fourth quarter and full-year 2020 results
TRANSCRIPT
PowerPoint PresentationCABOT OIL & GAS CORPORATION
2
This presentation includes forwardlooking 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. In addition, the declaration and payment of any future dividends, whether regular quarterly base dividends or annual supplemental dividends, will depend on the Company’s financial results, cash requirements, future prospects and other factors deemed relevant by the Board. 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 10K 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.
3
Fourth Quarter 2020 • Adjusted net income (non-GAAP) of $104.7 million, or $0.26
per share
• Free cash flow (non-GAAP) of $122.9 million
• Daily production of 2,375 Mmcfe per day, exceeding the high-end of the Company’s guidance range
• Operating expenses per unit improved 3% year-over-year
Full-Year 2020 • Adjusted net income (non-GAAP) of $214.0 million, or $0.54
per share
• Fifth consecutive year of positive free cash flow generation
• Returned $159.4 million of capital to shareholders (146% of free cash flow)
• Repaid $87 million of debt maturities
– Subsequent to year-end, repaid an additional $88 million of debt that matured in January 2021
• Increased proved reserves by 6% to 13.7 Tcfe at an all- sources F&D cost of $0.35 per Mcfe
• Reduced GHG emissions intensity by 58 percent and methane emissions intensity by 70 percent
Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures 1 Includes direct operations, transportation and gathering, taxes other than income, exploration, DD&A, general and administrative, and interest expense
Q4 2020
Q4 2019
FY 2020
FY 2019
Realized Gas Price (Incl. Hedges) ($/Mcf) $1.90 $2.15 $1.68 $2.45
Realized Gas Price (Excl. Hedges) ($/Mcf) $1.89 $2.05 $1.64 $2.29
Net Income ($mm) $131.2 $146.9 $200.5 $681.1
Adjusted Net Income (non-GAAP) ($mm) $104.7 $120.8 $214.0 $698.8
Discretionary Cash Flow (non-GAAP) ($mm) $220.3 $277.5 $685.0 $1,360.8
Free Cash Flow (non-GAAP) ($mm) $122.9 $109.5 $109.1 $563.1
EBITDAX (non-GAAP) ($mm) $229.8 $300.3 $719.3 $1,408.6
Operating Expenses1 ($/Mcfe) $1.39 $1.43 $1.43 $1.44
Net Debt / EBITDAX (non-GAAP) 1.4x 0.7x 1.4x 0.7x
ROCE (non-GAAP) 7.6% 22.2% 7.6% 22.2%
CABOT OIL & GAS CORPORATION
Cabot Oil & Gas Strategy
Return Capital to Shareholders
Focus on Safe, Responsible and Sustainable Operations
• Generate financial returns that exceed our cost of capital by focusing on disciplined capital investment and maintaining a low cost structure
• 2020 ROCE of 7.6% despite the lowest natural gas price realizations in the Company's 31-year history as a public company
• Low cost structure provides a competitive advantage, especially in a low natural gas price environment
• Full-year 2020 operating expenses per unit (including interest expense and G&A) of $1.43 per Mcfe
• Net debt / LTM EBITDAX of 1.4x as of 12/31/2020
• Subsequent to year-end 2020, repaid $88 million of debt that matured in January 2021 and plan to repay the $100 million of September 2021 debt maturities with a portion of excess free cash flow
• 2020 program generated positive free cash flow for the fifth consecutive year with a significant expansion of positive free cash flow expected in 2021
• Initiated a “base plus supplemental” dividend strategy to achieve a minimum capital return target of at least 50% of annual free cash flow
• Excess free cash flow to be used for balance sheet enhancement, additional supplemental dividends, or opportunistic share repurchases
• Reduced GHG emissions intensity in 2020 by 58% to 1.31 metric tons of CO2e per thousand barrels of oil equivalent (Mboe) and methane emissions intensity by 70% to 0.025%
Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures
Increase Our Proved Reserve Base • Increased proved reserves by 6% in 2020 to 13.7 Tcfe at an all-sources F&D cost of $0.35 per Mcfe
• Over two decades of remaining Marcellus drilling locations across ~175,000 net acres in the core of the dry gas window in Northeast Pennsylvania
CABOT OIL & GAS CORPORATION
2021 Capital Program & Outlook
