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Jagged Peak Energy Inc. (JAG) Down 6.1% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Jagged Peak Energy Inc. . Shares have lost about 6.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Jagged Peak Energy Inc. due for a breakout? 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 catalysts.

Jagged Peak Miss Q3 Earnings on Lower Realized Prices

Jagged Peak Energy reported third-quarter 2019 adjusted earnings of 10 cents per share, missing the Zacks Consensus Estimate of 13 cents and deteriorating from the year-ago quarter’s 18 cents.

In addition, revenues of $150.1 million missed the Zacks Consensus Estimate of $152 million and declined from the year-ago quarter’s $155.4 million.

Although the company reported higher production volumes, it was more than offset by lower commodity price realizations and increased operating expenses. This resulted in weak quarterly results.

Production Surges

In the quarter, total production volumes were recorded at 3,616 thousand barrels of oil equivalent (MBoe), up from 3,323 MBoe in the September quarter of 2018. Notably, oil contributed 76.3% to its total production volumes.

Oil production increased from 27,507 barrels per day (Bbls/d) to 29,980 Bbls/d in the quarter under review. Natural gas production was reported at 25,339 thousand cubic feet per day (Mcf/d), up from 23,245 Mcf/d in the year-ago period. Natural gas liquids output in the quarter was 5,096 Bbls/d, higher than the year-ago level of 4,738 Bbls/d.

Price Realizations Plunge

The average realized price, excluding realized hedge settlements, per barrel of oil equivalent was $41.51. The figure was significantly lower than the year-ago quarter’s $46.64 a barrel. Average realized price for oil was $53.55 per barrel compared with $55.95 in the year-ago quarter. The same for natural gas was recorded at 31 cents per Mcf, which plunged from the year-ago level of $1.19. Natural gas liquids price in the quarter under review averaged $3.47 per barrel, lower than $24.81 in third-quarter 2018.

Expenses Increase

Total operating expenses in the quarter amounted to $140.4 million, higher than the year-ago level of $90.7 million. Total lease operating expenses, which jumped nearly 57% from the prior-year quarter, primarily led to the surge in total operating costs. On a per BOE basis, lease operating expenses increased to $4.85 in the September quarter from $3.37 in the corresponding period of 2018.

Capital Expenditure & Balance Sheet

For the September quarter, the company’s capital spending on drill, complete and equip activities was $162.6 million.

As of Sep 30, 2019, its total cash and cash equivalents amounted to $10.6 million, and long-term debt was $705.3 million, with a debt-to-capitalization ratio of 43%.

Guidance

The company discontinued to provide guidance following its merger agreement with Parsley Energy, Inc. (PE), signed on Oct 14. The transaction is expected to conclude in first-quarter 2020.

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

Currently, Jagged Peak Energy Inc. has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Jagged Peak Energy Inc. has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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