For every third-quarter success story like Marathon Oil or Chesapeake Energy, there have been disappointments such as Cimarex Energy and Continental Resources which were shunned by investors after they fell short of the revenue and production targets set by analysts.
After two consecutive quarters when the shale drillers posted large oil production figures that exceeded expectations, companies are finding it more difficult to be superstars and Wall Street’s oil analysts are becoming harder to impress.
Oklahoma-based Continental Resources (NYSE:CLR) reported a third-quarter net loss of $110 Million but said momentum moving forward was strong enough to raise its expectations for output for North Dakota and Oklahoma. The company reported ($0.22) earnings per share for the quarter, missing analysts’ consensus estimates of $0.31 by $0.53. During the same period in the previous year, the firm posted ($0.12) EPS. The firm’s quarterly revenue was down 22.9% on a year-over-year basis.
Continental said it expects to end the year with production volumes that are about 5 percent more than it estimated in August. The company said it was betting on recovery from enhanced work at the Bakken shale oil reserve basin in North Dakota, and the SCOOP and STACK reservoirs in Oklahoma. Continental produced almost 208,000 barrels of oil equivalent per day in the third quarter, down from more than 228,000 equivalent barrels a day in the year-ago period.
Continental has focused their drilling activity on central Oklahoma, where it was the most active driller in the third quarter with 15 operated rigs. The Company plans to increase the total number of gross operated well completions in 2016 by 32, relative to its previous plan. The Company now expects to complete 119 gross operated wells with first production for the year, including 29 gross operated wells in the Bakken, 33 in SCOOP, 25 in Northwest Cana JDA and 32 in STACK Meramec.
Continental’s net loss of $110 million is 33 percent greater than the loss from third quarter 2015. In August, the company sold off some of its assets in and around the Bakken area for about $600 million in a move Harold Hamm said helped reduce debt and strengthen the balance sheet. Continental finished the quarter with $19.5 million cash.
Devon Energy (NYSE:DVN) posted better than expected Q3 earnings and revenues which provided a profit for the first time in two years, as it cut expenses and shifted to higher margin production. It expects cost savings to reach $1B this year. David A. Hager of Devon noted that development programs delivered the best quarterly drill bit results in Devon’s 45-year history, with new wells reaching peak 30-day rates of nearly 2,000 BOE per day. These prolific drilling results were centered in the world-class STACK play, where oil production increased by nearly 40% year over year.
In many ways, the third quarter was a transitional one for Devon Energy. That’s because the company closed $1.8 billion of non-core asset sales, which weighed on companywide production.
DVN says it plans to increase its rig activity in the U.S. from five operated rigs running in Q3 to as many as 10 operated rigs by year end. The increase is expected to boost the company’s exploration and production spending by $400 million to $425 million. The Company is the second-largest oil producer among North American onshore independents. It currently projects to deliver double-digit oil growth in 2017 at flat $55 oil, with plans to generate stronger growth in 2018 at $60 oil. The company’s next earnings report is expected to be released on or around 2.21.2017 for the Q4 period ending on 12.31.2016.
Marathon Oil Corporation (NYSE:MRO) reported strong third-quarter results with an adjusted loss of $0.97 million, or $0.11 per share during the third quarter. However, that was significantly less than the $0.20-per-share loss that analysts were anticipating. Driving the narrowing loss was stronger-than-expected production and a double-digit drop in costs.
Production averaged 402,000 barrels of oil equivalent per day during the third quarter, which was up 5% from last quarter and above the top end of Marathon’s guidance range. Driving that strong production were the exceptional well results across all three of its resource plays. Production costs dropped by more than 10% in North American and by nearly 20% internationally over just last quarter.
In the STACK and SCOOP, production was up over 50% from the prior quarter, as Marathon benefited from new wells to sales and a couple of months of contribution from the recent STACK acquisition of Payrock. Lee Tillman on Marathons earnings call noted that “we continue to balance leasehold demands and acreage delineation in the STACK, and brought some outstanding Meramec oil wells to sales that are, on average, exceeding type curves on both our legacy and acquired acreage.”
Chesapeake Energy Corp. (NYSE:CHK) said its third-quarter loss narrowed thanks to lower costs that helped offset a drop in revenue on reduced production and low commodities prices.