• For 2021, Cabot’s production guidance of 2,350 Mmcfe per day is based on a capital program of $530 - $540 million, representing a 6% reduction in capital spending year-over-year at the midpoint of the range
• 2021 capital is 32% lower than 2019 levels despite production levels being relatively flat from 2019 to 2021
• Disciplined capital allocation framework is focused on maintaining production flat in 2021 while enhancing capital returns to shareholders and repaying current debt maturities
• Any future improvement in natural gas prices for 2021 will not impact this capital allocation framework
• The Company’s 2021 program is expected to deliver a significant expansion of free cash flow, net income, and return on capital employed, while deleveraging the balance sheet below the target leverage ratio of 1.0x
5
$783
Capital Return to Shareholders ($mm)
6Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures 1 As of February 22, 2021
• Minimum annual capital return target of at least 50% of free cash flow comprised of a sustainable base dividend and an annual supplemental dividend
• Current quarterly base dividend of $0.10 per share that is positioned to grow over time (current annualized yield1 of 2.2%)
• Any supplemental dividend is expected to be declared and paid annually, with the first payment expected to occur in the fourth quarter of 2021
• The supplemental component of this dividend approach allows for sustainable capital return that is appropriately tailored for where we are in the natural gas price cycle
• Any excess free cash flow above the minimum capital return target of 50% of annual free cash flow will be utilized for balance sheet enhancement, additional supplemental dividends, or opportunistic share repurchases, depending on market conditions
• In 2021, Cabot plans to retire its $188 million of current debt maturities (including the $88 million tranche that was repaid in January) with a portion of excess free cash flow
$79 $111 $146 $159 $124
$873
$520
CABOT OIL & GAS CORPORATION
Free Cash Flow ($mm)
2017 2018 2019 2020
• Delivered positive free cash flow for the fifth consecutive year in 2020, despite the lowest average NYMEX price since 1995
• Anticipate a significant expansion of free cash flow in 2021, driven by higher price realizations and reduced capital spending
$2.31 $2.54 $2.45 $1.68
Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures 1 Including impact of derivatives
Realized Natural Gas Price ($/Mcf)1
CABOT OIL & GAS CORPORATION
8
7.3%
15.9%
22.2%
7.6%
2017 2018 2019 2020
• Focused on generating financial returns that exceed our cost of capital through the natural gas price cycle
• Generated ~8% ROCE in 2020 despite the lowest natural gas price realizations in the Company's 31-year history as a public company
• Targeting a significant expansion of ROCE in 2021 resulting from higher anticipated price realizations
$2.31 $2.54 $2.45 $1.68
Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures 1 Including impact of derivatives
Realized Natural Gas Price ($/Mcf)1
CABOT OIL & GAS CORPORATION
Adjusted Earnings per Share
Realized Natural Gas Price ($/Mcf)1 $2.31 $2.54 $2.45 $1.68
Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures 1 Including impact of derivatives
• Low cost structure allows for profitability through the natural gas price cycle
CABOT OIL & GAS CORPORATION
2017 2018 2019 2020
• Target leverage ratio of 1.0x through the natural gas price cycle
• Anticipate a significant reduction in the leverage ratio in 2021, resulting from higher anticipated realized prices and lower absolute debt levels
$2.31 $2.54 $2.45 $1.68
Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures 1 Including impact of derivatives
Realized Natural Gas Price ($/Mcf)1
CABOT OIL & GAS CORPORATION
• Industry-leading cost structure supports profitability and financial returns even in the trough of the natural gas price cycle
1 Excludes DD&A, stock-based compensation, non-cash interest expense associated with income tax reserves, amortization of deferred financing cost and dry hole cost
CABOT OIL & GAS CORPORATION
12
Climate Change / GHG Emissions • Net Production: 100% onshore U.S natural gas
