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QEP Resources Slips to Loss in Q4, Suspends Dividend

Zacks Equity Research

Domestic energy explorer QEP Resources Inc. QEP reported narrower-than-expected loss for fourth-quarter 2015 due to a massive decline in operating expenses. This was offset partially by lower production and price realizations.  

The company reported loss per share – adjusted for special items – of 1 cent, narrower than the Zacks Consensus Estimate of a loss of 12 cents. QEP Resources had reported a profit of 22 cents per share in the prior-year quarter.

Quarterly revenues of $468.3 million decreased about 38.2% from fourth-quarter 2014 and failed to surpass the Zacks Consensus Estimate of $603 million.

Dividend Suspension

QEP Resources has decided to suspend its dividend indefinitely. The move will likely leave the company will additional liquidity especially in an unfavorable business environment of persistent oil and gas price weakness.

Volume Analysis

QEP Resources’ overall production during the fourth quarter was 84 billion cubic feet equivalent (Bcfe), down 2% from the prior-year quarter. Notably, gas accounted for 54.8% of total production. A significant decrease in production from the Williston and Uinta Basins led to the downside. A fall in output in the Midcontinent area also added to the downfall.  

Natural gas volumes improved 4% year over year to 46 Bcf, while liquid volumes fell over 8% to 6,334.9 thousand barrels.   

Realized Prices

QEP Resources’ average realized natural gas price in the quarter was $3.04 per thousand cubic feet, down from the year-ago quarter price of $3.93. Moreover, average oil price realization decreased roughly 22% to $59.57 per barrel. 

Overall net realized equivalent price averaged $5.47 per thousand cubic feet equivalent in the quarter, reflecting a 23% decline from the year-ago figure.

Operating Expense

Total operating expenses for the quarter came in at $610.6 million, reflecting a decline of almost 68% from $1,886.1 million in the year-ago quarter.  

Proved Reserves

QEP announced proved reserves of 3.6 trillion cubic feet equivalent (Tcfe) as of Dec 31, 2015, down almost 8% from 2014. Total proved developed reserves were 58% of total reserves. Crude oil and NGL comprised about 42% of total proved reserves against 41% in 2014

Balance Sheet

As of Dec 31, 2015, QEP Resources had cash and cash equivalents of $376.1 million. The company’s long-term debt was $2,042 million, representing a debt-to-capitalization ratio of 36%.  

Guidance

QEP Resources projects 2016 production between 300 Bcfe and 328 Bcfe. The company stated plans to lower its 2016 rig count by over 55%, which should result in slow production growth.

Capital investment for 2016 is projected within $450−$500 million. 

Zacks Rank & Stocks to Consider

Currently, QEP Resources carries a Zacks Rank #3 (Hold). Some better-ranked players in the energy sector include Antero Resources Corporation AR, EXCO Resources Inc. XCO and Halcón Resources Corporation HK. Each of these players carries a Zacks Rank #2 (Buy).

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QEP RESOURCES (QEP): Free Stock Analysis Report
 
HALCON RESOURCS (HK): Free Stock Analysis Report
 
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ANTERO RESOURCE (AR): Free Stock Analysis Report
 
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