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Hess (HES) Q4 Loss Narrower Than Expected, Revenues Beat

Zacks Equity Research

Hess Corporation HES reported adjusted fourth-quarter 2018 loss from continuing operations of 31 cents per share, narrower than the Zacks Consensus Estimate of a loss of 41 cents.The result can be attributed to lower oil equivalent production. The company had incurred a loss of $1.01 in the prior-year quarter.

Hess Corporation Price, Consensus and EPS Surprise

Hess Corporation Price, Consensus and EPS Surprise | Hess Corporation Quote

In 2018, the company posted a loss of 74 cents, wider than the Zacks Consensus Estimate of a loss of 46 cents but narrower than the year-ago quarter’s loss of $4.61.

Revenues increased to $1,682 million from $1,291 million in the year-ago quarter. The top line also surpassed the Zacks Consensus Estimate of $1,594 million.

For 2018, total revenues were $6,466 million, up from $5,391 million reported in 2017. Also, revenues beat the Zacks Consensus Estimate of $6,300 million.

The results were impacted by lower liquids price realization, which was offset by decline in operating costs.

Q4 Operational Update

In the quarter under review, the Exploration and Production business incurred a loss of $5 million, narrower than a loss of $2,592 million in the year-ago quarter.

Quarterly hydrocarbon production was 289 thousand barrels of oil equivalent per day, down 3.7% year over year.

Crude oil production was 158 thousand barrels per day compared with 173 thousand barrels in the year-ago quarter. Natural gas liquids production totaled 37 thousand barrels compared with 41 thousand barrels in the prior-year quarter. Natural gas output was 545 thousand cubic feet (Mcf) compared with 556Mcf in the year-ago quarter.   

Worldwide crude oil realization per barrel of $55.24 (including the impact of hedging) declined 0.4% year over year and also missed the Zacks Consensus Estimate of $65 per barrel. The average worldwide natural gas liquids selling price also fell to $21.19 per barrel from $22.78 in the year-ago quarter and came below than the Zacks Consensus Estimate of $24.18 per barrel.

Worldwide natural gas prices rose 30.6% year over year to $4.82 per Mcf and beat the Zacks Consensus Estimate of $4.81 per Mcf.

Operating Expenses

Operating expenses in the fourth quarter totaled $292 million, down more than 18% from the year-ago quarter’s tally of $358 million.

Financials

Quarterly net cash flow from operations was $881 million at the end of the fourth quarter. Hess’ capital expenditures totaled $618 million, up 8.8% from $568 million in the prior-year quarter.

As of Dec 31, 2018, the company had approximately $2,694 million in cash and $6,605 million in long-term debt. The debt-to-capitalization ratio at the end of the quarter was 38%.   

Q4 Price Performance

The pricing chart reveals that the company underperformed the industry in the October-to-December 2018 quarter. During this period, the company’s shares plunged 45.7% compared with the industry’s decline of 30.7%.

Outlook

The company expects to invest $2.9 billion in 2019 for exploration and production activities. Hess also projects 2019 production between 270,000 and 280,000 BOE/D, up from 248,000 BOE/D recorded in 2018.

Proved Reserves

As of Dec 31, 2018, the company posted proved reserves of crude and natural gas at 1,192 million BOE, up from 1,154 BOE as of Dec 31, 2017.The company replaced 170% of 2018 production at a finding and development cost of about $11.75 per boe.

Zacks Rank & Stocks to Consider

Hess carries a Zacks Rank #3 (Hold).

A few better-ranked players in the energy space are Evergy, Inc. EVRG, Sunoco L.P SUN and TransCanada Corp. TRP, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Evergy, through its operating subsidiaries Kansas City Power & Light Company (KCP&L) and Westar Energy, Inc, provides clean, safe and reliable energy in Kansas and Missouri. The company delivered average negative earnings surprise of 11.1% in the last four quarters.

Headquartered in Houston, TX, Sunoco operates as a wholesale fuel distributor. The company is expected to witness year-over-year earnings decline of 38.9% in 2018.

Calgary, Alberta-based TransCanada is a premier energy infrastructure provider in North America. The company generated average positive surprise of 19.1% in the trailing four quarters.

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