• 2020 GHG emissions intensity: 1.31 metric tons CO2e per thousand barrels of oil equivalent, a 58% reduction compared to 2019
• 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
• December 2020 36-month OSHA Total Recordable Incidence Rate (TRIR) of 0.26
• Management comprised of 22% female and 18% ethnically diverse team members
• Contributed funds to educational assistance programs in Susquehanna County, Pennsylvania, to provide pre-K tuition assistance and equipment for schools such as laptops, tablets, internet access and 3-D printers
• Donated funds to various community programs in Susquehanna County, Pennsylvania to address food insecurity in the area
• 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 13
Appendix
2021 Guidance
(1) Based on $2.75 NYMEX and basis forward curves as of February 3, 2021 (2) Excluding exploratory dry hole costs; includes exploration administration expense and geophysical expenses (3) Excluding stock-based compensation
• 2021E production guidance: 2,350 Mmcfe per day
Q1 2021E production guidance: 2,250 – 2,300 Mmcfe per day
• 2021E capital guidance: $530 - $540 million
• 2021E weighted-average natural gas price differential1: ($0.50) to ($0.55) per Mcf
• 2021E wells drilled and completed: ~80 net wells
• 2021E income tax rate guidance: 23%
• 2021E deferred tax rate guidance1: 30% - 35%
2021E Natural Gas Price Exposure By Index Index Q1 2021 FY 2021 NYMEX (Q1: less $0.50 / FY: less $0.45) 27% 25% Fixed Price (Q1: ~$2.85 / FY: ~$2.65) 19% 23% Transco Z6 NNY (less $0.65) 19% 17% TGP Z4 –300 Leg 9% 9% Power Pricing 9% 9% Leidy Line 8% 8% Dominion 6% 5% Millennium 2% 4% Algonquin (less $0.80) 1% 0%
Note: Fixed price percentages above include volumes associated with sales agreements that have floor prices. An additional deduct of ~$0.05 per Mcf should be applied to account for fuel use.
FY 2021E Cost Assumptions ($/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 $0.05 - $0.06 General and administrative ($mm)3 $62 - $66
2021 Guidance
15
As of 12/31/2020 $bn
Debt $1.1
Debt Maturity Schedule ($mm) as of 12/31/2020
Capitalization / Liquidity
CABOT OIL & GAS CORPORATION
Swaps Collars
Ceiling Price Duration Q1 2021
LDS NYMEX 40,500,000 $2.68 $3.26 Jan-21 Dec-21 LDS NYMEX 4,500,000 $2.74 Jan-21 Dec-21
Q2 2021 LDS NYMEX 40,950,000 $2.68 $3.00 Jan-21 Dec-21 LDS NYMEX 4,550,000 $2.50 $2.80 Apr-21 Oct-21 LDS NYMEX 4,550,000 $2.74 Jan-21 Dec-21 LDS NYMEX 9,100,000 $2.78 Apr-21 Oct-21
Q3 2021 LDS NYMEX 41,400,000 $2.68 $3.00 Jan-21 Dec-21 LDS NYMEX 4,600,000 $2.50 $2.80 Apr-21 Oct-21 LDS NYMEX 4,600,000 $2.74 Jan-21 Dec-21 LDS NYMEX 9,200,000 $2.78 Apr-21 Oct-21
Q4 2021 LDS NYMEX 41,400,000 $2.68 $3.10 Jan-21 Dec-21 LDS NYMEX 1,550,000 $2.50 $2.80 Apr-21 Oct-21 LDS NYMEX 4,600,000 $2.74 Jan-21 Dec-21 LDS NYMEX 3,100,000 $2.78 Apr-21 Oct-21
16
CABOT OIL & GAS CORPORATION
Reconciliation of Net Income to Adjusted Net Income and Adjusted Earnings Per Share
17
Discretionary Cash Flow and Free Cash Flow Calculation and Reconciliation
20
21
22
CABOT OIL & GAS CORPORATION 23
We believe natural gas provides opportunity for a bright future, one filled with innovation and prosperity.
Slide Number 1
Fourth Quarter and Full-Year 2020 Highlights
Cabot Oil & Gas Strategy
2021 Capital Program & Outlook
Free Cash Flow ($mm)
Adjusted Earnings per Share
2021 Hedge Summary
Reconciliation of Net Income to Adjusted Net Income and Adjusted Earnings Per Share
EBITDAX Calculation and Reconciliation
Discretionary Cash Flow and Free Cash Flow Calculation and Reconciliation
Return on Capital Employed Calculation
Finding and Development Costs Calculations
Slide Number 23
2
This presentation includes forwardlooking 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. In addition, the declaration and payment of any future dividends, whether regular quarterly base dividends or annual supplemental dividends, will depend on the Company’s financial results, cash requirements, future prospects and other factors deemed relevant by the Board. 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 10K 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.
