QEP Resources, Inc. QEP recently reported second-quarter 2018 earnings per share — excluding special items — of 6 cents, which surpassed the Zacks Consensus Estimate of a loss of 11 cents and the prior-year quarter’s loss of 12 cents per share.
Quarterly revenues of $532.4 million beat the Zacks Consensus Estimate of $433 million. Sales were also up from the year-ago quarter’s figure of $383.7 million.
The strong performance can be attributed to higher oil production coupled with a rise in overall net realized price.
QEP Resources continues to make strides to transform into a pure-play Permian player. As part of that goal, the company has already divested its assets in Pinedale (in third-quarter 2017) and agreed to sell its Uinta Basin assets, which is expected to close in September. QEP Resources is now looking for potential buyers for its Williston Basin properties.
QEP Resources, Inc. Price, Consensus and EPS Surprise
QEP Resources, Inc. Price, Consensus and EPS Surprise | QEP Resources, Inc. Quote
Volume Analysis
Overall second-quarter production of the company came in at 14,106.1 thousand barrels of oil equivalent (Mboe), up 2% than the year-ago period. While natural gas volumes of 38.3 billion cubic feet (Bcf) fell 16% year over year, natural gas liquid volumes plummeted 15% to 1.152.8 thousand barrels (Mbbl). However, rise in overall production in the quarter resulted from oil volumes, which increased 35% from the prior-year quarter to 6,567.6 Mbbl.
With the company shifting its focus toward Permian Basin (included in the company’s Southern Region assets), equivalent production from the area jumped 108% year over year to 4,016.2 Mboe. Total Southern Region production surged 85% year over year to 8,781.9 Mboe, which was partially offset by the 42% year-over-year fall in production from the Northern Region assets, primarily due to the divestment of Pinedale properties.
Realized Prices
QEP Resources’ net realized natural gas price in the quarter was $2.72 per thousand cubic feet (Mcf), down 4% from the year-ago quarter’s $2.82. Net oil price realization improved 16% year over year to $54.30 per barrel. Overall net realized equivalent price averaged $34.54 per barrel of oil equivalent, up 26% from the prior-year quarter.
Operating Expenses and Capital Expenditure
Total operating expenses in the quarter increased to $850.3 million from $404.4 million a year ago. The rise was primarily due to increased General and Administrative, as well as Depreciation, Depletion and Amortization costs. Further, impairment expense, incurred in connection with the announced divestment of Uinta Basin properties, of $403.7 million gave a push to its total operating expenses.
Capital investment, excluding acquisitions, increased nearly 19.5% year over year to $365.7 million in the second quarter, mainly due to a rise in drilling and completion activities in the Permian and Williston basins, along with Haynesville/Cotton Valley.
Guidance
For 2018, QEP Resources increased its total oil-equivalent production guidance from 48.3-51.9 million barrels of oil equivalent (MMboe) to 49.8-52.3 MMboe. The company reiterated its total capital investment, which is expected in the range of $1,070-$1,170 million. Notably, majority of the capital investment is expected to be channeled toward the Permian Basin. For the third quarter of 2018, the company expects equivalent production within 12.9-13.9 MMboe.
Balance Sheet
As of Jun 30, 2018, QEP Resources had no cash and cash equivalents. The company’s long-term debt was $2,649.4 million, representing a debt-to-capitalization ratio of 44.1%.
Zacks Rank & key Picks
Currently, Denver, CO-based upstream energy company QEP Resources has a Zacks Rank #3 (Hold). Investors interested in the Energy sector can opt for some better-ranked stocks like Canadian Natural Resources Limited CNQ, ConocoPhillips COP and Cheniere Energy, Inc. LNG. While Canadian Natural Resources and ConocoPhillips sport a Zacks Rank #1 (Strong Buy), Cheniere Energy has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Calgary, Canada-based Canadian Natural Resources is an upstream energy company. The company’s top line for 2018 is anticipated to improve 35.3% year over year, while its bottom line is expected to increase more than 168%.
Houston, TX-based ConocoPhillips is an integrated energy company. The company’s top line for 2018 is likely to improve 18.4% year over year. In the last four reported quarters, the company delivered an average positive earnings surprise of 226.9%.
Houston, TX-based Cheniere Energy mainly focuses on liquefied natural gas-related businesses. The company’s top line for 2018 is anticipated to improve 25.9% year over year, while its bottom line is expected to increase more than 225%.
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