A month has gone by since the last earnings report for QEP Resources (NYSE:QEP). Shares have lost about 81.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is QEP Resources due for a breakout? 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 catalysts.
QEP Resource Incurs Q4 Loss, Sales Miss Mark
QEP Resources, Inc.incurred a net loss of 10 cents per share in the fourth quarter, primarily due to weak commodity price realizations. The Zacks Consensus Estimate was of a profit of 6 cents per share. Precisely, this upstream player’s oil price realization of $51.36 per barrel missed the Zacks Consensus Estimate of $54.
However, QEP Resources’ loss narrowed from the year-ago quarter’s adjusted loss of 13 cents on the back of higher output from the Permian play.
Quarterly revenues of $321.9 million lagged the Zacks Consensus Estimate of $329 million. Moreover, the top line deteriorated sharply from the year-ago figure of $410.5 million.
Volume Analysis
Production of crude and natural gas totaled 8,465.3 Mboe (67% oil and condensate), down 27% from the year-ago figure, primarily reflecting the sale of Haynesville/Cotton Valley and Uinta Basin assets. Further, lower activity levels in the Williston Basin caused an 11% reduction in volumes from the region.
Natural gas volumes substantially plunged 70% year over year to 8.5 billion cubic feet (Bcf) while natural gas liquids output improved 17% to 1,391.2 thousand barrels (Mbbl). Meanwhile, oil volumes declined from 5,749.9 Mbbl in fourth-quarter 2018 to 5,653.9 Mbbl in the quarter under review.
However, with the company’s focus shifted to the Permian Basin, equivalent production from the area rose 17% year over year to a record 5,113.4 Mboe. Investors should know that QEP Resources allocated bulk of its 2019 capital budget to this lucrative basin as it aims at transforming itself into a Permian pure play.
Realized Prices
QEP Resources’ net realized natural gas price in the quarter was $1.53 per thousand cubic feet, down 43% from the year-ago level of $2.69. The realized price also lagged the Zacks Consensus Estimate of $1.81 per Mcf of gas. Net oil price realization fell 5% year over year to $51.36 per barrel and was also below the Zacks Consensus Estimate of $54 per barrel. Finally, net NGLs price realization plummeted 47% from the fourth quarter of 2018 to $10.22 per barrel and also missed the Zacks Consensus Estimate of $10.63.
Costs, Capex and Balance Sheet
Total operating expenses in the quarter decreased significantly to $274.4 million from $1,525.6 million a year ago. Capital investment — excluding acquisitions — decreased 44% year over year to $105.5 million in the fourth quarter, mainly due to a fall in completion activities in the Permian Basin. Importantly, reining in costs helped QEP Resources generate $56.2 million in free cash flows in the fourth quarter.
As of Dec 31, QEP Resources had $166.3 million in cash and cash equivalents. The company’s long-term debt was $2,015.6 million, representing a debt-to-capitalization ratio of 43.1%.
2020 Guidance
For first-quarter 2020, QEP Resources expects total oil-equivalent production in the range of 7.6-7.9 million barrels of oil equivalent (MMBoe). Oil and condensate production is forecast within 5-5.1 million barrels (MMBbls). While gas output is envisioned in the 8.2-8.5 Bcf bracket, NGLs production is estimated within 1.3-1.4 MMBbls. Capital outlay for the first quarter is anticipated in the band of $180-$195 million.
For the full year, QEP Resources expects total oil-equivalent production in the range of 31.5-33.7 MMBoe. Oil output is estimated within 21.35-22.45 MMBbls. Gas and natural gas liquids production are anticipated within 31-34 Bcf and 5-5.6 MMBbls, respectively.
The company’s projections for lease operating expenses and adjusted transportation and processing costs are in the band of $5.20-$5.80 per Boe and $3.30-$3.60 per Boe each. QEP Resources predicts general/administrative expenses within $85-$95 million. Finally, the company estimates its current-year capital expenditure in the $545-$595 million range.
QEP Resources expects to generate positive free cash flow of $100 million for 2020 at an oil price of $50 a barrel.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -46.67% due to these changes.
VGM Scores
Currently, QEP Resources has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, QEP Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
QEP Resources, Inc. (QEP): Free Stock Analysis Report
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