On Nov 15, 2016, we issued an updated research report on WPX Energy WPX. The company continues to work on its strategy of ramping up oil production, which was evident from the rising share of liquid in its total production mix. However, the competitive energy space and ongoing volatility in crude oil prices are headwinds ahead of WPX Energy.
Recently, WPX Energy reported a loss of 17 cents per share in the third quarter of 2016, narrower than the Zacks Consensus Estimate of a loss of 18 cents. However, quarterly revenues of $251 million missed the Zacks Consensus Estimate of $268 million by 6.5%.
WPX Energy is building up a strong portfolio of assets which will continue to boost its performance. Moreover, the company’s focus on oil has started to yield results. The company now expects fourth-quarter oil production in the range of 42–44 thousand barrels of oil per day (Mbb/d). With high oil production expectations, the total production guidance for 2016 has been raised to 82–87 thousand barrels of oil equivalent per day (Mboe/d) from 77–82 Mboe/d guided earlier.
Meanwhile, WPX Energy has plans to invest nearly $800 million to $860 million in drilling and completion activities in 2017, out of which 50% will be directed toward the development of assets in the Delaware Basin. WPX Energy plans to fund an eight-rig program, with five in the Delaware Basin, two in the Williston Basin and one in the San Juan Basin. The company expects total production in 2017 in the range of 97–107 Mboe/d, including 49–53 Mbbl/d of oil.
However, WPX Energy, like all other oil and gas players, has been affected by the ongoing softness in commodity prices. Despite 16% year-over-year growth in production levels, third-quarter 2016 total revenue tanked nearly 38.3%.
Moreover, WPX Energy uses the hydraulic fracturing method to produce commercial quantities of natural gas and oil from many of its existing reservoirs. If legislations or regulations pertaining to the restricted use hydraulic fracturing are implemented, it could result in higher costs and lower margins.
Zacks Rank & Key Picks
WPX Energy currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space include Noble Energy NBL, Matador Resources Company MTDR and SM Energy Company SM. All these stocks presently carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Noble Energy, Matador Resources Company and SM Energy have each surpassed earnings estimates by a respective 68.18%, 700.00% and 41.27% in the last reported quarter.
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