The first-quarter 2019 earnings season is past the halfway mark for the energy sector, with majority of oil/gas biggies having already reported their quarterly numbers. With a host of companies slated to release quarterly results by the end of this week, let’s take a look at the oil and gas pricing scenario during the quarter, which is likely to affect energy companies’ fortunes.
Q1 Oil and Gas Price Report Card
Oil: Following the oil crash toward the end of 2018 that took everyone by storm, crude ended up posting the biggest quarterly gain in a decade. With oil popping up to $60.55 a barrel, the March quarter recorded the fastest rate of oil price hike since 2009 on the back of OPEC+ deal and other factors.
However, crude prices in first-quarter 2019 compared unfavorably with the year-ago period amid bearish outlook for Asian economies, increased inventories and softer y/y demand projections. Average West Texas Intermediate (WTI) crude prices in the month of January, February and March 2019 were recorded at $51.38, $55.01 and $58.17 per barrel, respectively, per data from the U.S. Energy Information Administration (EIA). These average prices were considerably lower than the year-ago respective prices of $63.55, $62.16 and $62.87. Hence, energy producers having an oil-weighted portfolio are likely to remain exposed to the vagaries of crude price fluctuations as they will derive less value for their products.
Natural Gas: Per the EIA data, the average spot prices of Henry Hub natural gas in the months of January, February and March of 2019 were recorded at $3.11, $2.69 and $2.80 per Million British thermal units (Btu), respectively. In the year-ago comparable months, the average prices of the commodity were recorded at $3.15, $2.65 and $2.70 per Million Btu, respectively, according to EIA. The y/y improved pricing scenario of the commodity over the last two months of first-quarter 2019 bodes well for the companies producing natural gas.
Picture Thus Far
Per the latest Earnings Preview report
, the energy sector’s first-quarter 2019 earnings are expected to decline 19.3% from the year-ago period, while the top line is likely to improve 3.1%.
Notably, oilfield services giants Schlumberger and Halliburton posted weaker y/y first-quarter 2019 earnings amid international market weakness. The bottom line of integrated oil majors like Chevron, ExxonMobil, TOTAL and BP plc declined year over year primarily due to weaker crude price realizations and lower refining margins.
Key Releases on May 9
Given the relatively weaker y/y backdrop, let’s a take a look at what’s in store for these four energy explorers that are set to report first-quarter results tomorrow.
Canadian Natural Resources Limited
(CNQ - Free Report
) : Calgary-based energy explorer is slated to release quarterly results before the opening bell.
According to our quantitative model, a company needs the right combination of two key ingredients — a positive Earnings ESP
and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter
Note that we caution against Sell-rated stocks (Zacks Ranks #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
In the last reported quarter, Canadian Natural reported a negative earnings surprise of 214.29% on lower liquids price realizations. Coming to earnings surprise history, the company missed estimates in two of the trailing four quarters, with average negative surprise of 39.58%.
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