.70) 2%

Note: Fixed price percentages above include volumes associated with sales agreements that have floor prices. An additional deduct of ~$0.05 per Mcf should be applied to account for fuel use.

Q4 2020E Cost Assumptions ($/Mcfe, unless otherwise noted)Direct operations $0.08 - $0.09

Transportation and gathering $0.66 - $0.68

Taxes other than income $0.02 - $0.03

Exploration2 $0.01 - $0.02

Depreciation, depletion and amortization $0.45 - $0.47

Interest expense $0.06 - $0.07

General and administrative ($mm, excluding stock-based compensation) $15.5 - $16.5

2020 Guidance

• 2021E preliminary production guidance: 2,350 Mmcfe per day

• 2021E preliminary capital guidance: $530 - $540 million

• Formal 2021 guidance will be provided in Q1 2021

Preliminary 2021 Guidance

12


Financial Position and Risk Management Profile

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$87

$188$62

$575

$312

4.26%

6.25%

3.67%

4.17%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

$0

$100

$200

$300

$400

$500

$600

2020 2021 2022 2023 2024 2025 2026

Senior Notes ($mm) Weighted-Average Coupon Rate

As of 9/30/2020 $bn

Cash and Cash Equivalents $0.0

Debt $1.2

Net Debt $1.2

Net Capitalization $3.3

Liquidity $1.5

Net Debt / Capitalization 35.4%

Net Debt / LTM EBITDAX 1.5x

Debt Maturity Schedule ($mm) as of 9/30/2020

Capitalization / Liquidity


2020 / 2021 Hedge Summary

14Note: As of October 29, 2020

2020 Natural Gas (NYMEX) SwapsTotal Volume (Mmbtu) Weighted-Average Price Duration9,300,000 $2.25 October 2020

2020 Natural Gas (NYMEX) CollarsTotal Volume (Mmbtu) Weighted-Average

Floor PriceWeighted-Average

Ceiling PriceDuration

15,500,000 $2.05 $2.24 October 2020

2021 Natural Gas (NYMEX) Swaps

Total Volume (Mmbtu) Weighted-Average Price Duration

18,250,000 $2.74 January 2021 – December 2021

2021 Natural Gas (NYMEX) Collars

Total Volume (Mmbtu) Weighted-Average Floor Price

Weighted-Average Ceiling Price

Duration

164,250,000 $2.68 $3.09 January 2021 – December 2021

10,700,000 $2.50 $2.80 April 2021 – October 2021


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

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EBITDAX Calculation and Reconciliation

16


Net Debt Reconciliation

17


Discretionary Cash Flow and Free Cash Flow Calculation and Reconciliation

18


Return on Capital Employed Calculation

19


Finding and Development Costs Calculations

20

CABOT OIL & GAS CORPORATION 21

We believe natural gas provides opportunity for abright future, one filled with innovation and prosperity.

Slide Number 1Forward-Looking Statements and Other DisclosuresThird Quarter 2020 HighlightsCabot Oil & Gas Strategy2020 and Preliminary 2021 Capital Program & Outlook Free Cash Flow ($mm)Return on Capital Employed (ROCE)Net Debt / EBITDAXUnit Costs ($/Mcfe)Commitment to SustainabilitySlide Number 112020 and Preliminary 2021 GuidanceFinancial Position and Risk Management Profile2020 / 2021 Hedge SummaryReconciliation of Net Income to Adjusted Net Income and Adjusted Earnings Per ShareEBITDAX Calculation and ReconciliationNet Debt ReconciliationDiscretionary Cash Flow and Free Cash Flow Calculation and ReconciliationReturn on Capital Employed CalculationFinding and Development Costs CalculationsSlide Number 21

Documents

Third Quarter 2020 Results...2020/10/29 · CABOT OIL & GAS CORPORATION Third Quarter 2020 Results CABOT OIL & GAS CORPORATION see the light March 1-2, 2020 October 29, 2020 2 This