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Centennial (CDEV) Reports Narrower-Than-Expected Loss in Q3

Centennial Resource Development, Inc. CDEV reported third-quarter 2020 adjusted loss of 19 cents per share, slightly narrower than the Zacks Consensus Estimate of a loss of 22 cents. Notably, the company had reported adjusted earnings of 1 cent per share in the year-ago quarter.

Quarterly revenues from oil and gas sales significantly dropped to $149.1 million from the prior year’s $229.1 million. However, the top line beat the consensus mark of $116 million.

The better-than-expected results can be attributed to reduced lease operating expenses during the reported quarter. This was negated partially by lower oil equivalent production volumes and prices.

Operations:

Production

Overall production of 68,934 barrels of oil equivalent per day (Boe/d) was down from the year-ago period’s 76,312 Boe/d. Of the total output, 51.2% comprised crude oil.

Oil volumes deteriorated from 42,079 Bbls/d to 35,292 barrels per day (Bbls/d) in the September-end quarter. Natural gas production of 112,545 thousand cubic feet per day (Mcf/d) fell from the year-ago quarter’s 124,896 Mcf/d. However, natural gas liquids (NGLs) production totaled 14,885 Bbls/d, up 10.9% from the year-ago quarter’s 13,417 Bbls/d.

Price Realizations

The company reported average realized crude price of $36.95 a barrel (excluding the effects of derivate settlements), down from the $51.71 witnessed in the third quarter of 2019. NGLs were sold at $12.58 a barrel, down from the $14.47 seen in year-earlier quarter. However, average natural gas price rose to $1.15 per Mcf from the prior year’s 96 cents.

Centennial Resource Development, Inc. Price, Consensus and EPS Surprise

 

Operating Costs

Centennial’s total operating costs came in at $181.1 million in third-quarter 2020, lower than the $217.8 million witnessed in the year-ago period, mainly due to reduced lease operating expenses.

On a per Boe basis, the company’s third-quarter lease operating expenses were $3.87, lower than the year-ago level of $6.03. Nevertheless, gathering processing and transportation costs flared up to $3.02 per Boe from the year-ago period’s $2.97.

Capital Expenditure & Balance Sheet

In July-September quarter, it incurred capital expenditure of only $21.5 million, of which $19.7 million was assigned to drilling and completion activities.

At the end of the third quarter, cash balance amounted to $5.2 million, down from the second-quarter level of $7.2 million. Long-term debt outstanding amounted to $1,127.9 million, down 1.3% from the prior-quarter level of $1,142.9 million. Centennial had a net debt to book equity capitalization of 29%. Notably, it had $355 million available under the revolving credit facility.

Cash Flow & Free Cash Flow

The company’s constant focus on cost reduction generated net cash of $45.7 million from operating activities. Notably, free cashflow generated during the quarter under review was $10.5 million as compared to a free cashflow deficit of $95.8 million in a year-ago comparable period. Thus, it is evident that the upstream firm is boosting up its liquidity position.

Guidance

Centennial raised the 2020 net production outlook to the band of 66,000-68,000 million Boe/d from the earlier forecast of 64,000-68,000 Boe/d. Net oil production for the ongoing year is estimated in the band of 35,500-36,500 bpd.

Lease operating expense for the full year is expected to be $4.25-$4.50 per Boe, lower than the company’s prior projection of $4.60-$5.00. Gathering, processing and transportation costs will likely be in the range of $2.90-$3.00 per Boe. The company resumed drilling activities during the September-end quarter, with the addition of one rig. For the rest of 2020, the upstream energy firm anticipates to continue the one-rig program.

Management plans to spend approximately $240-$265 million of capital compared with the prior guidance of $240-$270 million for 2020, the majority of which will be used in drilling and completion activities. It anticipates to complete 31-33 wells this year.

Zacks Rank & Stocks to Consider

Centennial currently carries a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space include Equitrans Midstream Corporation ETRN and DCP Midstream Partners LP DCP, both sporting a Zacks Rank #1 (Strong Buy), and Nustar Energy LP NS, holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Over the past six months, the Zacks Consensus Estimate for Equitrans’ 2020 earnings has been raised by 18.9%.

DCP Midstream is expected to see stellar earnings growth of 169.1% in 2021, while Nustar Energy will likely register bottom-line improvement of a whopping 177.5% during the same period.

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