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Oil & Gas Stock Roundup: BP, Kinder Morgan & Baker Hughes Report Q1 Earnings
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It was a week where oil prices fell below zero for the first time, while natural gas finished slightly lower
On the news front, energy companies BP plc (BP - Free Report) , Kinder Morgan (KMI - Free Report) and Baker Hughes (BKR - Free Report) reported March quarter earnings.
Overall, it was a bearish week for the sector. West Texas Intermediate (WTI) crude futures slumped 32.3% to close at $16.94 per barrel, while natural gas prices edged down 0.4% for the week to finish at 1.746 per million Btu (MMBtu). In particular, the oil markets extended their decline from the previous week when the commodity fell sharply, forcing E&P biggie ConocoPhillips (COP - Free Report) to cut its capital spending, suspend the share repurchase program and reduce production.
Coming back to the week ended Apr 24, the crude benchmark notched its biggest weekly loss ever, even hitting negative territory at one point, as concerns about the coronavirus-induced demand destruction amid a storage crisis continue to outweigh the historic OPEC+ deal to curb production. Further, the U.S. Energy Department's latest inventory release revealing another massive increase in oil stockpiles also had a negative effect on the commodity.
Meanwhile, natural gas ended slightly lower as the fuel gas faces the prospect of a coronavirus-related steep drop-off in usage. Natural gas is already coming off a mild winter amid strong production that kept inventories well above normal. In fact, the commodity recently slumped to its lowest price since 1995.
Recap of the Week’s Most Important Stories
1. British supermajor BP reported first-quarter 2020 adjusted earnings of 24 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line missed the Zacks Consensus Estimate of 28 cents and deteriorated from the year-ago quarter’s 70 cents. The weakness in first-quarter results is largely a reflection of a drop in oil equivalent production, commodity prices and refining marker margin. In particular, the coronavirus pandemic, which dented global energy demand, has hurt the company’s upstream and downstream business.
The company bought back 120 million ordinary shares in the first quarter for $776 million. Moreover, with the raising of the dividend payout in the fourth quarter, the company has maintained quarterly dividend at 63 cents per ADS, which will be paid on Jun 19. When many leading energy firms are considering a cut in dividend payouts amid the coronavirus outbreak, the company’s decision to maintain dividends is worth appreciating.
BP expects production volumes to decline sequentially in the second quarter of 2020. Since the coronavirus pandemic has hurt worldwide energy demand, the company expects refinery utilizations to decline in the June quarter. (BP Lags Q1 Earnings & Revenue Estimates, Maintains Dividend)
2. Energy infrastructure provider Kinder Morgan posted first-quarter 2020 adjusted earnings per share of 24 cents, in line with the Zacks Consensus Estimate. Increased average tariffs on its refined product pipeline boosted profits. The bottom line, however, declined from the year-ago quarter’s 25 cents owing to reduced contributions from the Tennessee gas pipeline and decreased NGL prices and crude volumes.
The company received approval from the board of directors to hike first-quarter dividend by 5% as compared to the December quarter of 2019. The raised dividend of 26.25 cents per share is likely to be paid on May 15, to common stockholders of record as of May 4.
As of Mar 31, 2020, Kinder Morgan reported $360 million in cash and cash equivalents. The company’s long-term debt amounted to $29,955 million at quarter-end. Total debt-to-capitalization ratio at the end of the first quarter was 50%. Owing to the drop in global energy demand due to the coronavirus pandemic, Kinder Morgan has lowered its 2020 expansion capital budget by 30%. (Kinder Morgan Meets Q1 Earnings Estimates, Ups Dividend)
3. Baker Hughes Company reported first-quarter 2020 adjusted earnings of 11 cents per share, which beat the Zacks Consensus Estimate of 9 cents. The better-than-expected earnings were supported by strong performance of the Oilfield Services segment, and higher cost productivity in Turbomachinery & Process Solutions despite unfavorable business environment.
Total orders from all business segments in first-quarter 2019 were $5,532 million, down 3% year over year, due to lower orders in Subsea Production Systems and Services businesses. The Zacks Rank #3 (Hold) company generated positive free cash flow of $152 million in the reported quarter versus negative free cash flow of $419 million in the year-ago period.
