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Oil & Gas Stock Roundup: BP and TOTAL Report Q2 Earnings

Nilanjan Choudhury

It was a week where oil prices tallied a small gain but natural gas futures settled lower.

On the news front, European integrated majors BP plc BP and TOTAL S.A. TOT reported contrasting second-quarter earnings.

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures edged up 0.8% to close at $56.20 per barrel, natural gas prices dropped 3.6% for the week to finish at $2.169 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Schlumberger & Halliburton Report Q2 Earnings)

The U.S. crude benchmark logged a gain after the U.S. government reported a sixth straight fall in domestic supplies. Prices also benefited from the possibility of mounting geopolitical tensions in the Middle East hampering global supplies.

Meanwhile, natural gas prices plunged to more than three-year lows, pressured by healthy supply and a bearish near-term weather forecast that signals weak power sector demand for the fuel.

Recap of the Week’s Most Important Stories

1.  British supermajor BP reported second-quarter 2019 adjusted earnings of 83 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line surpassed the Zacks Consensus Estimate of 78 cents. Oil equivalent volumes from key upstream projects along with higher refining marker margin primarily contributed to better-than-expected earnings.

In the second quarter, total production of 2.625 million barrels of oil equivalent per day (MMBoe/d) was higher than 2.465 MMBoe/d in the year-ago quarter. Key upstream projects primarily drove quarterly production volumes.

BP's net debt including leases was $56,650 million at the end of the second quarter, higher than $39,277 million in the prior-year quarter. Gearing was recorded at 31%, up from 27.5% in the prior-year quarter. Through the first half of 2019, the integrated energy firm made a payment of $2.1 billion, after tax, associated with the oil spill incident in the Gulf of Mexico. (Read more BP Q2 Earnings Beat on Key Upstream Projects, Declines Y/Y)

2.   French behemoth TOTAL reported second-quarter 2019 operating earnings of $1.05 per share (€0.94 per share), lagging the Zacks Consensus Estimate of $1.23 by 14.6%. The bottom line also declined 19.8% from the year-ago figure of $1.31 per share (€1.10 per share). This decline was primarily due to softness in the prices of commodities compared with the previous year.

Cash and cash equivalents as of Jun 30, 2019 were $26.7 billion compared with $26.5 billion at the end of 2018. Net debt-to-capital ratio was 20.6% at the end of the quarter, up from 16.5% in the comparable period of 2018. TOTAL repurchased 14.9 million shares during second-quarter 2019. Further, the Zacks Rank #3 (Hold) company has plans to repurchase shares worth $1.5 billion in 2019, which is part of the $5-billion buyback program for the 2018-2020 time frame.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TOTAL’s 2019 upstream production is expected to increase 9% from a year ago. It expects the operations at Lara 1 in Brazil, Kaombo South in Angola, Culzean in the U.K. and Johan Sverdrup in Norway to boost production levels. Facilities that started operations in 2018 are also expected to contribute to output growth. In 2019, it aims to invest in the range of $14-$15 billion. (Read more TOTAL Q2 Earnings Miss Estimates, Revenues Drop Y/Y)

3.   Refining giant Valero Energy VLO posted second-quarter 2019 income of $1.51 per share, beating the Zacks Consensus Estimate of $1.37. The better-than-expected results can be attributed to rebound in gasoline cracks in all regions served by the company and the expansion of the Diamond Green Diesel plant.

During the quarter, refining throughput volumes were approximately 3 million barrels per day (BPD), up 70,000 BPD from the prior-year quarter. Refinery throughput capacity utilization in the reported quarter was 94%.

Second-quarter capital expenditure totaled $740 million, of which $514 million was allotted for sustaining the business. At the end of the quarter, the company had cash and cash equivalents of $2 billion, and debt of $9.5 billion. Its debt-to-capitalization ratio was 26%.(Read more Valero Q2 Earnings, Sales Beat on Gasoline Crack Rebound)

4.   Oilfield services provider TechnipFMC plc FTI reported stellar results in the second quarter of 2019, surpassing both earnings and sales estimates. The oilfield services provider reported adjusted earnings of 39 cents a share, topping the Zacks Consensus Estimate of 35 cents. The outperformance was attributed to better-than expected contribution from all the three segments of the firm.

