However, QEP Resources’ bottom line witnessed a fall from the year-ago quarter’s adjusted profit of 17 cents on weak commodity price realizations.
Quarterly revenues of $307.5 million surpassed the Zacks Consensus Estimate of $296 million. However, the top line deteriorated sharply from the year-ago figure of $560.8 million.
Further, it has increased its full-year output guidance, and trimmed cost and capex forecasts. QEP Resources expects to generate positive free cash flow in the remainder of 2019 and 2020 at an oil price of $55 a barrel.
QEP Resources also named two new independent directors to its board as per the company’s cooperation agreement with billionaire activist investor Paul Singer’s Elliott Management Corp. Notably, despite the multibillion-dollar buyout offer from Elliot, the Denver-based oil and gas explorer has decided to remain an independent firm.
QEP Resources, Inc. Price, Consensus and EPS Surprise
QEP Resources, Inc. price-consensus-eps-surprise-chart | QEP Resources, Inc. Quote
Volume Analysis
Production of crude and totaled 8,404 Mboe (67% oil and condensate), down 42% from a year ago, primarily reflecting the sale of Haynesville/Cotton Valley and Uinta Basin assets. Further, lower activity levels in the Williston Basin caused a 38% decrease in volumes from the region.
Natural gas volumes substantially declined 78% year over year to 8.2 billion cubic feet (Bcf), while natural gas liquids output edged down 2% to 1,383 thousand barrels (Mbbl). Meanwhile, oil volumes decreased from 6,640.5 Mbbl in third-quarter 2018 to 5,670.5 Mbbl in the quarter under review.
However, with the company’s shift in focus toward the Permian Basin, equivalent production from the area rose 18% year over year to a record 5,658.5 Mboe. Investors should know that QEP Resources allocated bulk of 2019 capital budget for 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 $1.13 per thousand cubic feet, down 59% from the year-ago level of $2.76. The realized price also lagged the Zacks Consensus Estimate of $1.47 per Mcf of gas. Net oil price realization declined 8% year over year to $51.83 per barrel and was below the Zacks Consensus Estimate of $53 per barrel. Finally, net NGLs price realization plummeted 71% from the third quarter of 2018 to $8.63 per barrel and also missed the Zacks Consensus Estimate of $10.65.
Costs, Capex and Balance Sheet
Total operating expenses in the quarter decreased significantly to $253.3 million from $431.1 million a year ago. Capital investment — excluding acquisitions — decreased 36.7% year over year to $128.9 million in the third quarter, mainly due to a fall in completion activities in the Permian Basin. Importantly, a tight leash on costs helped QEP Resources generate $17.5 million in free cash flows.
As of Sep 30, QEP Resources had $92.4 million in cash and cash equivalents. The company’s long-term debt was $2,029.4 million, representing a debt-to-capitalization ratio of 42.3%.
Revised Guidance
For fourth-quarter 2019, QEP Resources expects total oil-equivalent production in the range of 8.3-8.9 million barrels of oil equivalent (MMBoe). Oil and condensate production is expected within 5.7-6 million barrels (MMBbls). While gas output is expected in the range of 7.9-8.4 Bcf, NGLs production is estimated within 1.3-1.5 MMBbls. Capital outlay for the third quarter is anticipated in the band of $101-$116 million.
For full-year 2019, QEP Resources expects total oil-equivalent production in the range of 32-32.6 MMBoe, up from the earlier forecast of 29.9-31 MMBoe. Oil output is now estimated within 21.6-21.9 MMBbls versus prior forecast of 21-21.5 MMBbls. Gas and natural gas liquids production are anticipated in the band of 32.4-32.9 Bcf and 5-5.2 MMBbls, revised upward from the prior guidance of 28-30 Bcf and 4.25-450 MMBbls, respectively.
The company has also lowered its projections for lease operating and adjusted transportation and processing costs to a band of $8.5-$9.25 per Boe from the previous guidance of $9-$10 per Boe. Moreover, QEP Resources now projects general/administrative expenses within $155-$165 million versus prior forecast of $160-$170 million. Finally, the company cut its capital expenditure guidance for 2019 from $580-$600 million to $567-$582 million.
The company projects free cash flow of $120 million in 2020.
Zacks Rank & Stock Picks
QEP Resources holds a Zacks Rank #3 (Hold).
Meanwhile, investors interested in the energy space could look at some better options like TC Energy (TSX:) , Phillips 66 (NYSE:) and Keane Group, Inc. (NYSE:) that sport a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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