Energen Ups Production Guidance On Strong Permian Prospects

U.S.-based upstream player Energen Corporation (NYSE:EGN) recently increased its production outlook for 2017 on the back of robust performance of the Generation 3 frac design wells.

Energen increased its estimated production capacity to 70.2 thousand barrels of oil equivalent per day, reflecting a 5.9% rise from the prior guidance. This would take the year-over-year growth in production to 29% as against the prior guidance of 21%.

Oil production is likely to account for most of the increased output, with full-year output expected around 44,900 barrels of oil per day (boe/d). Natural gas and NGL production is expected to total 13,200boe/d and 12,100 boe/d respectively. However, the company has not made changes in its drilling and developmental capex guidance, which is pegged at $850–$900 million.

The company expects 41 net Generation 3 wells to become operational in the second quarter. The company expects about 55 net wells to initiate production during the second half of 2017. While 29 net wells are expected to come online in the third quarter, the remaining 26 wells are likely to be operational in the fourth quarter. The company’s fourth-quarter exit rate is expected to be 53% higher than the year-ago quarter’s guidance of 47%.

Energen, which has a large concentration of assets in the Permian Basin, has taken notable steps in the past which has mitigated the leverage of the company and increased the operating margins. The company is expecting better operational efficiency as it remains focused on the optimization of its wells’ performance using advanced drilling designs and continued execution of frac designs. The company also remains on track with its cost cutting initiatives.

The company’s competitive assets, strong financials and improved execution of business plans are likely to boost shareholders value and drive growth.

Zacks Rank & Key Picks

Headquartered in Alabama, Energen is a pure-play Permian Basin oil and gas exploration and production company. The company operates in three major sub-basins of Permian, with Midland accounting for majority of production, followed by Delaware and Central Basin Platform.

Energen Corporation Price

The company, under the Zacks categorized U.S. Oil and Gas Exploration and Production industry, currently carries a Zacks Rank #3 (Hold).

Some better-ranked players from the same industry include Viper Energy Partners LP (NASDAQ:VNOM) , Legacy Reserves LP (NASDAQ:LGCY) and W&T Offshore, Inc. (NYSE:WTI) . All the three companies sport a Zacks Rank #1 (Strong buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Viper Energy Partners delivered positive earnings surprise in each of the trailing four quarters, the average being 20.35%.

Legacy Reserves posted positive average earnings surprise of 11.84% in the last four quarters.

W&T Offshoredelivered positive earnings surprise in each of the trailing four quarters, the average being 69.21%.

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