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QEP Resources (QEP) Beats on Q1 Earnings, Tweaks 2019 View

QEP Resources, Inc. QEP recently reported first-quarter 2019 earnings per share — excluding special items — of 15 cents against the Zacks Consensus Estimate of loss of 2 cents. The outperformance was attributed to lower operating expenses and income-tax benefits. The bottom line also improved significantly from the year-ago loss of 20 cents per share.

Quarterly revenues of $280.6 million lagged the Zacks Consensus Estimate of $288 million. Sales also declined 34.4% from the year-ago figure.

QEP Resources, Inc. Price, Consensus and EPS Surprise


QEP Resources, Inc. Price, Consensus and EPS Surprise | QEP Resources, Inc. Quote

Volume Analysis

Overall first-quarter production of the company came in at 7,806.3 thousand barrels of oil equivalent (Mboe), down 33% from the year-ago period. The divestment of Haynesville/Cotton Valley and Uinta Basin assets attributed to the fall in production volumes. Further, lack of new well completions caused 9% y/y decline in volumes from the Williston Basin.

While natural gas volumes substantially declined74% y/y to 9.2 billion cubic feet (Bcf), natural gas liquids output jumped 30% to 1,178.8 thousand barrels (Mbbl). Oil volumes increased marginally from 4,974 Mbbl in first-quarter 2018 to 5,083.6 Mbbl (65% of the total output) in the quarter under review.

With the company shifting its focus toward Permian Basin, equivalent production from the area jumped 47% year over year to 4,082.3 Mboe, partly offsetting the overall decline in volumes. QEP Resources allocated about 80% of its 2019 capital budget for this lucrative play, as it aims to transform itself into a Permian pure play.

Realized Prices

QEP Resources’ net realized natural gas price in the quarter was $2.18 per thousand cubic feet, down 26%from the year-ago level of $2.94. Net oil price realization declined 6% year over year to $48.50 per barrel. Net NGLs price realization also plummeted 35% year over year to $14.31 per barrel.

Operating Expenses 

Total operating expenses in the quarter decreased to $283.2 million from $411 million a year ago. The decline was primarily due to lower depreciation, lease operating costs, and transportation and processing expenses.

Capital Expenditure

Capital investment, excluding acquisitions, decreased more than 60% year over year to $167.2 million in the first quarter, mainly due to a fall in drilling and completion activities in Permian and Williston basins.

Balance Sheet

As of Mar 31, 2018, QEP Resources had $89.9 million in cash and cash equivalents. The company’s long-term debt was $2,026.7 million, representing a debt-to-capitalization ratio of 43.4%.

Revised Guidance

For full-year 2019, QEP Resources expects total oil-equivalent production in the range of 28.5-30.3 MMboe versus the earlier forecast of 28-29.9 MMboe. While oil and NGL output projections remain unchanged, the company now anticipates gas volumes to increase 10.4% from the midpoint of the prior guidance to 25.5-27.5 Bcf.

While the firm has kept its projections for lease operating and adjusted transportation and processing costs unchanged, QEP Resources projects general/administrative expenses within $165-$175 million versus prior forecast of $170-$180 million.Capital expenditure guidance for 2019 remains intact in the range of $615-$665 million. The mid-point of the guidance is 39% lower than 2018 capital spending.

For second-quarter 2019, QEP Resources expects total oil-equivalent production in the range of 6.8-7.2 million barrels of oil equivalent (MMboe). Oil and condensate production is expected within 4.95-5.15 million barrels (MMBbls). While gas output is expected in the range of 5.4-5.8 Bcf, NGLs production is estimated within 0.9-1.1 MMBbls. Capital outlay for the second quarter is anticipated in the band of $185-$205 million.

Zacks Rank and Key Picks

QEP Resources currently carries a Zacks Rank #3 (Hold).

Some better-ranked players in the same industry include W&T Offshore, Inc. WTI, Apache Corporation APA and Carrizo Oil & Gas CRZO. While W&T Offshore sports a Zacks Rank #1 (Strong Buy), both Apache and Carrizo carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

W&T Offshore pulled off average positive earnings surprise of 47.10% in the trailing four quarters.

Apache surpassed earnings estimates in each of the last four quarters, with average of 34.11%.

Carrizo delivered average positive earnings surprise of 20.15% in the preceding four quarters.

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