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Shale Earnings Analysis: Winners and Losers From Q2

As the second-quarter earnings season comes to its conclusion, it’s time to sit back and analyze the bevy of shale bigwigs just put in their reports. All of them reported profits that jumped in the second quarter compared to the same period a year before, aided along by the rise in oil prices in recent months and strong production growth. Majority of the companies also managed to beat the Zacks Consensus Estimate. At the same time, a number of them fell on the results, reflecting increased capital expenditure announcements.

In this writeup, we dive into the results from Matador Resources Company MTDR, Continental Resources, Inc. CLR, Pioneer Natural Resources Company PXD, Anadarko Petroleum Corporation APC, Concho Resources Inc. CXO and EOG Resources, Inc. EOG.

MTDR

Matador Resources is an independent oil and natural gas exploration and production company with focus on shale plays in the Eagle Ford and Permian basins. 

Earnings & Revenue: The company reported second-quarter adjusted earnings per share of 41 cents, ahead of the Zacks Consensus Estimate of 33 cents and the year-ago profit of 11 cents. The outperformances were driven by strong oil production and pricing gains.

Total revenues at the Dallas, TX-based energy explorer was $211.4 million, up more than 63% from a year ago and beating the Zacks Consensus Estimate of $184 million.

Production: The production of oil and natural gas averaged a record 52,937 oil-equivalent barrels per day (BOE/d) (56% oil), up 43% from last year. Results were also above the Zacks Consensus Estimate of 47,261 BOE/d.

Realized Prices: Realized oil prices were slightly better than expected at $61.44 per barrel. Matador Resources sold natural gas at $3.38 per thousand cubic feet (Mcf) as against our projection of $2.96 per Mcf.

Guidance: Matador Resources expects its average daily production to increase approximately 3% sequentially in the third quarter.

Share Price Impact: The company's shares fell more than 2% as investors looked past the solid results to focus more on the capital expenditure of $182.8 million, which they thought to be on the higher side.

CLR

Continental Resources is an independent oil and gas company with principal operations in the STACK & SCOOP plays in central Oklahoma and the Bakken/Three Forks formations of North Dakota and Montana.

Earnings & Revenue: The company reported second-quarter adjusted earnings per share of 73 cents, ahead of the Zacks Consensus Estimate of 70 cents and the year-ago quarter’s break-even earnings. The outperformances were driven by higher oil equivalent price realizations and increased production from the North Dakota Bakken, as well as SCOOP and STACK regions.

Total revenues at the Oklahoma City, OK-based energy explorer was $1.1 billion, up 72% from a year ago and marginally beat the Zacks Consensus Estimate of $1,135 million.

Production: The production of oil and natural gas averaged 284,059 BOE/d (55% oil), up 26% from last year. Overall volumes were below the Zacks Consensus Estimate, dragged down by oil production, which at 157,116 barrels per day, came in 7% lower than expected.

Realized Prices: Realized oil prices were 2% better than expected at $63.35 per barrel. Continental Resources sold natural gas at $2.65 per Mcf as against our projection of $2.79 per Mcf.

Guidance: Continental Resources expects its third-quarter average daily production to be in the range of 290,000 to 295,000 BOE/d, well above the last few quarters performance.

Share Price Impact: The company's shares rose a marginal 1% with the main catalysts being the robust production guidance and strong well results. However, price gains were capped by crude production miss and a $200 million increase in its annual drilling and completion capital expenditure.

PXD

Pioneer Natural Resources is a large independent oil and gas exploration and production company with focus on the Spraberry field in the Permian Basin and the Eagle Ford Shale in South Texas.

Earnings & Revenue: The company reported second-quarter adjusted earnings per share of $1.41, lagging the Zacks Consensus Estimate of $1.54 on higher non-cash costs. However, the bottom line was significantly ahead of the year-ago profit of 21 cents, driven by strong production and pricing gains.

Total revenues at the Irving, TX-based energy explorer was $2.1 billion, up 44% from a year ago but missing the Zacks Consensus Estimate of $2.2 billion.

Production: The production of oil and natural gas averaged 327,704 BOE/d (76% liquids), up 26% from last year. Results were also above the Zacks Consensus Estimate of 320,000 BOE/d.

Realized Prices: On an oil equivalent basis, average realized price was $43.12 per barrel in the reported quarter, compared with $32.56 a year ago. However, realizations failed to match the Zacks Consensus Estimate of $46.15.

Guidance: Pioneer Natural, which plans to operate exclusively in the Permian Basin and is in the process of selling its other assets, expects Permian production between 278,000 BOE/d and 288,000 BOE/d in the third quarter of 2018.

Share Price Impact: The company's shares rose more than 1% following the quarter’s better-than-forecasted volumes, partly offset by the company’s increased capital expenditure plans. Pioneer Natural Resources said it expects this year's capital budget to be in the range of $3.3-$3.4 billion, up from the earlier projection of $2.9 billion.

APC

Anadarko Petroleum is one of the world's largest independent oil and gas exploration and production companies with assets in onshore resource plays in the Rocky Mountain region, the southern United States, and the Appalachian basin.