On a further encouraging note, the company booked record inbound orders of $11.2 billion, skyrocketing 164.2% year over year. Markedly, the firm’s backlog skyrocketed 73.4% y/y to $25.8 billion.

While TechnipFMC has kept revenue and EBITDA margin forecasts for the Surface Technologies segment intact, it has tweaked projections for Onshore/Offshore and Subsea segments. The company now expects revenues from the Subsea unit within $5.6-$5.8 billion, higher than the prior forecast of $5.4-$5.7 billion.

EBITDA margin forecast is pegged a tad higher at 11.5% than the prior estimate of 11%. Sales projections from the Onshore/Offshore segment remain unchanged in the band of $6-$6.3 billion. Increased EBITDA margin of 16.5% versus prior forecast of 14% brightens prospects. (Read more TechnipFMC Q2 Earnings Top, Backlog Jumps, View Up)

5.   Cabot Oil & Gas Corporation COG reported second-quarter 2019 earnings per share — adjusted for special items — of 36 cents, surpassing the Zacks Consensus Estimate of 33 cents and the year-ago figure of 13 cents. The strong results can be attributed to lower costs and slightly higher-than-anticipated production. Precisely, the company’s production came in at 213.8 billion cubic feet equivalent (Bcfe), just ahead of the Zacks Consensus Estimate of 213 Bcfe.

Operating cash flows were $326.7 million (up 19.3% year over year), while capital expenditures totaled $225.9 million (down 2.2%). Free cash flow (FCF) — which is a key metric to gauge a company’s financial health — was $72.7 million during the second quarter, turning around from a negative $62 million a year ago. As of Jun 30, 2019, the company had cash and cash equivalents of $241.4 million and total debt of $1.2 billion, with a debt-to-capitalization ratio of 34.2%.

For the third quarter, Cabot provided its net production guidance in the range of 2,360-2,410 million cubic feet equivalent a day. Meanwhile, the company adjusted its full-year production growth guidance to a range of 16 to 18%, down from the previous projection of 20%. The downward revision was attributed to a change in operating plan that will push out some production to late December or early January. Finally, Cabot raised its full-year capital expenditure projection to $800-$820 million, as against $800 previously. The uptick reflects incremental drilling and completion activity.(Read more Cabot Beats on Q2 Earnings, Expands Buyback, FCF Soars)

Price Performance

The following table shows the price movement of some the major oil and gas players over the past week and during the last 6 months.

Company

Last Week

Last 6 Months

XOM

-0.2%

+2.8%

CVX

-1.1%

+8.5%

COP

-2.6%

-12.1%

OXY

-1.4%

-21.4%

SLB

+3.4%

-10.5%

RIG

-3.6%

-30%

VLO

+0.8%

-3.5%

MPC

+2.9%

-13.9%

 

The Energy Select Sector SPDR – a popular way to track energy companies – was down 0.5% last week. The worst performer was offshore driller Transocean Ltd. RIG whose stock fell 3.6%.

Longer-term, over six months, the sector tracker is down 1.4%. Again, Transocean was the major loser during this period, experiencing a 30% price decrease.

What’s Next in the Energy World?

As usual, market participants will be closely tracking the regular releases i.e. the U.S. government statistics on oil and natural gas - one of the few solid indicators that comes out regularly. Energy traders will also be focusing on the Baker Hughes data on rig count and the 2019 Q2 earnings, with quite a few supermajors and S&P 500 members coming out with quarterly results.

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TechnipFMC plc (FTI) : Free Stock Analysis Report
 
Valero Energy Corporation (VLO) : Free Stock Analysis Report
 
TOTAL S.A. (TOT) : Free Stock Analysis Report
 
BP p.l.c. (BP) : Free Stock Analysis Report
 
Transocean Ltd. (RIG) : Free Stock Analysis Report
 
Cabot Oil & Gas Corporation (COG) : Free Stock Analysis Report
 
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