Oil & Gas Stock Roundup: Shell, Concho Resources Reports Strong Q1, Apache Misses

It was a week where oil prices erased all gains associated with the OPEC-led output cut, while natural gas futures inched down after storage data.

On the news front, integrated major Royal Dutch Shell (LON:RDSa) plc RDS.A and energy explorer Concho Resources Inc. (NYSE:CXO) came up with strong first-quarter earnings reports but another oil producer Apache Corp. (NYSE:APA) reported lower-than-expected bottom line.

Overall, it was a rough week for the sector. West Texas Intermediate (WTI) crude futures dived 6.3% to close at $46.22 per barrel, while natural gas prices edged down 0.3% to $3.266 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Exxon (NYSE:XOM) & Chevron (NYSE:CVX)'s Q1 Beat, Pembina's $7.1B Buy & More.)

Suffering its third loss in as many weeks, oil prices were pressured by the continued growth in U.S. production and a burgeoning rig count – both pointing to the ever-increasing shale drilling activities. Talks of recovery in Libyan output further stymied the commodity.

Meanwhile, natural gas turned lower following a larger-than-expected storage build.

Recap of the Week’s Most Important Stories

1. Europe’s largest oil firm Royal Dutch Shell plc reported strong first-quarter results, as its upstream business swung to a profit on rebounding oil prices. The Hague-based Shell reported earnings per ADS (on a current cost of supplies basis, excluding items) of 82 cents, same as the Zacks Consensus Estimate but way ahead of the year-ago adjusted profit of 22 cents.

Upstream segment recorded a profit of $540 million (excluding items) during the quarter, turning around from the $1,437 million (adjusted) loss in the year-ago period.This primarily reflects the impact of a rise in production on the back of contribution from the BG assets, higher oil and gas realizations, reduced depreciation charges and better operational performance.

During the quarter under review, Shell generated cash flow from operations of $9,508 million, returned $3,900 million to shareholders through dividends and spent $4,720 million on capital projects.(Read more: Royal Dutch Shell's Q1 Earnings Soar on Oil Price.)

2. Permian-focused energy explorer Concho Resources reported first-quarter adjusted net earnings per share of 49 cents, comfortably beating the Zacks Consensus Estimate of 31 cents and way above the prior-year quarter adjusted loss of 5 cents. The outperformance came on the back of higher commodity prices and strong production growth.

Concho Resources' average quarterly volume increased 30% year over year to 181.4 thousand barrels of oil equivalent per day, of which 63% was liquids. Daily oil output was up 28% to 113.6 thousand barrels, while natural gas production came in at 406.6 million cubic feet (up 34%). Following first-quarter’s impressive production growth, Concho Resources raised its full-year production growth guidance range to 21%–25%, from the prior 20%–24%.

The average realized natural gas price doubled from the year-ago quarter to $3.00 per thousand cubic feet, while average oil price realization jumped 64% to $49.08 per barrel. Overall, the company fetched $37.47 per barrel as against $22.34 a year back. (Read more: Concho Resources Routs Q1 Earnings Estimates.)

3. U.S. energy firm Apache Corp. reported first-quarter earnings per share – excluding one-time items – of 8 cents, lower than the Zacks Consensus Estimate of 16 cents. The underperformance stems from a dip in output due to a conservative capital budget over the past two years. Apache currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The production of oil and natural gas (excluding divested assets and non-controlling interests) averaged 397,792 oil-equivalent barrels per day (BOE/d) (65% liquids), down 16% from last year. Apache’s production for oil and natural gas liquids (NGLs) was 257,534 barrels per day (Bbl/d), while natural gas output came in at 841.5 million cubic feet per day (MMcf/d).

During the Jan-Mar period, Apache’s exploration and development investments totaled $513 million, 8% higher than the $476 million incurred a year ago. This is in keeping with the company’s planned shift in strategic objective.

After aligning its spending plans with the low-price environment prevailing over the past few years, Apache is now looking to increase its capital investment after achieving cost rationalization. With returns-focused growth in mind, Apache announced a 2017 capital budget of $3.1 billion, representing a 60% increase over its 2016 spend. (Read more: https://www.zacks.com/stock/news/259422/apache-apa-shares-fall-after-q1-earnings-miss-estimate.)

4. Houston, TX-based leading upstream energy firm Marathon Oil Corp. (NYSE:MRO) posted first-quarter adjusted loss of 7 cents per share, narrower than the Zacks Consensus Estimate of a loss of 8 cents. This was also significantly narrower than the year-earlier adjusted loss figure of 43 cents. The better-than-expected results were driven by increased price realizations and cost-control initiatives.

In North America, the company realized liquids price of $41.13 per barrel, higher than the year-earlier level of $24.00 per barrel, reflecting an increase of 71%. Natural gas realizations increased 50% year over year to $3.02 per thousand cubic feet (Mcf).

Marathon Oil’s total quarterly cost and expenses declined by 8.5% to $1,010 million in the reported quarter. The decrease is attributed to the lower general and administrative costs, production, marketing and other operating costs.

Marathon Oil has raised its production guidance for the full-year 2017 owing to the inclusion of production from the Northern Delaware acquisition. The company expects the production available for sale from the combined North America and International E&P segments, excluding Libya, to average 340,000 to 360,000 BOE/d, about 6% higher than 2016. (Read more: Marathon Oil Q1 Loss Narrower than Expected, View Up.)

5. U.S. gas exporter Cheniere Energy Inc. (NYSE:LNG) reported strong first-quarter results amid the commencement of three of its units at Sabine Pass - North America’s first large-scale liquefied gas export facility. The 2.6 billion cubic feet per day Sabine Pass terminal in Cameron Parish, Louisiana opened in Feb 2016.

The company’s net income per share came in at 23 cents, contrary to the Zacks Consensus Estimate for a loss of 37 cents. The Mar quarter profitability was also an improvement over the year-ago period when Cheniere Energy reported a loss.

During the quarter, the company shipped 43 cargoes from Sabine Pass liquefied natural gas terminal in Louisiana, of which 7 were commissioning cargoes associated with Unit 3. Total volumes lifted in the Jan-Mar period were 154 trillion British thermal units.

Cheniere Energy reaffirmed its guidance for full-year 2017. While adjusted EBITDA is expected to be between $1.4 billion and $1.7 billion, distributable cash flow is likely to be between $500 million to $700 million ($2.10 to $2.80 per share). (Read more: Cheniere Energy Earnings Surprise in Q1, Sales Jump.)

Price Performance

The following table shows the price movement of some the major oil and gas players over the past week and during the last 6 months.

Over the course of last week, the Energy Select Sector SPDR – a popular way to track energy companies – fell by 1.29%. Consequently, investors witnessed selling in most market heavyweights. The worst performer was oilfield services giant Schlumberger Ltd. (NYSE:SLB) whose stock price declined 6.12%.

Longer-term, over the last 6 months, the sector tracker is down 3.78%. Schlumberger was again the major laggard during this period, experiencing a 9.66% price decline.

What’s Next in the Energy World?

In this week, market participants will be closely tracking the regular releases i.e. the U.S. government data on oil and natural gas. Energy traders will also be focusing on the Baker Hughes data on rig count. Finally, the 2017 Q1 earnings will continue to command attention with some S&P 500 members coming out with quarterly results.

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