It has been about a month since the last earnings report for Energen . Shares have added about 4.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Energen due for a pullback? 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 drivers.
Second-Quarter 2018 Results
Energen Corporation reported second-quarter 2018 adjusted earnings from continuing earnings of 77 cents per share, beating the Zacks Consensus Estimate of 75 cents and improving from the prior-year quarter’s 6 cents.
Revenues of $339.7 million steered past the Zacks Consensus Estimate of $337 million and improved from $256.8 million in the year-ago quarter.
The strong second-quarter results were supported by the surge in oil equivalent production and crude price realization.
Total production volumes for the April-to-June quarter of 2018 increased to 8,862 thousand barrels of oil equivalent (MBOE) from 6,596 MBOE in the prior-year quarter, courtesy of strong well operations as more wells in the Midland and Delaware basins came online. Of the total volume, oil accounts for 58.3%.
The company recorded oil production of 5,164 thousand barrel (MBbl), higher than 4,102 MBbl in the year-ago quarter. Natural gas production also raised to 11,058 million cubic feet (MMcf) from 7,596 MMcf.
Price Realization (Excluding Effects of All Derivative Instruments)
Average realized price for oil jumped from $44.54 a barrel in second-quarter 2017 to $61.21. However, realized natural gas prices fell to $1.21 per thousand cubic feet (Mcf) from $2.29 in the year-ago quarter.
Operating Cost Increases
Through the second quarter of 2018, the company’s total operating cost and expenses surged by almost $39 million to $241.2 million. The jump in expenses associated with oil, natural gas liquids and natural gas production was $14.1 million, primarily attributable to the rise in operating costs.
Balance Sheet & Capital Spending
As of Jun 30, 2018, the company had approximately $1.2 million in cash and cash equivalents. The company had long-term debt of $829.1 million, representing a debt-to-capitalization ratio of 18.6%.
Through the April-to-June quarter of 2018, the company spent $334.4 million that includes expenditures for acquisitions.
Through 2018, Energen expects daily production to lie between 97 and 104 thousand barrels of oil equivalent (MBOE/D), up 5% from the mid-point of the company’s earlier projection. With the new guidance mid-point, the growth in production over 2018 will likely be 32%. The consistent record performances by the operating wells primarily attributed to the growth.
The leading oil and natural gas exploration and production company projects its respective third-quarter 2018 and fourth-quarter 2018 production in the range of 95.5-102.5 MBOE/D and 108-115 MBOE/D.
Through 2018, Energen continues to project capital spending for drilling and development operations in the range of $1.1-$1.3 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, Energen has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Energen has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.