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U.S. Shale Oil Q1 Earnings Are All In: Here's How They Did

Nilanjan Choudhury

With the first-quarter energy earnings season essentially over, it’s time to sit back and analyze the bevy of shale bigwigs that put in their reports.

Most of them reported lower earnings than they did in the same quarter last year, hit by the commodity price crash triggered by the coronavirus-induced demand slump amid a supply glut. At the same time, a few of them missed the Zacks Consensus Estimate. Meanwhile, the beats were driven by higher production.

While some companies withdrew their 2020 forecasts due to the coronavirus’ impact, almost all of them announced plans to reduce capex further.

In this write-up, we dive into the results from EOG Resources EOG, Continental Resources CLR, Concho Resources CXO, Diamondback Energy FANG, Pioneer Natural Resources Company PXD and Marathon Oil MRO.

EOG Resources

EOG Resources is the largest crude producer and acreage holder in Texas’ Eagle Ford shale, boasting more than 500,000 net acres.

Earnings & Revenues: The company reported first-quarter adjusted net income per share of 55 cents, missing the Zacks Consensus Estimate of 73 cents and well below the comparable 2019 period profit of $1.19 on significantly lower realized prices.

Total revenues at the Houston, TX-based energy explorer were $4.7 billion, coming above the Zacks Consensus Estimate of $4.1 billion and up 16% year over year on the back of growth in output.

Production: The production of oil and natural gas averaged 874,100 BOE/d (55% oil), up 13% from last year.

Realized Prices: At $46.96 per barrel, average realized oil prices were down from $56.09 in the prior-year quarter. EOG Resources sold natural gas at an average of $1.67 per Mcf, compared to $2.85 in the first quarter of 2019.

Guidance: EOG Resources expects its 2020 average daily production to be between 671,400 and 739,600 BOE/d, 23% lower than its previous projection. The company also tightened its projection for the 2020 capital budget to $3.3-$3.7 billion from $4.3-$4.7 billion mentioned earlier.

Share Price Impact: Notwithstanding the bottom-line miss, EOG Resources’ shares surged 12.2% in the aftermath of the report. Apart from a healthy revenue beat and the company’s efforts on cost cutting and capex reduction, investors welcomed the decision to maintain the dividend.

Continental Resources

Continental Resources is an independent oil and gas company with principal operations in the STACK & SCOOP plays in central Oklahoma and the Bakken/Three Forks formations of North Dakota and Montana.

Earnings & Revenues: The company reported first-quarter adjusted net loss per share of 8 cents, wider than the Zacks Consensus Estimate of 3 cents loss. In the year-ago quarter, the company earned 58 cents a share. The underperformance was on account of substantially lower average realized commodity prices.

Total revenues at the Oklahoma City, OK-based energy explorer were $880.8 million, down 22% from a year ago but managed to surpass the Zacks Consensus Estimate of $873 million primarily due to higher production.

Production: The production of oil and natural gas averaged 360,841 BOE/d (56% oil), up 9% from last year.

Realized Prices: At $39.64 per barrel, average realized oil prices were down from $50.05 in the prior-year quarter. Continental Resources sold natural gas at an average of 90 cents per Mcf, compared to $2.56 in the first quarter of 2019.

Guidance: Continental said the unpredictable market environment and the implementation of massive shut-ins meant the company has withdrawn all guidance for 2020.

Share Price Impact: The company’s shares fell more than 4% following the earnings miss. Investors were also spooked by the massive production curtailments and a higher-than-expected capital outgo for the quarter.

Concho Resources

Concho Resources focuses on growth through a combination of acquisitions and active drilling in the Permian Basin spread over west Texas and New Mexico.

Earnings & Revenues: Concho Resources reported first-quarter adjusted net income per share of 72 cents, same as the Zacks Consensus Estimate and the comparable 2019 period profit. The Zacks Rank #3 (Hold) company’s bottom line was favorably impacted by better-than-anticipated production volumes, partly offset by lower commodity prices.

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

Total revenues at the Midland, TX-based energy explorer were $922 million, down 16.5% from a year ago and missing the Zacks Consensus Estimate of $1.1 billion.

Production: The production of oil and natural gas averaged 326,000 BOE/d (64% oil), essentially unchanged year over year but surpassed the Zacks Consensus Estimate of 323,800 BOE/d.

Realized Prices: At $45.85 per barrel, average realized oil prices were down from $49.39 in the prior-year quarter. Concho Resources sold natural gas at an average of 79 cents per Mcf, compared to $2.64 in the first quarter of 2019.

Guidance: Concho Resources has decided to withhold detailed quarterly and annual guidance, citing the slump in commodity prices and market uncertainties related to the coronavirus pandemic. The company expects 2020 overall volumes to remain flat year over year. Further, Concho Resources has cut capital expenditure budget for 2020 by 40% to $1.6 billion from its original guidance of $2.7 billion.

