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QEP Resources' (QEP) Q3 Earnings and Sales Beat, Up Y/Y

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QEP Resources, Inc. recently reported third-quarter 2018 earnings per share — excluding special items — of 17 cents, which surpassed the Zacks Consensus Estimate of a loss of a penny and the prior-year quarter’s loss of 10 cents.

Moreover, quarterly revenues of $560.8 million beat the Zacks Consensus Estimate of $494 million. Sales were also up from the year-ago figure of $390.1 million.

The strong performance can be attributed to higher oil production coupled with a rise in net realized prices of liquids.

QEP Resources, Inc. Price, Consensus and EPS Surprise

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

Volume Analysis

Overall third-quarter production of the company came in at 14,400 thousand barrels of oil equivalent (Mboe), up 2% from the year-ago period. While natural gas volumes of 38.1 billion cubic feet fell 18% year over year, natural gas liquid volumes plummeted 7% to 1,415.3 thousand barrels (Mbbl). However, the rise in overall quarterly production is attributed to oil volumes, which increased 38% from the prior-year quarter to 6,640.5 Mbbl (46.1% of total output).   

With the company shifting its focus toward Permian Basin (included in its Southern Region assets), equivalent production from the area jumped 104% year over year to 4,792.5 Mboe. Total Southern Region production surged 65% year over year to 9,349.8 Mboe. Production from Northern Region assets fell 40% year over year to 5,050.2 Mboe, primarily due to the divestment of Pinedale properties.

Realized Prices

QEP Resources’ net realized natural gas price in the quarter was $2.76 per thousand cubic feet, down 1% from the year-ago quarter’s $2.79. Net oil price realization improved 18% year over year to $56.38 per barrel. Net NGLs price realization also improved 39% year over year to $29.65 per barrel. Overall net realized equivalent price averaged $36.21 per barrel of oil equivalent, up 30% from the prior-year quarter.

Operating Expenses

Total operating expenses in the quarter decreased to $431.1 million from $443.4 million a year ago. The fall was primarily due to the lack of exploration and impairment costs, which were present in the year-ago period. Lease operating costs, along with transportation and processing expenses also fell from the year-ago period.

Capital Expenditure

Capital investment, excluding acquisitions, decreased nearly 37.8% year over year to $203.7 million in the third quarter, mainly due to a fall in drilling and completion activities in the Permian and Williston basins, along with Haynesville/Cotton Valley.

Balance Sheet

As of Sep 30, 2018, QEP Resources had no cash and cash equivalents. The company’s long-term debt was $2,451.1 million, representing a debt-to-capitalization ratio of 42.1%.

Guidance

For 2018, QEP Resources increased its total oil-equivalent production guidance from 49.8-52.3 million barrels of oil equivalent (MMboe) to 50.8-52.2 MMboe. The company increased its total capital investment guidance from the range of $1,070-$1,170 million to $1,140-$1,190 million, in order to bring additional wells online in the Permian Basin. For the fourth quarter of 2018, it expects equivalent production within 10.6-12 MMboe.

Divestment

Along with the earnings report, the company announced the sale of a portion of its non-Permian assets. QEP Resources continues to make strides to transform into a pure-play Permian player. As part of that goal, the company recently agreed to divest its assets in the Williston Basin for $1,725 million — through a cash-stock deal — to Vantage Acquisition Operating Company, a subsidiary of Vantage Energy Acquisition Corp.

Zacks Rank & Key Picks

Currently, Denver, CO-based QEP Resources has a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better-ranked stocks given below:

New York, NY-based Hess Corporation (HES - Free Report) has a Zacks Rank #1 (Strong Buy). Its earnings for 2018 are expected to surge around 100% from the 2017 level. You can see the complete list of today’s Zacks #1 Rank stocks here.

Fort Worth, TX-based Range Resources Corporation (RRC - Free Report) holds a Zacks Rank #2 (Buy). The company’s earnings for 2018 are expected to surge more than 100% year over year.

El Dorado, AR-based Murphy Oil Corporation (MUR - Free Report) carries a Zacks Rank #2. The company’s sales for 2018 are expected to grow more than 20% from 2017.

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