A month has gone by since the last earnings report for QEP Resources . Shares have lost about 8.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is QEP Resources due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Second-Quarter 2018 Results
QEP Resources recently reported second-quarter 2018 earnings per share — excluding special items — of 6 cents, which surpassed the Zacks Consensus Estimate of a loss of 11 cents and the prior-year quarter’s loss of 12 cents per share.
Quarterly revenues of $532.4 million beat the Zacks Consensus Estimate of $433 million. Sales were also up from the year-ago quarter’s figure of $383.7 million.
The strong performance can be attributed to higher oil production coupled with a rise in overall net realized price.
QEP Resources continues to make strides to transform into a pure-play Permian player. As part of that goal, the company has already divested its assets in Pinedale (in third-quarter 2017) and agreed to sell its Uinta Basin assets, which is expected to close in September. QEP Resources is now looking for potential buyers for its Williston Basin properties.
Volume Analysis
Overall second-quarter production of the company came in at 14,106.1 thousand barrels of oil equivalent (Mboe), up 2% than the year-ago period. While natural gas volumes of 38.3 billion cubic feet (Bcf) fell 16% year over year, natural gas liquid volumes plummeted 15% to 1.152.8 thousand barrels (Mbbl). However, rise in overall production in the quarter resulted from oil volumes, which increased 35% from the prior-year quarter to 6,567.6 Mbbl.
With the company shifting its focus toward Permian Basin (included in the company’s Southern Region assets), equivalent production from the area jumped 108% year over year to 4,016.2 Mboe. Total Southern Region production surged 85% year over year to 8,781.9 Mboe, which was partially offset by the 42% year-over-year fall in production from the Northern Region assets, primarily due to the divestment of Pinedale properties.
Realized Prices
QEP Resources’ net realized natural gas price in the quarter was $2.72 per thousand cubic feet (Mcf), down 4% from the year-ago quarter’s $2.82. Net oil price realization improved 16% year over year to $54.30 per barrel. Overall net realized equivalent price averaged $34.54 per barrel of oil equivalent, up 26% from the prior-year quarter.
Operating Expenses and Capital Expenditure
Total operating expenses in the quarter increased to $850.3 million from $404.4 million a year ago. The rise was primarily due to increased General and Administrative, as well as Depreciation, Depletion and Amortization costs. Further, impairment expense, incurred in connection with the announced divestment of Uinta Basin properties, of $403.7 million gave a push to its total operating expenses.
Capital investment, excluding acquisitions, increased nearly 19.5% year over year to $365.7 million in the second quarter, mainly due to a rise in drilling and completion activities in the Permian and Williston basins, along with Haynesville/Cotton Valley.
Guidance
For 2018, QEP Resources increased its total oil-equivalent production guidance from 48.3-51.9 million barrels of oil equivalent (MMboe) to 49.8-52.3 MMboe. The company reiterated its total capital investment, which is expected in the range of $1,070-$1,170 million. Notably, majority of the capital investment is expected to be channeled toward the Permian Basin. For the third quarter of 2018, the company expects equivalent production within 12.9-13.9 MMboe.
Balance Sheet
As of Jun 30, 2018, QEP Resources had no cash and cash equivalents. The company’s long-term debt was $2,649.4 million, representing a debt-to-capitalization ratio of 44.1%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 124% due to these changes.
VGM Scores
At this time, QEP Resources has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, QEP Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is QEP Resources (QEP) Down 8.5% Since Last Earnings Report?
A month has gone by since the last earnings report for QEP Resources . Shares have lost about 8.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is QEP Resources due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Second-Quarter 2018 Results
QEP Resources recently reported second-quarter 2018 earnings per share — excluding special items — of 6 cents, which surpassed the Zacks Consensus Estimate of a loss of 11 cents and the prior-year quarter’s loss of 12 cents per share.
Quarterly revenues of $532.4 million beat the Zacks Consensus Estimate of $433 million. Sales were also up from the year-ago quarter’s figure of $383.7 million.
The strong performance can be attributed to higher oil production coupled with a rise in overall net realized price.
QEP Resources continues to make strides to transform into a pure-play Permian player. As part of that goal, the company has already divested its assets in Pinedale (in third-quarter 2017) and agreed to sell its Uinta Basin assets, which is expected to close in September. QEP Resources is now looking for potential buyers for its Williston Basin properties.
Volume Analysis
Overall second-quarter production of the company came in at 14,106.1 thousand barrels of oil equivalent (Mboe), up 2% than the year-ago period. While natural gas volumes of 38.3 billion cubic feet (Bcf) fell 16% year over year, natural gas liquid volumes plummeted 15% to 1.152.8 thousand barrels (Mbbl). However, rise in overall production in the quarter resulted from oil volumes, which increased 35% from the prior-year quarter to 6,567.6 Mbbl.
With the company shifting its focus toward Permian Basin (included in the company’s Southern Region assets), equivalent production from the area jumped 108% year over year to 4,016.2 Mboe. Total Southern Region production surged 85% year over year to 8,781.9 Mboe, which was partially offset by the 42% year-over-year fall in production from the Northern Region assets, primarily due to the divestment of Pinedale properties.
Realized Prices
QEP Resources’ net realized natural gas price in the quarter was $2.72 per thousand cubic feet (Mcf), down 4% from the year-ago quarter’s $2.82. Net oil price realization improved 16% year over year to $54.30 per barrel. Overall net realized equivalent price averaged $34.54 per barrel of oil equivalent, up 26% from the prior-year quarter.
Operating Expenses and Capital Expenditure
Total operating expenses in the quarter increased to $850.3 million from $404.4 million a year ago. The rise was primarily due to increased General and Administrative, as well as Depreciation, Depletion and Amortization costs. Further, impairment expense, incurred in connection with the announced divestment of Uinta Basin properties, of $403.7 million gave a push to its total operating expenses.
Capital investment, excluding acquisitions, increased nearly 19.5% year over year to $365.7 million in the second quarter, mainly due to a rise in drilling and completion activities in the Permian and Williston basins, along with Haynesville/Cotton Valley.
Guidance
For 2018, QEP Resources increased its total oil-equivalent production guidance from 48.3-51.9 million barrels of oil equivalent (MMboe) to 49.8-52.3 MMboe. The company reiterated its total capital investment, which is expected in the range of $1,070-$1,170 million. Notably, majority of the capital investment is expected to be channeled toward the Permian Basin. For the third quarter of 2018, the company expects equivalent production within 12.9-13.9 MMboe.
Balance Sheet
As of Jun 30, 2018, QEP Resources had no cash and cash equivalents. The company’s long-term debt was $2,649.4 million, representing a debt-to-capitalization ratio of 44.1%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 124% due to these changes.
VGM Scores
At this time, QEP Resources has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, QEP Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.