The company expects uncertainty in the oil and gas industry to prevail going forward. Economic recovery from the coronavirus pandemic and supply response to the market situation will drive future crude price environment. The company expects to cut costs and optimize portfolio to navigate through the current market uncertainty. It expects to reduce 2020 capital expenditures by more than 20% from 2019 levels. (Baker Hughes Q1 Earnings Beat on Solid Oilfield Services)
4. TechnipFMCplc (FTI - Free Report) reported first-quarter 2020 adjusted loss of 11 cents per share. Meanwhile, the Zacks Consensus Estimate was of earnings of 22 cents and the year-earlier quarter's adjusted earnings came in at 6 cents. This underperformance can be primarily attributed to the coronavirus-induced vulnerable market scenario and lower-than-anticipated profits from the Technip Energies (previously Onshore/Offshore) segment, which is the major contributor to the company’s bottom line.
The company’s backlog increased in the first quarter. TechnipFMC’s order backlog stood at $21.9 billion, improving 23.5% from the year-ago quarter. In the reported quarter, TechnipFMC spent $83.5 million. Meanwhile, cash flow from operations for the quarter came in at $27.9 million. As of Mar 31, the company had cash and cash equivalents of $4.9 billion and a long-term debt of $3.8 billion with a debt-to-capitalization ratio of 48.5%.
TechnipFMC provided full-year guidance for its operating segments. The company expects revenues from the Subsea and Technip Energies units to be around $1 billion and $6.3-$6.8 billion, respectively. For the Technip Energies segment in particular, the revenue projection is a steep downward revision from the earlier range of $7.5-$7.8 billion. Further, the company set minimum EBITDA margin target of 10% for the Technip Energies segment. In a grim reminder of the difficult operating environment, the company expects subsea inbound orders in 2020 to fall by as much as 50% from the previous year. (TechnipFMC Q1 Earnings and Revenues Miss Estimates)
5. Core Laboratories N.V. (CLB - Free Report) recently reported first-quarter 2020 results wherein adjusted earnings of 31 cents a share fell short of the Zacks Consensus Estimate of 34 cents. Moreover, the profit declined from the year-ago quarter’s earnings of 44 cents. This downside was caused by a steep decline in U.S. onshore activity during the quarter.
As of Mar 31, 2020, Core Labs had cash and cash equivalents of $13.9 million and long-term debt (including lease obligations) of $302.4 million. The company’s debt-to-capitalization ratio was 81.2%. In the reported quarter, Core Labs generated $22 million in operating cash and its capital expenditure totaled $3.3 million. This, in turn, led to the $18.7-million free cash flow (FCF) generation. Markedly, this is the 74th consecutive quarter of the company’s FCF recognition.
With an aim to preserve its strong balance sheet and reduce the debt burden, last month, the board of directors declared a quarterly cash dividend of a cent per share, down from the previous dividend of 25 cents. This dividend cut has been effective the second quarter onward. (Core Labs' Q1 Earnings Miss, Sales Beat Estimates)
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 +1.2% -34.2% CVX -0.2% -24.3% COP +2.4% -33.3% OXY +1.3% -66.5% SLB +5.4% -54.2% RIG -18.5% -82.2% VLO +1.4% -44.5% MPC +1.2% -60.9%
The Energy Select Sector SPDR – a popular way to track energy companies – was up 2% last week. The best performer was oilfield service behemoth Schlumberger (SLB - Free Report) whose stock gained 5.4%.
But longer-term, over six months, the sector tracker is down 40.2%. Offshore driller Transocean Ltd. was the major loser during this period, experiencing a 82.2% price plunge.
What’s Next in the Energy World?
As global oil consumption plunges amid a supply glut, market participants will be closely tracking the regular releases to watch for signs that could indicate a rebound. In this context, the U.S. government statistics on oil and natural gas - one of the few solid indicators that comes out regularly - and the Baker Hughes data on rig count, will be on the energy traders' radar, plus the 2020 Q1 earnings, with the Big Oil companies coming out with quarterly results.
