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Centennial Resource (CDEV) Up 28.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Centennial Resource (CDEV - Free Report) . Shares have added about 28.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Centennial Resource due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Centennial Resources Q1 Earnings & Revenue Beat Estimates

Centennial Resource Development, Inc. reported first-quarter 2021 adjusted loss of 1 cent per share, beating the Zacks Consensus Estimate by a penny. Moreover, the figure improved from the year-ago adjusted loss of 24 cents per share.

Quarterly revenues from oil and gas sales marginally dropped to $192.4 million from the prior year’s $192.8 million. However, the top line beat the consensus mark of $158 million.

The better-than-expected quarterly results can be attributed to higher realized commodity prices and decreased operating costs. The positives were partially offset by reduced production volumes.

Operations:

Production

Overall production of 54,202 barrels of oil equivalent per day (Boe/d) declined from the year-ago period’s 71,820 Boe/d. Of the total output, 52.1% comprised crude oil.

Oil volumes deteriorated from 41,512 Bbls/d to 28,239 barrels per day (Bbls/d) for the March-end quarter. Natural gas production of 103,806 thousand cubic feet per day (Mcf/d) fell from the year-ago quarter’s 117,751 Mcf/d. Moreover, natural gas liquids (NGLs) production totaled 8,662 Bbls/d, down from the year-ago quarter’s 10,683 Bbls/d.

Price Realizations

Average realized crude price (excluding the effects of derivative settlements) was reported at $52.62 a barrel, up from $45.14 in first-quarter 2020. Moreover, the same for natural gas rose to $3.79 per Mcf from the prior year’s 78 cents. Furthermore, NGLs price rose to $29.78 per barrel for the first quarter from the year-ago level of $14.30.

Operating Costs

Centennial Resource’s total operating costs were $158.4 million for first-quarter 2021, significantly lower than $801.6 million in the year-ago period, mainly due to lower impairment charges.

On a per Boe basis, the company’s first-quarter lease operating expenses were $5.30, higher than the year-ago level of $4.99. Also, gathering processing and transportation costs flared up to $4.23 per Boe from the year-ago period’s $2.59.

Capital Expenditure & Balance Sheet

For the March quarter, it incurred capital expenditure of only $72.9 million, of which $70.6 million was allocated for drilling and completion activities.

At first quarter-end, cash balance increased to $10.9 million from the fourth-quarter level of $5.8 million. Long-term net debt outstanding amounted to $1,063.8 million, marginally down from $1,068.6 million at fourth quarter-end. Centennial had a net debt to capitalization of 29.4%.

Cash Flow & Free Cash Flow

The company’s constant focus on cost reduction helped it generate net cash of $72.3 million from operating activities. Notably, free cash flow generated during the quarter under review was $10.6 million.

Guidance

The company reiterated its production and unit cost guidance despite a setback due to unfavorable winter weather. Centennial Resource earlier projected 2021 production in the band of 56,000-63,000 Boe/d, based on capital budget of $260-$310 million. The majority of the capital spending will be allocated for drilling and completion activities. Notably, it anticipates to complete 40-48 gross wells this year.

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 60% due to these changes.

VGM Scores

Currently, Centennial Resource has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Centennial Resource has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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