It has been about a month since the last earnings report for WPX Energy (WPX). Shares have lost about 12.6% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is WPX due for a breakout? 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 Beat Estimates, Revenues Miss
WPX Energy Inc.’s first-quarter 2019 earnings of 5 cents per share surpassed the Zacks Consensus Estimate of 3 cents by 66.7%. The bottom line also reversed from a loss of 6 cents incurred in the year-ago quarter.
The company reported a GAAP loss of 11 cents in the first quarter compared with loss of 30 cents in the year-ago quarter. The difference between GAAP and operating earnings in the reported quarter was due to loss incurred on derivatives partially offset by gain from sale of assets and equity investments.
WPX Energy’s quarterly revenues of $359 million lagged the Zacks Consensus Estimate of $549 million by 3.5% and the year-ago figure of $374 million by 4%.
Highlights of the Release
Total production in the first quarter was 155,200 barrels of oil equivalent per day, up 51% year over year. Liquids volumes accounted for nearly 78% of the total production, reflecting the company’s increasing focus on oil.
Oil production in the quarter was 96,100 barrels per day (bbl/d), which was nearly 46% higher than the year-ago level, courtesy of 46% increase in Delaware Basin and 60% growth in Williston Basin volumes over the past 12 months. Adverse weather lowered first-quarter oil production volumes from Delaware Basin by 1,400 bbl/d, otherwise production would have been higher.
Total expenses were $508 million, up 38.1% from $368 million in the year-ago quarter.
Interest expenses in the reported quarter were $41 million, down 10.9% from $46 million.
WPX signed transactions for three divestitures in early 2019 totaling more than $550 million in net proceeds. The proceeds will be used to strengthen its balance sheet.
Realized Prices & Hedges
Realized oil prices in the quarter were $51.92 per barrel, down 14.8% from the year-ago level.
Realized natural gas prices were $1.36 per thousand cubic feet, down 5.5% from a year ago. Realized prices for natural gas liquids were down 34.6% to $14.47 per barrel.
For the balance of 2019, WPX Energy has 53,000 bbl/d of oil hedged at a weighted average price of $54.62 a barrel. The company also has 110,000 million British thermal units (MMBtu) per day of natural gas hedged at a weighted average price of $3.07 per MMBtu.
Cash and cash equivalents of WPX Energy on Mar 31, 2019 were $3 million compared with $3 million as of Dec 31, 2018.
Its long-term debt on Mar 31, 2019 was $2,470 million, down marginally from $2,485 million as of December 2018 end.
Net cash from operating activities in the first quarter of 2019 was $272 million compared with $145 million recorded a year ago. Capital expenditure was $451 million compared with $321 million in the prior-year quarter.
WPX Energy reiterated total production guidance for 2019 in the range of 149-161 thousand barrels of oil equivalent per day (Mboe/d), out of which 63.2% is supposed to be oil. The midpoint of the guided range is 155 Mboe/d, which is 225% higher than the 2018 production level.
Capital expenditure for 2019 is expected in the range of $1,100-$1,275 million.
WPX Energy continues to expect 5-10% oil growth from fourth-quarter 2018 to fourth-quarter 2019, with majority expected in the second half of 2019.
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 11.18% due to these changes.
At this time, WPX has a great 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.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise WPX has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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