3
Fourth Quarter 2020 • Adjusted net income (non-GAAP) of $104.7 million, or $0.26
per share
• Free cash flow (non-GAAP) of $122.9 million
• Daily production of 2,375 Mmcfe per day, exceeding the high-end of the Company’s guidance range
• Operating expenses per unit improved 3% year-over-year
Full-Year 2020 • Adjusted net income (non-GAAP) of $214.0 million, or $0.54
per share
• Fifth consecutive year of positive free cash flow generation
• Returned $159.4 million of capital to shareholders (146% of free cash flow)
• Repaid $87 million of debt maturities
– Subsequent to year-end, repaid an additional $88 million of debt that matured in January 2021
• Increased proved reserves by 6% to 13.7 Tcfe at an all- sources F&D cost of $0.35 per Mcfe
• Reduced GHG emissions intensity by 58 percent and methane emissions intensity by 70 percent
Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures 1 Includes direct operations, transportation and gathering, taxes other than income, exploration, DD&A, general and administrative, and interest expense
Q4 2020
Q4 2019
FY 2020
FY 2019
Realized Gas Price (Incl. Hedges) ($/Mcf) $1.90 $2.15 $1.68 $2.45
Realized Gas Price (Excl. Hedges) ($/Mcf) $1.89 $2.05 $1.64 $2.29
Net Income ($mm) $131.2 $146.9 $200.5 $681.1
Adjusted Net Income (non-GAAP) ($mm) $104.7 $120.8 $214.0 $698.8
Discretionary Cash Flow (non-GAAP) ($mm) $220.3 $277.5 $685.0 $1,360.8
Free Cash Flow (non-GAAP) ($mm) $122.9 $109.5 $109.1 $563.1
EBITDAX (non-GAAP) ($mm) $229.8 $300.3 $719.3 $1,408.6
Operating Expenses1 ($/Mcfe) $1.39 $1.43 $1.43 $1.44
Net Debt / EBITDAX (non-GAAP) 1.4x 0.7x 1.4x 0.7x
ROCE (non-GAAP) 7.6% 22.2% 7.6% 22.2%
CABOT OIL & GAS CORPORATION
Cabot Oil & Gas Strategy
Return Capital to Shareholders
Focus on Safe, Responsible and Sustainable Operations
• Generate financial returns that exceed our cost of capital by focusing on disciplined capital investment and maintaining a low cost structure
• 2020 ROCE of 7.6% despite the lowest natural gas price realizations in the Company's 31-year history as a public company
• Low cost structure provides a competitive advantage, especially in a low natural gas price environment
• Full-year 2020 operating expenses per unit (including interest expense and G&A) of $1.43 per Mcfe
• Net debt / LTM EBITDAX of 1.4x as of 12/31/2020
• Subsequent to year-end 2020, repaid $88 million of debt that matured in January 2021 and plan to repay the $100 million of September 2021 debt maturities with a portion of excess free cash flow
• 2020 program generated positive free cash flow for the fifth consecutive year with a significant expansion of positive free cash flow expected in 2021
• Initiated a “base plus supplemental” dividend strategy to achieve a minimum capital return target of at least 50% of annual free cash flow
• Excess free cash flow to be used for balance sheet enhancement, additional supplemental dividends, or opportunistic share repurchases
• Reduced GHG emissions intensity in 2020 by 58% to 1.31 metric tons of CO2e per thousand barrels of oil equivalent (Mboe) and methane emissions intensity by 70% to 0.025%
Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures
Increase Our Proved Reserve Base • Increased proved reserves by 6% in 2020 to 13.7 Tcfe at an all-sources F&D cost of $0.35 per Mcfe
• Over two decades of remaining Marcellus drilling locations across ~175,000 net acres in the core of the dry gas window in Northeast Pennsylvania
CABOT OIL & GAS CORPORATION
2021 Capital Program & Outlook
• For 2021, Cabot’s production guidance of 2,350 Mmcfe per day is based on a capital program of $530 - $540 million, representing a 6% reduction in capital spending year-over-year at the midpoint of the range
• 2021 capital is 32% lower than 2019 levels despite production levels being relatively flat from 2019 to 2021
