Houston-based Cabot Oil & Gas Corp. reported its best-ever fourth quarter results and higher earnings overall in 2003, but like many other North American-based independents, equivalent production year-over-year was slightly off.

Cabot produced 89 Bcfe in 2003 versus 91.1 Bcfe in 2002. The decrease was accelerated by declines in Cabot’s South Louisiana assets, the company said.

“As has been highlighted many times, opportunities for replacing reserves are getting increasingly more difficult to find, but again Cabot was able to successfully accomplish this and at a reasonable cost to find,” said CEO Dan O. Dinges.

On the East Coast, however, Cabot found success, adding 72 Bcfe, or about 3.3%, at a cost of $0.39/Mcfe “on the strength of a very solid development drilling program that was expanded and will be expanded again in 2004.” Separately, Cabot’s West Coast production declined primarily because of the level of reinvestment in 2002 and 2003. It also reported steep declines from its once prolific South Louisiana assets.

“After three years of very prolific production from four discoveries, the [South Louisiana] wells began declining and now account for only 25% of Gulf Coast production, down from 50% at the start of 2003,” Dinges said. “While these declines hindered growth this year in the Gulf Coast, our 2003 drilling program was able to recapture a portion of these daily volumes by year-end as evidenced by the Gulf Coast’s increase in natural gas volumes between comparable fourth quarters.”

Dinges said 2003 “provided several highlights including exploration success in the Rocky Mountains and the significant expansion of our commodity play from our East operations. Add to this, development drilling success in the Gulf Coast along with the expansion offshore where we were four out of seven with net production of 22-25 MMcf/ day expected in 2004, Cabot posted a solid year,”

Cabot is planning to invest $207 million in its exploration and production operations this year, said Dinges. “The regional breakdown consists of 42% for the Gulf Coast, 28% for the East, 23% in the West and 7% in Canada. The focus of this effort is to explore in the Gulf Coast and Canada, exploit our two exploration successes in the Rocky Mountains and continue the momentum in the East that gave us production and reserve growth in 2003 by planning to drill 179 wells in 2004.”

Dinges added, “We have numerous exploration opportunities in our drilling inventory. The 2004 program exposes Cabot to a net unrisked reserve potential of 400-500 Bcfe.”

Total audited proved reserves at the end of 2003 were 1,142.1 Bcfe, down slightly from 2002 because of 53.4 Bcfe of reserve sales during the year. Cabot also replaced 127% of its production, 125% through the drill bit in 2003. For the last five years, Cabot’s production replacement percentage is 163% at an average finding and development cost of $1.38/Mcfe.

Cabot reported its best-ever fourth quarter results, posting net income of $19.2 million (60 cents/share), more than double 4Q2002’s net income of $8.7 million (27 cents). Discretionary cash flow also improved between comparable quarters with $71.7 million in 2003 versus $58.1 million in 2002. However, cash flow from operations declined between comparable quarters to $35.4 million versus $55.9 million because of changes in working capital primarily driven by a decrease in accounts payable and an increase in accounts receivable.

“Although not as dramatic, the fourth quarter also saw higher realized prices (16% for natural gas and 18% for oil), increasing exploration expenses, more brokered activity and higher taxes other than income when compared to the fourth quarter of 2002,” the company said in a statement.

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