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The Zacks Analyst Blog Highlights: TOTAL S.A., ConocoPhillips, Valero Energy, National Oilwell Varco and Denbury Resources

Zacks Equity Research
Papa John's (PZZA) higher costs, soft comps trend and a challenging sales environment are likely to reflect on third-quarter 2018 earnings.

For Immediate Release

Chicago, IL – October 31, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include TOTAL S.A. TOT, ConocoPhillips COP, Valero Energy Corp. VLO, National Oilwell Varco, Inc. NOV and Denbury Resources Inc. DNR.

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Here are highlights from Tuesday’s Analyst Blog:

Oil & Gas Stock Roundup: TOT, COP, VLO & More

It was a week where both oil and natural gas settled with modest losses.

On the news front, energy biggies TOTAL S.A., ConocoPhillips and Valero Energy Corp. reported third-quarter earnings that came above the Zacks Consensus Estimate.

Overall, it wasn’t a good week for the sector. While West Texas Intermediate (WTI) crude futures lost 2.4% to close at $67.59 per barrel, natural gas prices fell around 2% to $3.185 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Schlumberger & Halliburton's Q3, Shell's Asset Sale & More)

The U.S. crude benchmark dropped for a third week in a row after the Energy Department's inventory release showed that stockpiles recorded another large build. Apart from the dim oil consumption picture – reflected by the continued rise in domestic inventories – indications that production elsewhere will offset the loss in Iranian output also played spoilsport. 

Natural gas also finished the week down on unfavorable weather forecasts and strength in the commodity’s production.

Recap of the Week’s Most Important Stories

1.    TOTAL S.A. reported third-quarter 2018 operating earnings of $1.47 per share (€1.26 per share), beating the Zacks Consensus Estimate of $1.31 by 12.2%. The bottom line improved 42.0% from the year-ago figure of $1.04 (€0.88 per share). This upswing is due to solid operational performance, improvement in commodity prices and new project ramp ups, boosting its production.

Total hydrocarbon production during the third quarter averaged 2,804 thousand barrels of oil equivalent per day, up 9% year over year. The increase was due to higher contribution from Kashagan, Moho Nord, Fort Hills, Edradour-Glenlivet, Yamal LNG and the integration of Maersk Oil.

TOTAL’s upstream production is expected to increase 8% in 2018, and improve in the range of 6-7% during the period 2017 to 2020. The company expects that the startup of new trains, namely Yamal LNG in Russia, Egina in Nigeria, Tempa Rossa in Italy and Ichthys LNG in Australia, will continue to boost production. It aims to invest $16B in 2018 and is implementing a 10% increase in dividend rate. (Read more TOTAL Q3 Earnings & Revenues Beat on High Production)

2.    ConocoPhillips reported third-quarter 2018 adjusted earnings per share of $1.36, beating the Zacks Consensus Estimate of $1.17 and improving significantly from the year-ago 16 cents. The outperformance stems from higher oil realizations and strong volumes from the unconventional assets.

The production of oil and natural gas averaged 1,261 thousand barrels of oil equivalent per day (64% liquids), up 2.9% from last year and ahead of the Zacks Consensus Estimate of 1,247 thousand barrels of oil equivalent per day. Results were helped by 48% growth in the Zacks Rank #2 (Buy) company’s Big 3 unconventional assets (Eagle Ford, Bakken and Delaware).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In an attempt to take advantage of higher commodity prices, ConocoPhillips raised its 2018 capital spending projection from $6 billion to $6.1 billion. For the October-to-December quarter of this year, the company projects production in the range of 1,275-1,315 thousand barrels of oil equivalent per day. (Read more ConocoPhillips Q3 Earnings Beat on Oil Price, Output)

3.    Valero Energy posted adjusted third-quarter 2018 profit of $2.01 per share, which surpassed the Zacks Consensus Estimate of $1.95 and the year-ago figure of $1.91. Higher throughput volumes along with impressive capacity utilization supported the better-than-expected results.

During the quarter, refining throughput volumes were approximately 3.1 million barrels per day, up from 2.9 million in the year-ago quarter. Capacity utilization rate in the reported quarter was 99%, higher than 92% achieved in the corresponding quarter of 2017.

Third-quarter capital expenditure was $604 million, including $435 million for turnarounds and catalyst expenditures. For 2018, the company reiterated its capital expenditure of $2.7 billion, in line with the 2017 level. Of this, $1.0 billion will be allocated toward growth projects and $1.7 billion for sustaining the business. (Read more Valero Energy Q3 Earnings Surpass Estimates, Sales Lag)

4.    National Oilwell Varco, Inc. reported break-even earnings in third-quarter 2018 versus the Zacks Consensus Estimate of 12 cents. Weaker-than-expected contribution from the ‘Wellbore Technologies’ and ‘Completion & Production Solutions’ segments led to this underperformance.

However, National Oilwell Varco’s bottom line witnessed a solid rebound from the year-ago quarter’s loss of 7 cents on the back of robust results from its ‘Rig Technologies’ segment, whose operating profit of $58 million outpaced the Zacks Consensus Estimate by $6 million.

Capital equipment order backlog for Rig Technologies was $3.4 billion as of Sep 30, 2018, including $151 million worth of new order. Meanwhile, the Completion & Production Solutions segment reported a backlog of $880 million in capital equipment order at the end of the third quarter. The figure included $372 million of new orders. (Read more National Oilwell Varco Q3 Earnings Miss, Rise Y/Y)

5.    Denbury Resources Inc. recently agreed to acquire Penn Virginiafor $1.7 billion. The move is expected to add a new core position in the Eagle Ford shale to Denbury’s portfolio.

The combined entity is expected to have an enterprise value of $6 billion. Following the closure of the transaction, Denbury stockholders are expected to hold around 71% of the combined entity. The deal is expected to complete in the first quarter 2019.

The Eagle Ford assets are expected to have a low breakeven point, which will complement Denbury’s portfolio. Moreover, the deal is expected to strengthen its balance sheet, which is currently highly leveraged with a debt-to-capitalization ratio of 75.2%. The company expects the combined entity to bring about positive free cash flow without further ado. (Read more Can Denbury Benefit from $1.7B Penn Virginia Acquisition?)

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National Oilwell Varco, Inc. (NOV) : Free Stock Analysis Report
 
Valero Energy Corporation (VLO) : Free Stock Analysis Report
 
TOTAL S.A. (TOT) : Free Stock Analysis Report
 
Denbury Resources Inc. (DNR) : Free Stock Analysis Report
 
ConocoPhillips (COP) : Free Stock Analysis Report
 
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