Today's Best Stocks from Zacks
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This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
Image: Bigstock
Oil & Gas Stock Roundup: BP, Kinder Morgan & Baker Hughes Report Q1 Earnings
It was a week where oil prices fell below zero for the first time, while natural gas finished slightly lower
On the news front, energy companies BP plc (BP - Free Report) , Kinder Morgan (KMI - Free Report) and Baker Hughes (BKR - Free Report) reported March quarter earnings.
Overall, it was a bearish week for the sector. West Texas Intermediate (WTI) crude futures slumped 32.3% to close at $16.94 per barrel, while natural gas prices edged down 0.4% for the week to finish at 1.746 per million Btu (MMBtu). In particular, the oil markets extended their decline from the previous week when the commodity fell sharply, forcing E&P biggie ConocoPhillips (COP - Free Report) to cut its capital spending, suspend the share repurchase program and reduce production.
Coming back to the week ended Apr 24, the crude benchmark notched its biggest weekly loss ever, even hitting negative territory at one point, as concerns about the coronavirus-induced demand destruction amid a storage crisis continue to outweigh the historic OPEC+ deal to curb production. Further, the U.S. Energy Department's latest inventory release revealing another massive increase in oil stockpiles also had a negative effect on the commodity.
Meanwhile, natural gas ended slightly lower as the fuel gas faces the prospect of a coronavirus-related steep drop-off in usage. Natural gas is already coming off a mild winter amid strong production that kept inventories well above normal. In fact, the commodity recently slumped to its lowest price since 1995.
Recap of the Week’s Most Important Stories
1. British supermajor BP reported first-quarter 2020 adjusted earnings of 24 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line missed the Zacks Consensus Estimate of 28 cents and deteriorated from the year-ago quarter’s 70 cents. The weakness in first-quarter results is largely a reflection of a drop in oil equivalent production, commodity prices and refining marker margin. In particular, the coronavirus pandemic, which dented global energy demand, has hurt the company’s upstream and downstream business.
The company bought back 120 million ordinary shares in the first quarter for $776 million. Moreover, with the raising of the dividend payout in the fourth quarter, the company has maintained quarterly dividend at 63 cents per ADS, which will be paid on Jun 19. When many leading energy firms are considering a cut in dividend payouts amid the coronavirus outbreak, the company’s decision to maintain dividends is worth appreciating.
BP expects production volumes to decline sequentially in the second quarter of 2020. Since the coronavirus pandemic has hurt worldwide energy demand, the company expects refinery utilizations to decline in the June quarter. (BP Lags Q1 Earnings & Revenue Estimates, Maintains Dividend)
2. Energy infrastructure provider Kinder Morgan posted first-quarter 2020 adjusted earnings per share of 24 cents, in line with the Zacks Consensus Estimate. Increased average tariffs on its refined product pipeline boosted profits. The bottom line, however, declined from the year-ago quarter’s 25 cents owing to reduced contributions from the Tennessee gas pipeline and decreased NGL prices and crude volumes.
The company received approval from the board of directors to hike first-quarter dividend by 5% as compared to the December quarter of 2019. The raised dividend of 26.25 cents per share is likely to be paid on May 15, to common stockholders of record as of May 4.
As of Mar 31, 2020, Kinder Morgan reported $360 million in cash and cash equivalents. The company’s long-term debt amounted to $29,955 million at quarter-end. Total debt-to-capitalization ratio at the end of the first quarter was 50%. Owing to the drop in global energy demand due to the coronavirus pandemic, Kinder Morgan has lowered its 2020 expansion capital budget by 30%. (Kinder Morgan Meets Q1 Earnings Estimates, Ups Dividend)
3. Baker Hughes Company reported first-quarter 2020 adjusted earnings of 11 cents per share, which beat the Zacks Consensus Estimate of 9 cents. The better-than-expected earnings were supported by strong performance of the Oilfield Services segment, and higher cost productivity in Turbomachinery & Process Solutions despite unfavorable business environment.
