Oil & Gas Stock Roundup: Bunch of Q2 Earnings & Canadian Natural's Acquisition
It was a week wherein oil futures closed at their highest since March and gas prices moved above $2 for the first time in three months.
On the news front, energy companies EOG Resources EOG, Williams Companies WMB, Pioneer Natural Resources PXD and Diamondback Energy FANG reported June-quarter earnings. Meanwhile, Canadian Natural Resources Limited CNQ has reached an agreement to acquire Painted Pony Energy in an all-stock deal worth C$461 million.
Overall, it was a good week for the sector. West Texas Intermediate (WTI) crude futures gained 2.4% to close at $41.22 per barrel, while natural gas prices soared 24.4% for the week to finish at 2.238 per million Btu (MMBtu).
The crude benchmark rose to its highest in five months after a weekly report from the Energy Information Administration ("EIA") showed a stockpile draw nearly twice above expectations. Additionally, the dollar-denominated commodity got a boost from a weaker greenback, news of progress on the next coronavirus relief package and an upbeat U.S. factory data.
Meanwhile, natural gas rallied strongly due to record cooling demand and expectations of continued hot weather, which is likely to translate into the burning of more fuel to feed higher electricity consumption for air-conditioning.
Recap of the Week’s Most-Important Stories
1. Upstream energy company EOG Resources reported second-quarter 2020 adjusted loss per share of 23 cents, wider than the Zacks Consensus Estimate of a loss of 14 cents. The weak results were due to a massive drop in commodity price realizations and lower production volumes, partially offset by decreased operating costs.
Meanwhile, total operating expenses decreased to $2,189.9 million from $3,566.9 million in second-quarter 2019. Lease and Well expenses declined to $245.3 million from $347.3 million a year ago. Moreover, transportation costs decreased to $151.7 million from $174.1 million a year ago. Also, the Zacks Rank #2 (Buy) company reported Gathering and Processing costs of $96.8 million, lower than the year-ago quarter’s $112.6 million. Exploration expenses fell to $27.3 million from the year-ago level of $32.5 million.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The company increased its well cost-savings target for this year to 12% from 8% announced earlier. Due to the low price environment, the company curtailed significant production volumes in the second quarter. Although it resumed production in many places, the company expects around 25,000 barrels of oil per day output to remain shut-in in the third quarter. It expects 2020 production in the range of 730.1-765.9 MBoe/d. Third-quarter output will likely be in the band of 676.1-711.7 MBoe/d. (EOG Resources Q2 Earnings Miss on Lower Crude Prices)
2. Energy infrastructure provider The Williams Companies, Inc. reported second-quarter 2020 adjusted earnings per share of 25 cents, beating the Zacks Consensus Estimate of 23 cents, attributable to a strong contribution from the Northeast G&P unit.
Distributable cash flows came in at $797 million, down 8.07% from the year-ago number of $867 million. Adjusted EBITDA was $1.24 billion in the quarter under review, in line with the year-ago quarter’s figure. Cash flow from operations totaled $1.14 billion compared with $1.07 billion in the prior-year period. Lower maintenance capital drove cash flow in the quarter.
In the reported quarter, total costs and expenses decreased to $1.17 billion from $1.54 billion a year ago owing to fall in product expenses and G&A costs. Williams’ total capital expenditure was $613 million in the second quarter, down substantially from $919 million a year ago. As of Jun 30, 2020, the company had cash and cash equivalents worth $1.13 billion and a long-term debt of $22.3 billion with a debt-to-capitalization of 64.6%. (Williams Q2 Earnings Top Estimates, Revenues Miss)
3. Pioneer Natural Resources, a premier Permian producer, reported second-quarter 2020 loss per share of 32 cents, excluding one-time items, narrower than the Zacks Consensus Estimate of a loss of 35 cents. The outperformance reflects higher oil equivalent production volumes.
Total production in the reported quarter was 374.6 thousand barrels of oil equivalent per day (MBOE/D), up 12.1% year over year. Oil production was 214.9 thousand barrels per day (MBbl/D), up 3.6% year over year. Natural gas liquids (NGLs) production of 90.2 MBbl/D compared with the year-ago quarter’s 67.1 MBbl/D. Moreover, natural gas production amounted to 416.5 million cubic feet per day (MMcf/D), up from the year-ago quarter’s 357.9 MMcf/D.