• Disciplined capital allocation framework is focused on maintaining production flat in 2021 while enhancing capital returns to shareholders and repaying current debt maturities
• Any future improvement in natural gas prices for 2021 will not impact this capital allocation framework
• The Company’s 2021 program is expected to deliver a significant expansion of free cash flow, net income, and return on capital employed, while deleveraging the balance sheet below the target leverage ratio of 1.0x
5
$783
Capital Return to Shareholders ($mm)
6Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures 1 As of February 22, 2021
• Minimum annual capital return target of at least 50% of free cash flow comprised of a sustainable base dividend and an annual supplemental dividend
• Current quarterly base dividend of $0.10 per share that is positioned to grow over time (current annualized yield1 of 2.2%)
• Any supplemental dividend is expected to be declared and paid annually, with the first payment expected to occur in the fourth quarter of 2021
• The supplemental component of this dividend approach allows for sustainable capital return that is appropriately tailored for where we are in the natural gas price cycle
• Any excess free cash flow above the minimum capital return target of 50% of annual free cash flow will be utilized for balance sheet enhancement, additional supplemental dividends, or opportunistic share repurchases, depending on market conditions
• In 2021, Cabot plans to retire its $188 million of current debt maturities (including the $88 million tranche that was repaid in January) with a portion of excess free cash flow
$79 $111 $146 $159 $124
$873
$520
CABOT OIL & GAS CORPORATION
Free Cash Flow ($mm)
2017 2018 2019 2020
• Delivered positive free cash flow for the fifth consecutive year in 2020, despite the lowest average NYMEX price since 1995
• Anticipate a significant expansion of free cash flow in 2021, driven by higher price realizations and reduced capital spending
$2.31 $2.54 $2.45 $1.68
Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures 1 Including impact of derivatives
Realized Natural Gas Price ($/Mcf)1
CABOT OIL & GAS CORPORATION
8
7.3%
15.9%
22.2%
7.6%
2017 2018 2019 2020
• Focused on generating financial returns that exceed our cost of capital through the natural gas price cycle
• Generated ~8% ROCE in 2020 despite the lowest natural gas price realizations in the Company's 31-year history as a public company
• Targeting a significant expansion of ROCE in 2021 resulting from higher anticipated price realizations
$2.31 $2.54 $2.45 $1.68
Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures 1 Including impact of derivatives
Realized Natural Gas Price ($/Mcf)1
CABOT OIL & GAS CORPORATION
Adjusted Earnings per Share
Realized Natural Gas Price ($/Mcf)1 $2.31 $2.54 $2.45 $1.68
Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures 1 Including impact of derivatives
• Low cost structure allows for profitability through the natural gas price cycle
CABOT OIL & GAS CORPORATION
2017 2018 2019 2020
• Target leverage ratio of 1.0x through the natural gas price cycle
• Anticipate a significant reduction in the leverage ratio in 2021, resulting from higher anticipated realized prices and lower absolute debt levels
$2.31 $2.54 $2.45 $1.68
Note: See supplemental tables at the end of the presentation for a reconciliation of non-GAAP measures 1 Including impact of derivatives
Realized Natural Gas Price ($/Mcf)1
CABOT OIL & GAS CORPORATION
• Industry-leading cost structure supports profitability and financial returns even in the trough of the natural gas price cycle
1 Excludes DD&A, stock-based compensation, non-cash interest expense associated with income tax reserves, amortization of deferred financing cost and dry hole cost