Total orders from all business segments in first-quarter 2019 were $5,532 million, down 3% year over year, due to lower orders in Subsea Production Systems and Services businesses. The Zacks Rank #3 (Hold) company generated positive free cash flow of $152 million in the reported quarter versus negative free cash flow of $419 million in the year-ago period.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company expects uncertainty in the oil and gas industry to prevail going forward. Economic recovery from the coronavirus pandemic and supply response to the market situation will drive future crude price environment. The company expects to cut costs and optimize portfolio to navigate through the current market uncertainty. It expects to reduce 2020 capital expenditures by more than 20% from 2019 levels. (Baker Hughes Q1 Earnings Beat on Solid Oilfield Services)
4. TechnipFMCplc (FTI - Free Report) reported first-quarter 2020 adjusted loss of 11 cents per share. Meanwhile, the Zacks Consensus Estimate was of earnings of 22 cents and the year-earlier quarter's adjusted earnings came in at 6 cents. This underperformance can be primarily attributed to the coronavirus-induced vulnerable market scenario and lower-than-anticipated profits from the Technip Energies (previously Onshore/Offshore) segment, which is the major contributor to the company’s bottom line.
The company’s backlog increased in the first quarter. TechnipFMC’s order backlog stood at $21.9 billion, improving 23.5% from the year-ago quarter. In the reported quarter, TechnipFMC spent $83.5 million. Meanwhile, cash flow from operations for the quarter came in at $27.9 million. As of Mar 31, the company had cash and cash equivalents of $4.9 billion and a long-term debt of $3.8 billion with a debt-to-capitalization ratio of 48.5%.
TechnipFMC provided full-year guidance for its operating segments. The company expects revenues from the Subsea and Technip Energies units to be around $1 billion and $6.3-$6.8 billion, respectively. For the Technip Energies segment in particular, the revenue projection is a steep downward revision from the earlier range of $7.5-$7.8 billion. Further, the company set minimum EBITDA margin target of 10% for the Technip Energies segment. In a grim reminder of the difficult operating environment, the company expects subsea inbound orders in 2020 to fall by as much as 50% from the previous year. (TechnipFMC Q1 Earnings and Revenues Miss Estimates)
5. Core Laboratories N.V. (CLB - Free Report) recently reported first-quarter 2020 results wherein adjusted earnings of 31 cents a share fell short of the Zacks Consensus Estimate of 34 cents. Moreover, the profit declined from the year-ago quarter’s earnings of 44 cents. This downside was caused by a steep decline in U.S. onshore activity during the quarter.
As of Mar 31, 2020, Core Labs had cash and cash equivalents of $13.9 million and long-term debt (including lease obligations) of $302.4 million. The company’s debt-to-capitalization ratio was 81.2%. In the reported quarter, Core Labs generated $22 million in operating cash and its capital expenditure totaled $3.3 million. This, in turn, led to the $18.7-million free cash flow (FCF) generation. Markedly, this is the 74th consecutive quarter of the company’s FCF recognition.
With an aim to preserve its strong balance sheet and reduce the debt burden, last month, the board of directors declared a quarterly cash dividend of a cent per share, down from the previous dividend of 25 cents. This dividend cut has been effective the second quarter onward. (Core Labs' Q1 Earnings Miss, Sales Beat Estimates)
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 +1.2% -34.2%
CVX -0.2% -24.3%
COP +2.4% -33.3%
OXY +1.3% -66.5%
SLB +5.4% -54.2%
RIG -18.5% -82.2%
VLO +1.4% -44.5%
MPC +1.2% -60.9%
The Energy Select Sector SPDR – a popular way to track energy companies – was up 2% last week. The best performer was oilfield service behemoth Schlumberger (SLB - Free Report) whose stock gained 5.4%.
But longer-term, over six months, the sector tracker is down 40.2%. Offshore driller Transocean Ltd. was the major loser during this period, experiencing a 82.2% price plunge.
What’s Next in the Energy World?
As global oil consumption plunges amid a supply glut, market participants will be closely tracking the regular releases to watch for signs that could indicate a rebound. In this context, the U.S. government statistics on oil and natural gas - one of the few solid indicators that comes out regularly - and the Baker Hughes data on rig count, will be on the energy traders' radar, plus the 2020 Q1 earnings, with the Big Oil companies coming out with quarterly results.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>