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Oil & Gas Stock Roundup: Williams, Concho & Pioneer Natural Report Q4 Earnings

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It was a week when both oil and natural gas prices settled higher.

On the news front, The Williams Companies, Inc. (WMB - Free Report) , Pioneer Natural Resources (PXD - Free Report) and Concho Resources (CXO - Free Report) reported December quarter earnings.  

Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures added 2% to close at $53.38 per barrel, natural gas prices gained 3.7% in the week to finish at 1.905 per million Btu (MMBtu).

The crude benchmark rose for the second week in a row after a data report showed a smaller-than-expected increase in domestic supplies. Further, Trump administration’s sanctions on the trading unit of Russia's state-owned oil company Rosneft and China’s economic stimulus package had a positive effect on prices. These factors were partly offset by the rumored rift in the alliance between Russia and Saudi Arabia-led producer group and increased concerns over fears that the coronavirus outbreak in China would have a severe impact on oil demand    

Meanwhile, natural gas ended slightly higher following an in-line decrease in supplies and bullish weather forecasts.  

Recap of the Week’s Most Important Stories

1.  Energy infrastructure provider Williams Companies reported fourth-quarter 2019 adjusted earnings per share (EPS) of 24 cents, missing the Zacks Consensus Estimate by a penny owing to weaker West segment performance.

However, the bottom line was above the year-earlier quarter's adjusted earnings of 19 cents on strong contribution from the energy infrastructure provider’s Atlantic-Gulf and Northeast G&P units. On a further encouraging note, Williams’ gathered volumes were up 10% year over year to a record 13.3 billion cubic feet per day (Bcf/d), while reserved transportation capacity improved 8% from the corresponding period of 2018 to 21.8 Bcf/d – another all-time high.

The company reaffirmed its full-year adjusted EBITDA guidance in the band of $4.95-$5.25 billion with distributable cash flow within $3.05-$3.45 billion. Adjusted EPS view for the year is expected in the range of 95 cents to $1.20. Further, Williams expects to grow its dividend at an annual rate of 5% and aims toward a dividend coverage ratio of 1.7x at the midpoint of its 2020 guidance. Importantly, the company looks to cover its dividend hike and capital spending in 2020 with internally generated cash flows. (Read more Williams Misses Q4 Earnings Estimates, Tops on Revenues)

2.   Pioneer Natural Resources, a premier Permian producer, reported fourth-quarter 2019 adjusted earnings per share of $2.36, beating the Zacks Consensus Estimate of $2.12, thanks to higher production and average realized prices on an oil-equivalent basis. Further, the bottom line surged from the year-ago quarter’s $1.18.

In a separate release, the Zacks Rank #3 (Hold) company hiked quarterly dividend by 25% to 55 cents per share. The increased dividend is likely to be paid out on Apr 14, to stockholders of record as of Mar 31. At the end of the quarter under review, cash balance totaled $631 million. Long-term debt summed $1,839 million, reflecting a debt-to-capitalization ratio of 15.9%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

For 2020, the upstream energy player projects capital budget for drilling, completions and facilities in the band of $3-$3.3 billion. Average oil equivalent volumes for 2020 has been estimated in the band of 383 to 403 thousand barrels of oil equivalent per day. Notably, the company expects daily oil production for 2020 in the range of 235 to 245 thousand barrels. (Read more Pioneer Natural Q4 Earnings & Revenues Beat Estimates)

3.   Concho Resources reported net income per share (excluding special items) of $1.03, ahead of the Zacks Consensus Estimate of 77 cents and the prior-year period earnings of 94 cents. The outperformance can be primarily attributed to better-than-anticipated production volumes. Precisely, the Permian-focused upstream player’s output of 337,288 barrels of oil equivalent per day (Boe/d) surpassed the Zacks Consensus Estimate of 325,265 Boe/d.

In more good news for investors, the crude and natural gas explorer raised its quarterly dividend by 60% to 20 cents per share (or 80 cents per share annualized), to be paid out on on Mar 27 to shareholders of record as of Feb 28.

