A month has gone by since the last earnings report for Hess (HES). Shares have added about 2.2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Hess due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Hess Q3 Earnings & Revenues Top Estimates
Hess reported third-quarter 2022 earnings per share of $1.89, beating the Zacks Consensus Estimate by a penny. The bottom line improved from the year-ago quarter’s 28 cents per share.
Total quarterly revenues increased to $3,157 million from $1,811 million a year ago. The top line also beat the Zacks Consensus Estimate of $2,939 million.
The strong quarterly results have been driven by higher realizations of commodity prices and increased hydrocarbon production.
Exploration and Production:
For the quarter under review, the Exploration and Production business reported adjusted earnings of $626 million, improving from $149 million a year ago. The business was favored by higher realized commodity prices.
Quarterly hydrocarbon production was 368 thousand barrels of oil equivalent per day (MBoe/d), up from 284 MBoe/d in the year-ago period, primarily due to higher production in Guyana.
Crude oil production increased from 153 thousand barrels per day (MBbls/d) in third-quarter 2021 to 217 MBbls/d. Natural gas liquid production totaled 60 MBbls/d, up from 47 MBbls/d in the prior-year quarter. Natural gas output was 547 thousand cubic feet per day (Mcf/d), up from 503 Mcf/d a year ago.
Worldwide crude oil realization per barrel of $93.95 (excluding the impacts of hedging) significantly improved from $67.88 in the year-ago period. Also, worldwide natural gas prices rose to $5.85 per Mcf from the year-ago figure of $4.71. The average worldwide natural gas liquids’ selling price increased to $35.44 per barrel from $32.88 a year ago.
From the midstream business, the company generated adjusted net earnings of $68 million, up from $61 million a year ago.
Operating expenses for the third quarter totaled $398 million versus the year-ago level of $333 million. Marketing costs increased to $982 million from $522 million a year ago. Also, exploration expenses increased to $58 million from $36 million in the year-ago period.
Total costs and expenses increased to $2,269 million for the quarter from $1,483 million a year ago.
Net cash provided by operating activities was $1,339 million for the third quarter. Hess’ capital expenditure for exploration and production activities totaled $701 million.
As of Sept 30, 2022, the company had $2,384 million in cash and cash equivalents. Its long-term debt was $8,303 million at the third-quarter end.
For 2022, Hess has revised its net production guidance (excluding Libya) upward to 325,000 barrels of oil equivalent per day (Boe/d) from the prior stated 320,000 Boe/d. For the fourth quarter, net production (excluding Libya) is projected to be 370,000 Boe/d.
The company has reiterated its capital and exploratory expenditure guidance of $2.7 billion.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -12.73% due to these changes.
Currently, Hess has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Hess has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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