QEP Resources, Inc. (QEP - Free Report) recently reported first-quarter 2018 loss per share — excluding special items — of 20 cents, wider than the Zacks Consensus Estimate of a loss of 18 cents and the prior-year quarter’s loss of 14 cents per share. The underperformance could be attributed to lower production and increase in operating expenses.
Quarterly revenues of $428.9 million beat the Zacks Consensus Estimate of $374 million. Sales were also up from the year-ago quarter’s figure of $420.1 million. The top line was benefited by a rise in overall net realized price.
QEP Resources announced strategic initiatives for 2018 that are expected to make the company a Permian Basin-focused one. The company wants to divest the non-Permian assets in the second quarter of 2018. Proceeds from the divestments will be used for Permian Basin development, debt reduction and share repurchases.
Overall production of the company — engaged in shifting its focus to the Permian Basin — in the quarter came in at 11,724.6 thousand barrels of oil equivalent (Mboe), down 10% than the year-ago period. While natural gas volumes of 35.1 billion cubic feet (Bcf) fell 17% year over year, natural gas liquid volumes plummeted 33% to 904.4 thousand barrels (Mbbl). However, oil production in the quarter increased 6% from the prior-year quarter to 9,740 Mbbl.
The fall in overall production was primarily due to 52% decline in output from the company’s Northern Region. It was partially offset by a rise in volume from the Southern Region, where total production increased 106%. Notably, production in the Permian Basin increased 100% year over year to 2,782.9 Mboe in the quarter. Also, Haynesville/Cotton Valley production increased 110% from the year-ago quarter to 4,290.5 Mboe.
QEP Resources’ net realized natural gas price in the quarter was $2.94 per thousand cubic feet (Mcf), up 4% from the year-ago quarter’s price of $2.84. Net oil price realization improved 10% year over year to $51.54 per barrel. Overall net realized equivalent price averaged $32.34 per barrel of oil equivalent in the quarter, up 15% from the prior-year quarter.
Operating Expenses and Capital Expenditure
Total operating expenses in the quarter decreased to $411 million from $425.3 million a year ago. The decrease was primarily due to a fall in transportation and processing costs, as well as a decline in the purchased oil and gas expense.
Capital investment, excluding acquisitions, increased nearly 95.4% year over year to $418.8 million in the first quarter.
Additionally, in the quarter, the company made $36.2 million worth acquisitions, primarily focused on oil and gas assets in the Permian Basin. The company also closed the divestment of several non-core assets that fetched a total of around $33.3 million in the quarter.
QEP Resources bought back and retired 5,621,540 shares in March for $52.8 million. Moreover, during the end of that month, the company initiated a repurchase program of 592,310 shares for $5.6 million, which settled in April. The company also authorized a share buyback program worth $1.25 billion, which is expected to be paid using proceeds from the divestments.
For 2018, QEP Resources increased total oil-equivalent production guidance to 48.3-51.9 million barrels of oil equivalent (MMboe). Total capital investment is expected to be in the range of $1,070-$1,170 million. Notably, 70% of the capital investment is expected to be channeled toward the Permian Basin. For the second quarter of 2018, the company expects equivalent production to be within 12.4-13.1 MMboe.
As of Mar 31, 2018, QEP Resources had no cash and cash equivalents. The company’s long-term debt was $2,458.1 million, representing a debt-to-capitalization ratio of 39.9%.
Zacks Rank and Stocks to Consider
Denver, CO-based QEP Resources currently carries a Zacks Rank #3 (Hold).
Investors interested in the Energy sector can opt for some better-ranked stocks in the same space like Nine Energy Service, Inc. (NINE - Free Report) , Oasis Midstream Partners LP (OMP - Free Report) and CNOOC Limited (CEO - Free Report) . While Nine Energy Service sports a Zacks Rank #1 (Strong Buy), Oasis Midstream and CNOOC carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Houston, TX-based Nine Energy Service is an onshore service provider. For 2018, the bottom line is likely to be up 33.4%. In the last reported quarter, the company delivered a positive earnings surprise of 6.3%.
Houston, TX-based Oasis Midstream is an integrated energy partnership. The company’s revenues for 2018 are anticipated to improve 29.3% from the prior-year quarter, while its earnings are expected to increase 337.2%.
Hong Kong-based CNOOC is an integrated energy company. The company’s top line for 2018 is anticipated to improve 49% year over year, while its bottom line is expected to increase 82.8%.
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