Production for the first quarter is expected within 316,000-325,000 Boe/d, including the impact of its New Mexico property disposition. Concho expects 2020 overall volumes to grow 6-8% year over year, with oil output increasing 10-12%. Full-year capex budget is forecast to be between $2.6 billion and $2.8 billion, 10% below the 2019 spending at the midpoint of the projected range. The company’s controllable cash costs are expected to clock in at $9 per Boe, down from $9.44 in 2019. Finally, Concho has set itself the target of increasing the length of the company’s laterals by 10% in 2020 to 10,000 feet, up from 9,000 in 2019 – reflecting improved efficiencies. (Read more Concho Q4 Earnings Top on Volume Gains, Dividend Hiked)

4.   Cenovus Energy Inc. (CVE - Free Report) reported fourth-quarter 2019 loss per share of 10 cents. The Zacks Consensus Estimate of profit was pegged at 8 cents. The Canadian integrated energy firm’s weaker-than-expected quarterly results were primarily owing to higher transportation and blending expenses along with lower margins from the Refining and Marketing business. The bottom line, however, was narrower than loss of $1.03 per share in fourth-quarter 2018, driven by higher oil sand production volumes.

Transportation and blending expenses in the reported quarter increased to C$1,416 million from C$1,269 million in the year-ago quarter. However, expenses for purchased products fell to C$2,059 million from C$2,555 million.

The company incurred total capital expenditure of C$317 million in the quarter under review. Notably, Cenovus generated $361 million in free funds flow. As of Dec 31, 2019, the Canadian energy player had cash and cash equivalents of C$186 million, and total long-term debt of C$6,699 million. Its total debt-to-capitalization ratio was 25.9%. (Read more Cenovus' Earnings and Revenues Miss Estimates in Q4)

5.   Diamondback Energy, Inc. (FANG - Free Report) reported strong fourth-quarter 2019 results. Better-than-expected production led to this outperformance. Precisely, overall volume came in at 301.3 thousand barrels of oil equivalent per day (MBOE/d), beating the Zacks Consensus Estimate of 299.6 MBOE/d.

Diamondback’s board of directors announced a 100% hike in quarterly dividend to 37.5 cents per share from the previous rate of 18.8 cents. The new quarterly dividend will be paid out on Mar 10, 2020 to its shareholders of record as of Mar 3, 2020. The current annual dividend yield of the company is 2%.

As of Dec 31, 2019, this Permian-focused operator had $123-million in cash and cash equivalents, and long-term debt of $5.4 billion. The debt-to-capital ratio of the company was 28.8%. Diamondback projects 2020 average daily production of 310-325 MBOE/d. Its average daily oil production is estimated between 205 MBO/d and 215 MBO/d with expected capital spend of $2.8-$3 billion.(Read more Diamondback's Q4 Earnings Beat on Strong Production)

Price Performance

The following table shows the price movement of some the major oil and gas players over the past week and during the last 6 months.

Company

Last Week

Last 6 Months

XOM

-2.5%

-16.9%

CVX

-1%

-9.5%

COP

-0.3%

+9.8%

OXY

+1.3%

-6.3%

SLB

-3%

-2.1%

RIG

-8%

-11.2%

VLO

+0.3%

+6%

MPC

+2.4%

+21.4%

 

The Energy Select Sector SPDR – a popular way to track energy companies – fell 0.8% last week. The worst performer was offshore driller Transocean Ltd. (RIG - Free Report) whose stock slumped 8%.

Longer-term, over six months, the sector tracker is down 8.1%. Integrated behemoth ExxonMobil (XOM - Free Report) was the major loser during this period, experiencing a 16.9% price decline.

What’s Next in the Energy World?

As usual, market participants will be closely tracking the regular releases i.e. the U.S. government statistics on oil and natural gas - one of the few solid indicators that comes out regularly. The Baker Hughes data on rig count will also be on the energy traders' radar, plus the 2019 Q4 earnings, with a few energy biggies coming out with quarterly results.

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