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Analyst Blog

On Mar 6, 2014, upstream operator Warren Resources Inc. (WRES - Snapshot Report) reported strong fourth-quarter 2013 earnings, on the back of lower operating expenses and increased crude oil production.

Earnings per share – excluding one-time items – came in at 11 cents, above the Zacks Consensus Estimate of 8 cents and the year-ago adjusted profit of 7 cents.

Revenues of $32.6 million were up 2.2% from the year-ago quarter and came in line with the Zacks Consensus Estimate. Improved total price realization aided the results.

For 2013, Warren Resources reported per share profits of 47 cents (excluding non-operating items), higher than the year-ago adjusted profit of 26 cents. Revenues of $128.8 million came ahead of $121.8 million in 2012.

The company soared to an intraday high of $5.27 per share on Thursday after the favorable results were announced. However, the stock fell to $4.51 per share during the end of the trading session.  

Operational Performance

The production of oil and natural gas averaged 551.0 thousand barrels of oil equivalent (Mboe) − 53.0% oil − down 5.0% from the year-ago quarter.

Warren Resources’ crude oil production stood at 292.0 thousand barrels (MBbl), up 7.0% from 273.0 MBbl in the fourth quarter of 2012.

However, natural gas production of 1,552.0 million cubic feet (MMcf) was down 15.7% from the year-earlier quarter.

For the fourth quarter, Warren Resources’ total price realization averaged $57.51 per barrels of oil equivalent, up 4.5% year over year.

On the flip side, the average realized crude oil price during the fourth quarter was $92.27 per barrel, representing a 2.3% drop from the year-ago realization of $94.42. Moreover, the average realized natural gas price during the December quarter of 2013 was $3.04 per thousand cubic feet (Mcf), down 8.7% from the year-ago period.

Total Operating Cost

The company’s operation expenses came in at $24.2 million, down 13.0 % from $27.8 million in the prior-year quarter.

Balance Sheet & Capital Spending

As of Dec 31, 2013, cash and cash equivalents at Warren Resources stood at $11.6 million. During 2013, the company’s capital investments totaled $72.7 million, of which $48.0 million was spent for drilling and development activities.

Increase in Proved Reserves

Warren Resources’ total proved reserves, as of Dec 31, 2013, came in at roughly 33.7 million barrels of oil equivalent (MMboe), representing a 35.0% rise from 24.9 MMboe at end-2012.

Guidance

In the first quarter of 2014, the company is expected to produce 528.0–555.0 Mboe, while the production for full-year 2014 is projected to lie in 2,325.0–2,508.0 Mboe band. Moreover, in 2014, Warren Resources will likely invest $116.0 million.

Zacks Rank

Warren Resources currently retains a Zacks Rank #1 (Strong Buy), implying that it is expected to significantly outperform the broader U.S. equity market over the next one to three months.

One can also consider other well-performing players in the oil and gas exploration and production sector like Range Resources Corporation (RRC - Analyst Report), Abraxas Petroleum Corp. (AXAS - Snapshot Report) and Cheniere Energy Inc. (LNG - Snapshot Report). Range Resources sports the same Zacks Rank as Warren Resources, while Abraxas Petroleum and Cheniere Energy hold a Zacks Rank #2 (Buy). 

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