Overall, Chesapeake reported a loss of $1.16 billion, or $1.54 a share, compared with a year-earlier loss of $4.7 billion, or $7.08 a share, a year earlier. Excluding Barnett shale exit costs, asset write-downs and other items, adjusted per-share earnings were 9 cents, compared with a year-earlier loss of 6 cents. Revenue dropped by a third to $2.28 billion. At the end of the quarter, Chesapeake had a cash balance of $4 million. Debt balance was $9,022 million.
Chesapeake’s production for the reported quarter averaged approximately 59 million barrels of oil equivalent (MMBoe), down 3.3% year over year. Production consisted of approximately 8 barrels (MMbbls) of oil, 268 billion cubic feet (bcf) of natural gas and 6 MMbbls of natural gas liquids (NGL). Oil production was down 27.2% and NGL production fell more than 14%, whereas natural gas production improved 2%.
Chesapeake in August agreed to pay nearly $340 million to exit the Barnett Shale in Texas, part of the energy producer’s efforts to improve its finances. The move helps rid Chesapeake of nearly $1.9 billion in financial commitments it had to Williams Partners LP, a pipeline company that moved to market the natural gas Chesapeake pumped in the Barnett. Chesapeake also will transfer its interests in the Barnett field to Saddle Barnett Resources LLC, a private equity-backed company based in Dallas.
Cimarex Energy Co (NYSE:XEC) Coming into the Q3 earnings report, Wall Street was expecting earnings per share in the range of $.037 – $0.55. The market consensus range for revenue was $345.9M-$429.8M, with an average of $388.04M.
The company reported Q3 2016 earnings of 41 cents per share and total revenue of $335.7 million down from $356.1 million a year ago.
In the quarter under review, total production averaged 947 million cubic feet equivalent (MMcfe) per day, down 3.3 year over year. Oil volumes declined 10.8% to 44.5 thousand barrels per day (MBbls/d), natural gas volumes decreased 3.8% to 446.7 MMcf, whereas natural gas liquids (NGL) volumes were up 8.3% to 38.8 MBbls/d, all on a year-over-year basis.
Cimarex Energy Co is an oil and gas exploration and production company with operations focused in two main areas: the Mid-Continent region and the Permian Basin. Headquartered in Denver, CO, Cimarex Energy Co has 925 employees and is currently under the leadership of CEO Thomas E. Jorden.
The company brought 42 gross (17 net) wells online during the quarter. As of Sep 30, 2016, 104 gross (45 net) wells were awaiting completion. XEC’s new completion schedule moves 10 net well completions previously scheduled for Q4 into early 2017, bringing total net wells completed in 2016 to 62 from the previous expectation of 72 net wells; 2016 capex is now estimated at $785M, up from $750M previously.
Cimarex Energy is currently operating eight drilling rigs and intends to increase it to nine by the end of this year.
Newfield Exploration Co. (NYSE:NFX) issued its quarterly earnings results on Tuesday. The energy company reported $0.45 EPS for the quarter, beating analysts’ consensus estimates of $0.27 by $0.18. The business had revenue of $392 million for the quarter, compared to analysts’ expectations of $414.42 million.
Newfield Exploration’s 3Q16 production volumes totaled 15.2 million barrels of oil equivalent (MMboe). In comparison, its 3Q15 production volumes totaled 14.3 MMboe.
Newfield Exploration’s CEO, Lee Boothby, said in the company’s 3Q16 earnings release, “We high-graded our portfolio during the year by selling non-strategic assets in Texas and acquiring additional core acreage in STACK, and we have successfully reduced costs and improved margins across the Company.
“Today, Newfield has a strong balance sheet, cash on hand and advantaged assets ready for rapid acceleration. We are planning to add additional rigs to our Anadarko Basin drilling program as we enter 2017. Our heightened activity levels can quickly be adjusted if commodity prices weaken moving into next year.”
In September 2016, NFX closes its previously announced sale of its Texas assets for ~$380 million. Earlier during the year, NFX had acquired 42,000 net acres in the Anadarko Basin STACK play from Chesapeake Energy (CHK).
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