Share Price Impact: Notwithstanding the in-line earnings performance, the company's shares ticked down 4.3% following the release. This can be attributed to the lowered production guidance for the year.

Diamondback Energy

Diamondback Energy is another company that focuses on the Permian Basin.

Earnings & Revenues: The company reported first-quarter adjusted net income per share of $1.45, above the Zacks Consensus Estimate of $1.32 and the comparable 2019 period profit of $1.39 on production gains.

Total revenues at the Midland, TX-based energy explorer were $899 million, coming below the Zacks Consensus Estimate of $954 million due to weaker average price realizations. However, the top line improved 4% from the year-earlier figure of $864 million.

Production: The production of oil and natural gas averaged 321,057 BOE/d (63% oil), up 22% from last year.

Realized Prices: At $45.10 per barrel, average realized oil prices were down from $46.12 in the prior-year quarter. Diamondback sold natural gas at an average of 14 cents per Mcf, compared to $1.32 in the first quarter of 2019.

Guidance: Diamondback stuck to its trimmed 2020 average daily production expectation to 295,000-310,000 BOE/d and capital expenditure guidance to $1.5 - $1.9 billion.

Share Price Impact: With few surprises in the release and the company choosing to keep its guidance intact, shares were little changed. The marginal 0.4% increase could be attributed to the relatively low capex projection of $550 million in the fourth quarter.

Pioneer Natural Resources

Pioneer Natural Resources is among the top Permian basin producers. In the Midland basin, the firm has amassed a large acreage position with operations across 680,000 net acres of land.

Earnings & Revenues: The company reported first-quarter adjusted income per share of $1.15, beating the Zacks Consensus Estimate of $1.03 thanks to higher oil equivalent production volumes. However, the bottom line came below the comparable 2019 period profit of $1.83 on lower realized prices.

Total revenues at the Irving, TX-based energy explorer was $2.3 billion, coming 1.8% below the Zacks Consensus Estimate and decreasing 6.5% year over year.

Production: The production of oil and natural gas averaged 375,163 BOE/d (59% oil), up 12.5% from last year.

Realized Prices: At $45.60 per barrel, average realized oil prices were down from $49.38 in the prior-year quarter. Pioneer Natural Resources sold natural gas at an average of $1.61 per Mcf, compared to $2.50 in the first quarter of 2019.

Guidance: Pioneer Natural Resources expects its 2020 average daily production to be between 341,000 and 359,000 BOE/d, down around 4% from its earlier projection. Meanwhile, the company revised its 2020 capital budget to the band of $1.4 billion to $1.6 billion, representing a decline of roughly 55% from its initial spending budget.

Share Price Impact: The company's shares rose 5.5% in the aftermath of the report. Apart from the obvious - bottom line beat and strong volumes - investors welcomed Pioneer natural Resources’ strong operational efficiencies and lower costs.

Marathon Oil

Marathon Oil is a leading energy explorer with its largest focus areas being Eagle Ford in South Texas and Bakken play in North Dakota. The company is also present in Oklahoma’s STACK and SCOOP plays, and the Permian Basin in New Mexico.

Earnings & Revenues: The company reported first-quarter adjusted net loss per share of 16 cents, 3 cents wider than the Zacks Consensus Estimate. A year ago, the company earned 31 cents per share. The unfavorable comparisons were triggered by substantially lower average realized commodity prices.

Total revenues at the Houston, TX-based oil and gas producer was $1.2 billion, up 3% from a year ago and ahead of the Zacks Consensus Estimate of $1 billion on higher production from the U.S. shale plays.

Production: The production of oil and natural gas from its core shale oil operations in the United States averaged 340,000 BOE/d (61% oil), up 15% from last year. Investors should note that Marathon Oil derives 80% of total output from its unconventional business in the United States.

Realized Prices: At $44.23 per barrel, average realized domestic oil and condensate prices were down from $54.05 in the prior-year quarter. Marathon Oil sold natural gas in the U.S. at an average of $1.60 per Mcf, compared to $2.93 in the first quarter of 2019.

Guidance: For 2020, Marathon Oil forecasts total U.S. oil production decline of 8%, while international oil volumes are expected to be 7% lower from 2019. The company has already cut capital expenditure budget for 2020 by 46% to $1.3 billion (or less) from its original guidance of $2.4 billion

Share Price Impact: Despite the headline miss, Marathon Oil's shares were little changed. The marginal 0.4% decrease could be attributed to the temporarily suspension of its quarterly dividend and its share repurchase program.

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Marathon Oil Corporation (MRO) : Free Stock Analysis Report
 
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EOG Resources Inc (EOG) : Free Stock Analysis Report
 
Concho Resources Inc (CXO) : Free Stock Analysis Report
 
Continental Resources Inc (CLR) : Free Stock Analysis Report
 
Diamondback Energy Inc (FANG) : Free Stock Analysis Report
 
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