For the third quarter of 2020, the company expects daily oil equivalent production in the range of 341 to 356 (MBOE/D). For 2020, Pioneer Natural revised its oil equivalent production volumes guidance higher to 356 MBoE/D to 371 MBoE/D. At the end of the quarter under review, cash balance totaled $180 million. Long-term debt summed $2,054 million, reflecting a debt-to-capitalization of 15.7%. (Pioneer Q2 Earnings Beat Estimates, Revenues Miss)
4. Another Permian operator Diamondback Energy delivered strong second-quarter 2020 earnings. Better-than-expected production led to this outperformance. Precisely, overall volumes came in at 294.1 thousand barrels of oil equivalent per day (MBOE/d), beating the Zacks Consensus Estimate of 293.3 MBOE/d. The company’s adjusted net income per share of 15 cents outpaced the Zacks Consensus Estimate of 3 cents.
Second-quarter cash operating cost was $6.44 per barrel of oil equivalent (BOE), down 25.7% from the prior-year figure of $8.67 per BOE. Diamondback’s lease operating expense (LOE) of $3.85 was down 22.7% year over year. Moreover, production taxes plummeted nearly 67% from the prior-year quarter to $2.51 per BOE. Meanwhile, gathering and transportation expense was $1.35, higher than 67 cents in the second quarter of 2019.
Diamondback projects 2020 average daily production to be 290-305 MBOE/d, lower than the previous guidance of 295-310 MBOE/d. Its average daily oil production is estimated between 178 MBO/d and 182MBO/d with expected capital spend of $1,800-$1,900 million. Further, this Midland, TX-headquartered company plans to complete 153-180 net wells and drill 205-215 gross wells in 2020. (Diamondback Q2 Earnings Top Estimates on Solid Output)
5. Canadian Natural Resources Limited has reached an agreement to acquire Calgary-based natural gas producer Painted Pony Energy in an all-stock deal worth C$461 million. Further, the company is expected to assume Painted Pony’s total debt of approximately C$350 million.
Painted Pony’s assets are said to well complement Canadian Natural’s diversified portfolio. Moreover, the integration between the two companies is expected to make a significant impression on Canadian Natural’s natural gas assets and production base in its core operating areas as Painted Pony’s land and production are located in the same regions.
The proposed takeover, wherein Canadian Natural will acquire Painted Pony’s outstanding shares worth 69 Canadian cents per share in cash, will comprise the latter’s properties in Northeast British Columbia areas of Blair, Daiber, Kobes and Townsend. These areas jointly produce nearly 270 million cubic feet of natural gas and 4,600 barrels of natural gas liquids per day. (Canadian Natural Inks Acquisition Deal With Painted Pony)
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 six months.
Company Last Week Last 6 Months
XOM +3.2% -25.8%
CVX +3.4% -20.9%
COP +2.4% -33.8%
OXY -1.8% -61.9%
SLB +8.2% -42.9%
RIG +9.8% -48.7%
VLO -4.7% -37.6%
MPC -4% -33.4%
The Energy Select Sector SPDR — a popular way to track energy companies — gained 3.2% last week. The best performer was offshore driller Transocean Ltd. RIG whose stock surged 9.8%.
For the longer term, over six months, the sector tracker is down 30.8%. Oil and gas producer Occidental Petroleum OXY lost the most during this period, experiencing a 61.9% price plunge.
What’s Next in the Energy World?
As global oil consumption gradually ticks up, market participants will be closely tracking the regular releases to watch for signs that could further validate a rebound. In this context, the U.S. government’s statistics on oil and natural gas -— one of the few solid indicators that comes out regularly — will be on energy traders' radar. Data on rig count from energy service firm Baker Hughes, which is a pointer to trends in U.S. crude production, is also closely followed. Finally, there will be 2020 Q2 earnings, with a few of companies coming up with quarterly results.
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Transocean Ltd. (RIG) : Free Stock Analysis Report
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
EOG Resources, Inc. (EOG) : Free Stock Analysis Report
Williams Companies, Inc. The (WMB) : Free Stock Analysis Report
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
Canadian Natural Resources Limited (CNQ) : Free Stock Analysis Report
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
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