Earnings & Revenue: The company reported second-quarter adjusted earnings per share of 54 cents, lagging the Zacks Consensus Estimate of 60 cents on certain hedging adjustments. However, The Woodlands, TX-based company turned around from the year-ago loss of 77 cents on higher-than-expected production and realized oil prices.

In the reported quarter, Anadarko Petroleum’s revenues of $3.3 billion surpassed the Zacks Consensus Estimate of $3 billion and was 21% above the second-quarter 2017 sales. 

Production: The production of oil and natural gas averaged 637,000 BOE/d (73% liquids), up slightly from last year’s 631,000 BOE/d and also above the Zacks Consensus Estimate of 633,000 BOE/d.

Realized Prices: Average realized crude price was $68.43 per barrel in the reported quarter, compared with $47.19 a year ago, surpassing the Zacks Consensus Estimate of $65.

Guidance: Anadarko Petroleum expects its third-quarter average daily production to rise sequentially, projecting it to be in the range of 652,000 to 707,000 BOE/d.

Share Price Impact: The company's shares lost around 6% as investors were spooked by the increased spending guidance for the second straight quarter – this time by $250 million.

CXO

Concho Resources is an independent oil and gas exploration and production company with producing properties mainly in the Permian Basin of southeast New Mexico and west Texas.

Earnings & Revenue: The company reported adjusted net earnings per share of $1.24, comfortably beating the Zacks Consensus Estimate of 92 cents. The bottom line also improved significantly from the prior-year quarter’s adjusted income of 52 cents per share. The outperformances came on the back of higher commodity-price realizations and robust production growth.

Total operating revenues for the second quarter amounted to $945 million, which increased substantially from $567 million a year ago. The top line at the Midland, TX-based energy explorer further surpassed the Zacks Consensus Estimate of $861 million.

Production: The production of oil and natural gas averaged 228,958 BOE/d (63% oil), up 24% from last year. However, volumes were below the Zacks Consensus Estimate of 235,777 BOE/d.

Realized Prices: Average realized crude price was $60.98 per barrel in the reported quarter, compared with $44.75 a year ago, surpassing the Zacks Consensus Estimate of $57.

Guidance: Concho Resources expects production between 280,000 BOE/d and 285,000 BOE/d in the third quarter of 2018.

Share Price Impact: Despite the headline beats, the company's shares fell around 3%. Apart from the production numbers coming in below expectations, investors were also not impressed by the company's capital expenditure guidance for 2018. Concho Resources now expects capital spending in the band of $2.5-$2.6 billion versus prior guidance of $2 billion – ostensibly to reflect the July acquisition of RSP Permian, Inc.

EOG

EOG Resources is an oil and gas exploration and production company with focus on the key Texas and Oklahoma basins and the Rocky Mountains in the U.S., and Canada.

Earnings & Revenue: The company reported second-quarter adjusted earnings per share of $1.37, ahead of the Zacks Consensus Estimate of $1.25 and improved significantly from the year-ago quarter’s 8 cents. The outperformances were supported by increased production as well as higher oil and gas price realizations.

Total revenues at the Houston, TX-based energy explorer was $4.2 billion, up 62% from a year ago and beating the Zacks Consensus Estimate of $3.9 billion.  

Production: The production of oil and natural gas averaged 702,200 BOE/d (71% liquids), up 16% from last year. Results were also above the Zacks Consensus Estimate of 691,000 BOE/d.

Realized Prices: Average realized crude oil and condensate price was $67.93 per barrel in the reported quarter, compared with $47.46 a year ago, surpassing the Zacks Consensus Estimate of $63.

Guidance: EOG Resources expects production between 716,500 BOE/d and 754,600 BOE/d in the third quarter of 2018.

Share Price Impact: The company's shares fell around 3% on higher-than-expected second-half capital expenditure, which came at around $1.7 billion. EOG Resources' third-quarter oil production guidance of 401,500-414,700 barrels per day were also slightly short of expectations.

Want to Own a Shale Stock Now?

All the above-mentioned currently retain a Zacks Rank #3 (Hold).

If you are looking for a near-term shale energy play, Bonanza Creek Energy, Inc. BCEI may be an excellent selection. This company has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Wildhorse is an independent energy company focused on the acquisition, development, exploration and operation of onshore oil and liquids-rich natural gas properties in the Niobrara Oil Shale in Colorado and the Cotton Valley sands in Arkansas. In the last 60 days, the Zacks Consensus Estimate for current year earnings has risen 23%.

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Pioneer Natural Resources Company (PXD): Free Stock Analysis Report
 
Anadarko Petroleum Corporation (APC): Free Stock Analysis Report
 
EOG Resources, Inc. (EOG): Free Stock Analysis Report
 
Concho Resources Inc. (CXO): Free Stock Analysis Report
 
Matador Resources Company (MTDR): Free Stock Analysis Report
 
Bonanza Creek Energy, Inc. (BCEI): Free Stock Analysis Report
 
Continental Resources, Inc. (CLR): Free Stock Analysis Report
 
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