A month has gone by since the last earnings report for QEP Resources (QEP). Shares have lost about 1.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is QEP Resources due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
QEP Resources’ Q1 Earnings Beat Estimates, Revenues Miss
QEP Resources reported first-quarter 2019 earnings per share — excluding special items — of 15 cents against the Zacks Consensus Estimate of loss of 2 cents. The outperformance was attributed to lower operating expenses and income-tax benefits. The bottom line also improved significantly from the year-ago loss of 20 cents per share.
Quarterly revenues of $280.6 million lagged the Zacks Consensus Estimate of $288 million. Sales also declined 34.4% from the year-ago figure.
Overall first-quarter production of the company came in at 7,806.3 thousand barrels of oil equivalent (Mboe), down 33% from the year-ago period. The divestment of Haynesville/Cotton Valley and Uinta Basin assets attributed to the fall in production volumes. Further, lack of new well completions caused 9% y/y decline in volumes from the Williston Basin.
While natural gas volumes substantially declined74% y/y to 9.2 billion cubic feet (Bcf), natural gas liquids output jumped 30% to 1,178.8 thousand barrels (Mbbl). Oil volumes increased marginally from 4,974 Mbbl in first-quarter 2018 to 5,083.6 Mbbl (65% of the total output) in the quarter under review.
With the company shifting its focus toward Permian Basin, equivalent production from the area jumped 47% year over year to 4,082.3 Mboe, partly offsetting the overall decline in volumes. QEP Resources allocated about 80% of its 2019 capital budget for this lucrative play, as it aims to transform itself into a Permian pure play.
QEP Resources’ net realized natural gas price in the quarter was $2.18 per thousand cubic feet, down 26%from the year-ago level of $2.94. Net oil price realization declined 6% year over year to $48.50 per barrel. Net NGLs price realization also plummeted 35% year over year to $14.31 per barrel.
Total operating expenses in the quarter decreased to $283.2 million from $411 million a year ago. The decline was primarily due to lower depreciation, lease operating costs, and transportation and processing expenses.
Capital investment, excluding acquisitions, decreased more than 60% year over year to $167.2 million in the first quarter, mainly due to a fall in drilling and completion activities in Permian and Williston basins.
As of Mar 31, 2018, QEP Resources had $89.9 million in cash and cash equivalents. The company’s long-term debt was $2,026.7 million, representing a debt-to-capitalization ratio of 43.4%.
For full-year 2019, QEP Resources expects total oil-equivalent production in the range of 28.5-30.3 MMboe versus the earlier forecast of 28-29.9 MMboe. While oil and NGL output projections remain unchanged, the company now anticipates gas volumes to increase 10.4% from the midpoint of the prior guidance to 25.5-27.5 Bcf.
While the firm has kept its projections for lease operating and adjusted transportation and processing costs unchanged, QEP Resources projects general/administrative expenses within $165-$175 million versus prior forecast of $170-$180 million.Capital expenditure guidance for 2019 remains intact in the range of $615-$665 million. The mid-point of the guidance is 39% lower than 2018 capital spending.
For second-quarter 2019, QEP Resources expects total oil-equivalent production in the range of 6.8-7.2 million barrels of oil equivalent (MMboe). Oil and condensate production is expected within 4.95-5.15 million barrels (MMBbls). While gas output is expected in the range of 5.4-5.8 Bcf, NGLs production is estimated within 0.9-1.1 MMBbls. Capital outlay for the second quarter is anticipated in the band of $185-$205 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted -13.89% due to these changes.
Currently, QEP Resources has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, QEP Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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