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Jagged Peak (JAG) Q2 Earnings Lag Estimates on Low Oil Prices

Zacks Equity Research

Jagged Peak Energy Inc. JAG reported second-quarter 2019 adjusted earnings of 10 cents per share, missing the Zacks Consensus Estimate by a penny and deteriorating from the year-ago quarter’s 20 cents.

Revenues of $147 million surpassed the Zacks Consensus Estimate of $142 million but were lower than the year-ago quarter’s $159 million.

The weak quarterly earnings were due to lower oil equivalent price realization and surge in lease operating expenses. The negatives were partially offset by higher production volumes.  

Production Surges

In the quarter, total production volumes were recorded at 3,482 thousand barrels of oil equivalent (MBoE), up from 3,145 MBoE in the June quarter of 2018. Notably, oil contributes 76.1% of the total production volumes.

While oil production increased 8.1% year over year, NGL volumes jumped 37%. Natural gas production was reported at 2,334 million cubic feet (MMcf), up 5.1% year over year.

Price Realizations Plunge

The average realized price, excluding realized hedge settlements, per barrel of oil equivalent was $42.15. The figure was significantly lower than the year-ago quarter’s $50.41 a barrel. Average realized price for oil was $54.98 per barrel compared with $60.66 in the year-ago quarter.

Expenses Increase

Total operating expenses in the quarter amounted to $102.3 million, higher than the year-ago level of $85.5 million. Lease operating expenses which jumped more than 48% primarily led to the surge in total operating costs.  

Capital Expenditure & Balance Sheet

For the June quarter, the company reported capital spending for drill, complete and equip activities at $152 million. As of Jun 30, 2019, the company’s total cash and cash equivalents amounted to $24.8 million, and long-term debt was $639.9 million, with a debt-to-capitalization ratio of 41.5%.

Updated Guidance

The company expects its total oil equivalent daily volumes for the September quarter of 2019 at a band of 38.6 to 40.2 thousand barrels of oil equivalent per day (MBoE/D). Of the total production, the probable oil contribution will be 76%.

For 2019, the company’s production is estimated in the range of 38.6-41 MBoE/D, of which roughly 76% is expected to be oil.

Jagged Peak projects total capital budget for 2019 in the range of $617-$653 million.

Zacks Rank & Stocks to Consider

Jagged Peak currently carries a Zacks Rank #3 (Hold). Meanwhile, a few better-ranked players in the energy space include World Fuel Services Corporation INT, Delek Logistics Partners, L.P. DKL and TC PipeLines, LP TCP. All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.      

World Fuel beat the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being 16.4%.

Delek Logistics is likely to see earnings growth of 4.9% through 2019.

TC PipeLines has an average positive earnings surprise of 12.6% for the past four quarters.

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