A month has gone by since the last earnings report for QEP Resources . Shares have lost about 16.9% 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.
QEP Resources' Q3 Earnings and Sales Beat, Up Y/Y
QEP Resources 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.
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.
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 90% due to these changes.
VGM Scores
At this time, QEP Resources has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise QEP Resources has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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QEP Resources (QEP) Down 16.9% Since Last Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for QEP Resources . Shares have lost about 16.9% 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.
QEP Resources' Q3 Earnings and Sales Beat, Up Y/Y
QEP Resources 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.
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.
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 90% due to these changes.
VGM Scores
At this time, QEP Resources has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise QEP Resources has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.