Cabot O&G announced its 2010 financial results, including net income of $103.4 million, or $0.99 per share, cash flow from operations of $484.9 million and discretionary cash flow of $457.6 million. These results compare to 2009 net income of $148.3 million, or $1.43 per share, cash flow from operations of $614.1 million and discretionary cash flow of $604.6 million. The full year selected items, detailed in an attached table, net to a reduction of $1.0 million, or $0.01 per share, on reported net income.
"Overall 2010 was a transitional year, as we streamlined our operations in the Marcellus and migrated our South region to 100 percent of its capital allocated towards liquids. Additionally, for 2010, Cabot posted tremendous operational numbers, reported net income of over $100 million for the sixth consecutive year and solidified its balance sheet for the long-term," said Dan O. Dinges, Chairman, President and Chief Executive Officer.
For 2010 equivalent production surpassed the 130 Bcfe level for the first time, establishing a new benchmark for both absolute levels and for year-over-year growth, which totaled 26.8 percent. The price comparison for natural gas realizations was $5.54 per Mcf in 2010 versus $7.47 per Mcf in 2009, while oil increased over 14 percent year-over-year to $97.91 per barrel in 2010. Gains associated with the hedge portfolio once again added significantly to price realizations and improved overall revenues in 2010 by $173 million. In absolute terms, total operating expenses plus interest expense increased 15 percent; with the 26 plus percent improvement in production, the per unit expense comparisons dropped nine percent year-to-year. "We anticipate this trend towards lower unit cost levels to continue in 2011," commented Dinges.
As it relates to the tax provision, due to the increased activity in the Pennsylvania Marcellus, a true-up of deferred taxes was required to reflect a larger portion of activity taking place in higher state tax jurisdictions. "As we continue to expand our programs and presence in Pennsylvania, we will continue to monitor its impact on deferred taxes, making adjustments to deferred taxes when required as part of our annual fourth quarter evaluation," said Dinges. This rate change increased the effective tax rate for the year to 47.9 percent, requiring a 55.8 percent effective tax rate for the fourth quarter. This change and the gain were the large selected items in the fourth quarter.
The reported 2010 fourth quarter figures included net income of $49.1 million, or $0.47 per share, $117.4 million for cash flow from operations and $83.4 million for discretionary cash flow. These compare to net income of $36.4 million, or $0.34 per share, cash flow from operations of $196.9 million and discretionary cash flow of $174.1 million in the previous year. Removing the selected items, which are highlighted in the table, net income would be $20.0 million, or $0.19 per share, for the 2010 fourth quarter versus $53.8 million, or $0.51 per share in the comparable 2009 period. Lower commodity prices and overall higher absolute (but lower per unit) expenses, partially offset by higher production, drove the results.
In 2010, the Company placed $175 million of new 10, 12 and 15 year senior notes, repaid $75 million of senior notes that were to mature in 2011 and extended its Credit Facility out five years. "Financially, we continue to have a solid balance sheet, and we retain a significant level of flexibility as evident by our 32.9 percent net debt to adjusted total capital ratio," added Dinges.
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