CABOT OIL & GAS CORPORATION
12
Climate Change / GHG Emissions • Net Production: 100% onshore U.S natural gas
• 2020 GHG emissions intensity: 1.31 metric tons CO2e per thousand barrels of oil equivalent, a 58% reduction compared to 2019
• 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
• December 2020 36-month OSHA Total Recordable Incidence Rate (TRIR) of 0.26
• Management comprised of 22% female and 18% ethnically diverse team members
• Contributed funds to educational assistance programs in Susquehanna County, Pennsylvania, to provide pre-K tuition assistance and equipment for schools such as laptops, tablets, internet access and 3-D printers
• Donated funds to various community programs in Susquehanna County, Pennsylvania to address food insecurity in the area
• 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 13
Appendix
2021 Guidance
(1) Based on $2.75 NYMEX and basis forward curves as of February 3, 2021 (2) Excluding exploratory dry hole costs; includes exploration administration expense and geophysical expenses (3) Excluding stock-based compensation
• 2021E production guidance: 2,350 Mmcfe per day
Q1 2021E production guidance: 2,250 – 2,300 Mmcfe per day
• 2021E capital guidance: $530 - $540 million
• 2021E weighted-average natural gas price differential1: ($0.50) to ($0.55) per Mcf
• 2021E wells drilled and completed: ~80 net wells
• 2021E income tax rate guidance: 23%
• 2021E deferred tax rate guidance1: 30% - 35%
2021E Natural Gas Price Exposure By Index Index Q1 2021 FY 2021 NYMEX (Q1: less $0.50 / FY: less $0.45) 27% 25% Fixed Price (Q1: ~$2.85 / FY: ~$2.65) 19% 23% Transco Z6 NNY (less $0.65) 19% 17% TGP Z4 –300 Leg 9% 9% Power Pricing 9% 9% Leidy Line 8% 8% Dominion 6% 5% Millennium 2% 4% Algonquin (less $0.80) 1% 0%
Note: Fixed price percentages above include volumes associated with sales agreements that have floor prices. An additional deduct of ~$0.05 per Mcf should be applied to account for fuel use.
FY 2021E Cost Assumptions ($/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 $0.05 - $0.06 General and administrative ($mm)3 $62 - $66
2021 Guidance
15
As of 12/31/2020 $bn
Debt $1.1
Debt Maturity Schedule ($mm) as of 12/31/2020
Capitalization / Liquidity
CABOT OIL & GAS CORPORATION
Swaps Collars
Ceiling Price Duration Q1 2021
LDS NYMEX 40,500,000 $2.68 $3.26 Jan-21 Dec-21 LDS NYMEX 4,500,000 $2.74 Jan-21 Dec-21
Q2 2021 LDS NYMEX 40,950,000 $2.68 $3.00 Jan-21 Dec-21 LDS NYMEX 4,550,000 $2.50 $2.80 Apr-21 Oct-21 LDS NYMEX 4,550,000 $2.74 Jan-21 Dec-21 LDS NYMEX 9,100,000 $2.78 Apr-21 Oct-21
Q3 2021 LDS NYMEX 41,400,000 $2.68 $3.00 Jan-21 Dec-21 LDS NYMEX 4,600,000 $2.50 $2.80 Apr-21 Oct-21 LDS NYMEX 4,600,000 $2.74 Jan-21 Dec-21 LDS NYMEX 9,200,000 $2.78 Apr-21 Oct-21
Q4 2021 LDS NYMEX 41,400,000 $2.68 $3.10 Jan-21 Dec-21 LDS NYMEX 1,550,000 $2.50 $2.80 Apr-21 Oct-21 LDS NYMEX 4,600,000 $2.74 Jan-21 Dec-21 LDS NYMEX 3,100,000 $2.78 Apr-21 Oct-21
16
CABOT OIL & GAS CORPORATION
Reconciliation of Net Income to Adjusted Net Income and Adjusted Earnings Per Share
17
Discretionary Cash Flow and Free Cash Flow Calculation and Reconciliation
20
21
22
CABOT OIL & GAS CORPORATION 23
We believe natural gas provides opportunity for a bright future, one filled with innovation and prosperity.
Slide Number 1
Fourth Quarter and Full-Year 2020 Highlights
Cabot Oil & Gas Strategy
2021 Capital Program & Outlook
Free Cash Flow ($mm)
Adjusted Earnings per Share
2021 Hedge Summary
Reconciliation of Net Income to Adjusted Net Income and Adjusted Earnings Per Share
EBITDAX Calculation and Reconciliation
Discretionary Cash Flow and Free Cash Flow Calculation and Reconciliation
Return on Capital Employed Calculation
Finding and Development Costs Calculations
Slide Number 23