QEP Resources (QEP) Reports Surprise Q4 Earnings, Sales Beat

Independent energy explorer QEP Resources, Inc. (NYSE:QEP) recently reported fourth-quarter 2017 earnings per share – excluding special items – of $1.13, abundantly beating the Zacks Consensus Estimate of a loss of 4 cents. The company had reported adjusted loss of 15 cents per share in the year-ago quarter.

Quarterly revenues of $429 million also beat the Zacks Consensus Estimate of $387 million. Sales were up from the year-ago quarter’s figure of $400 million.

The improvement in results was primarily driven by benefits from the U.S. tax reform and increased overall net realized price.

Since the release of fourth quarter and full-year 2017 financial results by the company, the stock has gained 11.7%.

QEP Resources announced some strategic initiatives for 2018 that are expected to make the company a Permian Basin-focused one. QEP Resources wants to start the selling process of the assets in Williston and Uinta basin in the first half of 2018, while the rest will be scheduled to commence in the second half of the year.

Volume Analysis

Overall production of the company – which is engaged in shifting its focus to the Permian Basin – in the quarter came in at 12,069.9 thousand barrels of oil equivalent (Mboe): 53% liquids, 12% less than the year-ago period. While natural gas volumes of 34.1 billion cubic feet (Bcf) fell 22% year over year, liquid volumes increased marginally to 6,381.5 thousand barrels (Mbbl) from 6,358.8 Mbbl.

The fall in overall production volume was caused by adverse weather conditions in the Permian Basin and Williston Basin. The Pinedale asset sale also affected production.

Realized Prices

QEP Resources’ average realized natural gas price in the quarter was $2.70 per thousand cubic feet (Mcf), down 4% from the year-ago quarter’s price of $2.81. However, average oil price realization improved 13% year over year to $51.30 per barrel. Overall net realized equivalent price averaged $32.21 per barrel of oil equivalent in the quarter, up 18% from the prior-year quarter.

Operating Expenses and Capital Expenditure

Total operating expenses in the quarter increased to $461.8 million from $436.2 million a year ago. The increase was primarily due to a rise in impairment, general and administrative charges, and lease operating expenses.

Capital investment, excluding acquisitions, increased nearly 156% year over year to $372.2 million in the fourth quarter.

2018 Guidance

For 2018, QEP Resources expects oil and natural gas prices to be $55 per barrel and $3 per million British Thermal Units (MMBtu). Total oil-equivalent production is expected to be in the range of 47.7-51.5 million barrels of oil equivalent (MMboe). Total capital investment is expected to be around $1.075 billion. Notably, 65% of the capital investment is expected to be channeled toward the Permian Basin.

The company has also authorized a share buyback program worth $1.25 billion, which is expected to be paid using proceeds from the divestments.

Balance Sheet

As of Dec 31, 2017, QEP Resources had no cash and cash equivalents. The company’s long-term debt was $2,160.8 million, which represents a debt-to-capitalization ratio of 36.3%.

About the Company

Denver, CO-based QEP Resources is a leading independent energy company engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. The company’s operations are focused on the Northern Region (primarily in Utah and North Dakota), and the Southern Region (primarily in Louisiana and Texas) of the United States.

Price Performance

QEP Resources’ stock has gained 11.7% in the fourth quarter of 2017, outperforming the 9% gain of the industry it belongs to.

Zacks Rank and Other Stocks to Consider

The company carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the oil and energy sector are Continental Resources, Inc. (NYSE:CLR) , ConocoPhillips (NYSE:COP) and Pioneer Natural Resources Company (NYSE:PXD) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Based in Oklahoma City, OK, Continental Resources is an upstream energy company. Its revenues for first-quarter 2018 are anticipated to improve 53% from the prior-year quarter. The company witnessed a positive average earnings surprise of 64.9% in the trailing four quarters.

Houston, TX-based ConocoPhillips is an upstream energy player. Its revenues for first-quarter 2018 are anticipated to improve 9.6% from the prior-year quarter. The company witnessed a positive average earnings surprise of 144.5% in the trailing four quarters.

Irving, TX-based Pioneer Natural Resources is an independent oil and gas exploration and production company. Its revenues for first-quarter 2018 are expected to improve 22.8% from the year-ago quarter. For 2018, the bottom line is anticipated to be up 185.7%.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>