Whiting Petroleum (WLL) Q1 Earnings: What's In The Cards?

Domestic oil and gas explorer Whiting Petroleum Corporation (NYSE:WLL) is set to release first-quarter 2017 results after the closing bell on Apr 26.

In the preceding three-month period, the company delivered a positive earnings surprise of 15.15%. However, the company had missed estimates in three of the last four quarters with an average negative surprise of 18.52%.

Let’s see how things are shaping up for this announcement.

Factors at play

The first two months of the quarter were favorable for Energy firms as oil was almost consistently over the $50 per barrel mark. However, the U.S. shale producers started gathering to the oil patches to take advantage of improved oil prices. This, in turn, pushed the commodity in a comparatively bearish territory in March. In fact, oil traded below $50 per barrel during the month. The stock has been on the downtrend since the last three months, especially in March when oil prices dropped significantly. This is also reflected in the price performance of the company. The company underperformed the Zacks categorized U.S. Oil and Gas Production & Exploration industry. The company’s shares slumped 21% in the last three months, while the broader industry declined 11%. Further, the earnings are also expected to be negatively affected by the massive increase in its capex budget by 36% to $1.1 billion in 2017. Also, despite the increase in its capex budget, Whiting Petroleum has not forecasted a similar rise in its production.

While these factors indicate a negative outlook, a measure of safety is provided by the company’s leverage and proved reserves. The company has managed to cut a large chunk of its debt by a series of asset sales, debt for equity swaps and other transactions making its balance sheet stronger. In March, Moody’s Investor Service upgraded the ratings of the company from B3 to B2 on account of the company’s significant debt reductions, down 42% from its 2016 levels. Further, the company’s developed reserves are sound both by volume and dollar value.

Whiting Petroleum Corporation Price and Consensus

Earnings Whispers

Our proven model does not conclusively show that Whiting Petroleum will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Negative Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -4.76%. This is because the Zacks Consensus Estimate stands at a loss of 21 cents, whereas the Most Accurate estimate is pegged wider at a loss of 22 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Whiting Petroleum carries a Zacks Rank #3 which when combined with a negative ESP makes surprise prediction difficult.

Please note that we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions

Stocks to Consider

While earnings beat looks uncertain for Whiting Petroleum, here are some firms from the energy space you may want to consider on the basis of our model, which shows that they have the right combination of elements to post earnings beat this quarter.

EP Energy Corp (NYSE:EPE) is expected to release first-quarter earnings results on May 3. The company has an Earnings ESP of +33.33% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Rice Energy Inc. (NYSE:RICE) is expected to release first-quarter earnings results on May 3. The company has an Earnings ESP of +25% and a Zacks Rank #3.

Earthstone Energy, Inc. (NYSE:ESTE) is expected to release first-quarter earnings results on May 9. The company has an Earnings ESP of +166.67% and a Zacks Rank #3.

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