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Oil & Gas Stock Roundup: Linde, Enbridge & TC Energy Report Q4 Earnings

Nilanjan Choudhury

It was a week where the U.S. crude benchmark recovered some ground but natural gas prices ended further below the psychologically important level of $2.

On the news front, Linde plc LIN, Enbridge Inc. ENB and TC Energy TRP reported December quarter earnings. 

Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures rose 3.4% to close at $52.05 per barrel, natural gas prices dropped 1.1% for the week to finish at 1.837 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: TOTAL & BP Report Q4 Earnings)

The crude benchmark gained for the first time in six weeks after a data report showed a decrease in fuel supplies. The U.S. Energy Department's latest inventory release revealed that gasoline stocks tallied a surprise drop while distillate fuel supplies (including diesel and heating oil) were down for a fourth consecutive week.

This more than offset the impact of fears that the coronavirus outbreak in China would have a severe impact on oil demand. Further, indications that the OPEC+ group is preparing deeper output cuts to stem the decline, also had a slight positive effect on prices.

Meanwhile, natural gas ended slightly lower despite a larger-than-expected decrease in supplies, primarily due to warm winter weather and strong production.  

Recap of the Week’s Most Important Stories

1.  Leading industrial gas producer and distributor Linde reported adjusted earnings from continuing operations of $1.89 per share in fourth-quarter 2019, beating the Zacks Consensus Estimate of $1.84. Moreover, the bottom line improved from the year-ago figure of $1.51 per share. The Zacks Rank #2 (Buy) company’s strong quarterly earnings were supported by improved prices across Americas, Asia Pacific, Europe, Middle East & Africa.

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

Pro forma sales from the Americas unit (Linde’s largest business segment) in the December-end quarter of 2019 were $2,737 million, up from $2,684 million in the year-ago comparable period. Moreover, the segment contributed $676 million to pro forma operating profit, mirroring an improvement from $609 million in fourth-quarter 2018. Higher prices and volume primarily contributed to the outperformance.

As of Dec 31, 2019, Linde had cash and cash equivalents of $2,700 million. Long-term debt totaled $10,693 million. Its debt-to-capitalization ratio is 21.3%. The company expects adjusted EPS of $8-$8.25 for 2020, suggesting a year-over-year improvement of 9-12%. (Read more Linde's Q4 Earnings Beat Estimates on Higher Prices)

2.   Canadian pipeline giant Enbridge reported fourth-quarter 2019 earnings per share of 46 cents, missing the Zacks Consensus Estimate of 50 cents and declining from the year-ago quarter’s profit of 49 cents. The underperformances were owing to lower contributions from Mainline System. This was partly compensated by higher distributed natural gas volumes.

In fourth-quarter 2019, the company reported DCF of C$2,051 million compared with C$1,863 million a year ago. Moreover, Enbridge hiked the quarterly dividend by 9.8% to 81 Canadian cents per share. The raised dividend will likely be payable on Mar 1 to shareholders of record as on Feb 14.

At the end of fourth-quarter 2019, the company reported total debt of C$64,963 million, and cash and cash equivalents of C$648 million.  Its debt-to-capitalization ratio was 49.6%. For 2020, the company has reaffirmed its guidance for DCF per share at the band of C$4.50 to C$4.80. Enbridge also projects EBITDA for 2020 at C$13.7 billion. (Read more Enbridge Misses Q4 Earnings & Revenue Estimates)

3.   Another Canadian midstream behemoth TC Energy fourth-quarter 2019 earnings of 78 cents per share came in line with the Zacks Consensus Estimate as well as the year-ago figure. This performance is primarily attributable to a solid progress in the company’s projects at U.S. Natural Gas Pipelines, Mexico Natural Gas Pipelines plus the Power and Storage segments. Contributions from growth projects worth C$8.7 billion that came online in 2019 also aided the earnings.

However, the company’s comparable EBITDA of C$2.3 billion in the quarter was down from C$2.5 billion reported in the same period last year owing to lower contribution from the Canadian Natural Gas Pipelines segment. TC Energy’s revenues of C$3.26 billion dropped 16.42% year over year.

TC Energy's board of directors announced an 8% dividend hike in its first-quarter 2020 to 81 Canadian cents per share (or C$3.24 cents annually). This marks the company’s 20th consecutive dividend payout hike. The move is indicative of its commitment to create value for its shareholders and also underlines its confidence in business growth. (Read more TC Energy Q4 Earnings Meet, Sales & EBITDA Fall Y/Y)

4.   TechnipFMC plc FTI recently provided a guidance update on fourth-quarter 2019 segmental operations. The oilfield services provider envisioned its fourth-quarter non-cash impairment charges to be $2.4 billion, primarily due to sinking market capitalization induced by geopolitical turmoil and softened commodity prices. The company is a leading manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry.

TechnipFMC estimates its full-year revenues to be 13.5 billion, indicating a movement toward the midpoint of the earlier guided range. The company is likely to have borne corporate expenses within its previously provided projection of $210-$215 million.

TechnipFMC expects its full-year adjusted EBITDA margin for the Subsea, Onshore/Offshore and Surface Technologies units to meet or exceed the respective past expectation of 11.5%, 16.5% and 10%.  (Read more TechnipFMC Suffers Market Cap Erosion, To Bear $2.4B Charge)

5.   Marathon Oil MRO reported fourth-quarter 2019 results wherein both earnings and revenues missed the respective Zacks Consensus Estimate. Weaker-than-expected net sales volumes caused this underperformance. Precisely, the same totaled 411 thousand barrels of oil equivalent per day (MBOE/d), falling short of the Zacks Consensus Estimate of 418 MBOE/d.

Marathon Oil repurchased $350 million of shares in 2019. It also paid out $162 million as dividends. As of Dec 31, it had cash and cash equivalents worth $858 million and long-term debt of 5,501 million. Debt-to-capitalization ratio of the company was 31.16%.

Marathon Oil’s 2020 capital expenditure is trimmed by almost 11% to $2.4 billion (of which $2.2 billion is allocated to development capital) from $2.68 million in 2019. For the first quarter of the ongoing year, the company anticipates its U.S. oil production guidance between 192,000 and 202,000 bpd. It projects its total production guidance in the 204,000 - 218,000 bpd range. For 2020, the company forecasts total U.S. oil production growth of 6% at the midpoint of 198,000 -208,000 bpd guided range. (Read more Marathon Oil Q4 Earnings Miss on Weak Oil Realizations)

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%

-13.8%

CVX

+2.2%

-6%

COP

+1.1%

+8.1%

OXY

-0.7%

-8.8%

SLB

+1.5%

-1.3%

RIG

-4.8%

-4.3%

VLO

-1.7%

+3.5%

MPC

+6.6%

+18.1%

The Energy Select Sector SPDR – a popular way to track energy companies – rose 1.1% last week. The best performer was Findlay, OH-based refiner Marathon Petroleum MPC whose stock jumped 6.6%.

But longer-term, over six months, the sector tracker is down 7.1%. Integrated behemoth ExxonMobil XOM was the major loser during this period, experiencing a 13.8% price decline.

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. The Baker Hughes data on rig count will also be on the energy traders' radar, plus the 2019 Q4 earnings, with a few energy biggies coming out with quarterly results.

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