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WPX (WPX) Up 14.8% Since Last Earnings Report: Can It Continue?

·4 min read

It has been about a month since the last earnings report for WPX Energy (WPX). Shares have added about 14.8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is WPX due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

WPX Energy Q1 Earnings and Revenues Beat Estimates

WPX Energy Inc.’s first-quarter 2020 earnings of 7 cents per share beat the Zacks Consensus Estimate by 40% and improved from the year-ago reported figure of 5 cents.

The company reported first-quarter GAAP loss of 85 cents per share compared with a loss of 11 cents in the year-ago period.

Total Revenues

WPX Energy’s quarterly revenues of $1,398 million surpassed the Zacks Consensus Estimate of $629 million by 122.2% and improved 289.4% from the year-ago figure.

Highlights of the Release

Total production volumes in the first quarter were 196,900 barrels of oil equivalents per day (Mboe/d), up 27% year over year. Liquids volumes accounted for nearly 79% of total production, reflecting the company’s increased focus on oil.

Oil production in the quarter was 122.2 thousand barrels per day (Mbbl/d), which was nearly 27% higher than the year-ago level, courtesy of 35% volume growth in the Delaware basin over the past 12 months on the back of solid contribution from the acquired Felix Energy assets.

Total costs and expenses were $1,624 million, up 219.7% from $508 million in the year-ago quarter.

Interest expenses in the reported quarter were $48 million, up 17.1% from the year-ago figure.

The company initiated a program to repurchase up to $400 million shares in the next 24 months, which will further increase WPX Energy’s shareholder value. In the first quarter, it repurchased 10.4 million shares for $43.5 million. Since third-quarter 2019, WPX has retired a total of 16.1 million shares for $100.6 million.

Realized Prices & Hedges

Realized oil prices in the quarter were $42.13 per barrel, down 20% from the year-ago level.

Realized natural gas prices were $1.61 per thousand cubic feet, down 38% from a year ago. Realized prices for natural gas liquids were down 48% from the year-ago quarter to $8.72 per barrel. The substantial decline in natural gas and natural gas liquid prices did not allow the company to enjoy the full benefits from increase in total production.

For the remainder of 2020, WPX Energy has 91,787 barrels per day of oil hedged at a weighted average price of $57.88 per barrel. At present, more than 90% of remaining 2020 oil output of the company is hedged at just more than $57 per barrel.

Financial Update

Cash and cash equivalents of WPX Energy on Mar 31, 2020 were $61 million compared with $60 million as of Dec 31, 2019. The company exited the first quarter with a total liquidity of $1.4 billion, which includes cash, cash equivalents and the available revolver capacity.

Its long-term debt on Mar 31, 2019 was $3,200 million, up from $2,202 million at the end of 2019.
 
Net cash from operating activities in first-quarter 2020 was $256 million compared with $272 million in the year-ago period. During first-quarter 2020, capital expenditure was $302 million compared with $451 million in first-quarter 2019.

Guidance

Given the unprecedented economic crisis due to the novel coronavirus outbreak, the company decided to withdraw its guidance for production and other metrics.  

To preserve liquidity, the company has slashed 2020 capital expenditure view by $700 million or 40% from the original projection.

WPX Energy is implementing cost-savings measures, and has a target of lowering operating and G&A expenses by $100 million in 2020.

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 167.34% due to these changes.

VGM Scores

Currently, WPX has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 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.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, WPX has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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