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QEP Resources (QEP) Q1 Loss Wider Than Expected, Sales Top

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QEP Resources, Inc. QEP recently reported first-quarter 2018 loss per share — excluding special items — of 20 cents, wider than the Zacks Consensus Estimate of a loss of 18 cents and the prior-year quarter’s loss of 14 cents per share. The underperformance could be attributed to lower production and increase in operating expenses.

Quarterly revenues of $428.9 million beat the Zacks Consensus Estimate of $374 million. Sales were also up from the year-ago quarter’s figure of $420.1 million. The top line was benefited by a rise in overall net realized price.

QEP Resources announced strategic initiatives for 2018 that are expected to make the company a Permian Basin-focused one. The company wants to divest the non-Permian assets in the second quarter of 2018. Proceeds from the divestments will be used for Permian Basin development, debt reduction and share repurchases.

QEP Resources, Inc. Price, Consensus and EPS Surprise

QEP Resources, Inc. Price, Consensus and EPS Surprise | QEP Resources, Inc. Quote

Volume Analysis

Overall production of the company — engaged in shifting its focus to the Permian Basin — in the quarter came in at 11,724.6 thousand barrels of oil equivalent (Mboe), down 10% than the year-ago period. While natural gas volumes of 35.1 billion cubic feet (Bcf) fell 17% year over year, natural gas liquid volumes plummeted 33% to 904.4 thousand barrels (Mbbl). However, oil production in the quarter increased 6% from the prior-year quarter to 9,740 Mbbl.  

The fall in overall production was primarily due to 52% decline in output from the company’s Northern Region. It was partially offset by a rise in volume from the Southern Region, where total production increased 106%. Notably, production in the Permian Basin increased 100% year over year to 2,782.9 Mboe in the quarter. Also, Haynesville/Cotton Valley production increased 110% from the year-ago quarter to 4,290.5 Mboe.

Realized Prices

QEP Resources’ net realized natural gas price in the quarter was $2.94 per thousand cubic feet (Mcf), up 4% from the year-ago quarter’s price of $2.84. Net oil price realization improved 10% year over year to $51.54 per barrel. Overall net realized equivalent price averaged $32.34 per barrel of oil equivalent in the quarter, up 15% from the prior-year quarter.

Operating Expenses and Capital Expenditure

Total operating expenses in the quarter decreased to $411 million from $425.3 million a year ago. The decrease was primarily due to a fall in transportation and processing costs, as well as a decline in the purchased oil and gas expense.

Capital investment, excluding acquisitions, increased nearly 95.4% year over year to $418.8 million in the first quarter.

Additionally, in the quarter, the company made $36.2 million worth acquisitions, primarily focused on oil and gas assets in the Permian Basin. The company also closed the divestment of several non-core assets that fetched a total of around $33.3 million in the quarter.

Share Repurchase

QEP Resources bought back and retired 5,621,540 shares in March for $52.8 million. Moreover, during the end of that month, the company initiated a repurchase program of 592,310 shares for $5.6 million, which settled in April. The company also authorized a share buyback program worth $1.25 billion, which is expected to be paid using proceeds from the divestments.


For 2018, QEP Resources increased total oil-equivalent production guidance to 48.3-51.9 million barrels of oil equivalent (MMboe). Total capital investment is expected to be in the range of $1,070-$1,170 million. Notably, 70% of the capital investment is expected to be channeled toward the Permian Basin. For the second quarter of 2018, the company expects equivalent production to be within 12.4-13.1 MMboe.

Balance Sheet

As of Mar 31, 2018, QEP Resources had no cash and cash equivalents. The company’s long-term debt was $2,458.1 million, representing a debt-to-capitalization ratio of 39.9%.

Zacks Rank and Stocks to Consider

Denver, CO-based QEP Resources currently carries a Zacks Rank #3 (Hold).

Investors interested in the Energy sector can opt for some better-ranked stocks in the same space like Nine Energy Service, Inc. NINE, Oasis Midstream Partners LP OMP and CNOOC Limited CEO. While Nine Energy Service sports a Zacks Rank #1 (Strong Buy), Oasis Midstream and CNOOC carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based Nine Energy Service is an onshore service provider. For 2018, the bottom line is likely to be up 33.4%. In the last reported quarter, the company delivered a positive earnings surprise of 6.3%.

Houston, TX-based Oasis Midstream is an integrated energy partnership. The company’s revenues for 2018 are anticipated to improve 29.3% from the prior-year quarter, while its earnings are expected to increase 337.2%.

Hong Kong-based CNOOC is an integrated energy company. The company’s top line for 2018 is anticipated to improve 49% year over year, while its bottom line is expected to increase 82.8%.

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