What's in Store for Lilis Energy (LLEX) in Q3 Earnings?

Lilis Energy Inc. LLEX is expected to release third-quarter 2018 results on Nov 1.

In the last reported quarter, the upstream energy company reported a loss of 18 cents per share, which was wider than the Zacks Consensus Estimate of a loss of 6 cents. The company lagged estimates in two of the trailing four quarters, delivering a negative earnings surprise of 83.3%.

Lilis Energy Inc. Price and EPS Surprise

Lilis Energy Inc. Price and EPS Surprise | Lilis Energy Inc. Quote

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

Which Way are Estimates Treading?

Let's have a look at the estimate revision trend to get a clear picture of what analysts are thinking about the company before earnings release.

The Zacks Consensus Estimate of a loss of 9 cents for third-quarter earnings has seen no upward and five downward revisions by firms in the past 30 days. It reflects an improvement of 25% from the year-ago quarter's tally.

Further, the Zacks Consensus Estimate for third-quarter revenues is pegged at $22.8 million, reflecting an improvement of 323% from the year-ago quarter's tally.

Factors at Play

Lilis Energy's operations are primarily based in Permian and Delaware Basin, where the company has a decent position. The company's ability to negotiate firm takeaway contracts for oil production through a pipeline gathering network along with a fracking water-gathering disposal contract that permits it to use local pipeline networks are noteworthy. These contracts will lower crude gathering and water costs by 86% as well as result in savings of about $16.7 million annually.

The company reiterated guidance of achieving 8,000 barrels of oil equivalent per day (BOE/D) at the end of the year. The company continues to delineate its position in the Delaware Basin and has delivered strong results from Wolfcamp A and Wolfcamp B wells. Lilis Energy also reported positive initial results from the Wolfcamp XY and 3rd Bone Spring wells. At the end of the third quarter, total proved reserves surged 308% since year-end 2017. These developments are likely to boost the company's revenues.

However, Lilis Energy, being a small player, is significantly exposed to price sensitivity. Also, the company's debt load is a concern as its debt to capitalization of 68% is much higher than industry's 45.8%. This might raise liquidity concerns.

What Does the Zacks Model Unveil?

Our proven model does not show that Lilis Energy is likely to beat the Zacks Consensus Estimate in the to-be-reported quarter. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Earnings ESP : Lilis Energy has an ESP of -27.06% as the Most Accurate Estimate is at a loss of 11 cents, while the Zacks Consensus Estimate is pegged at a loss of 9 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : Currently, Lilis Energy carries a Zacks Rank #3.

We caution against Sell-rated stocks (Zacks Ranks #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Energy Stocks With Favorable Combination

Here are some companies from the energy space, which according to our model have the right combination of elements to post an earnings beat in the quarter to be reported.

Enterprise Products Partners L.P. EPD , based in Houston, TX, is a leading midstream energy player in North America. The company has an Earnings ESP of +0.89% and carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .

Plano, TX-based Denbury Resources Inc DNR is an exploration and production (E&P) company engaged in the acquisition, development, operation and exploration of oil as well as natural gas properties. The company has an Earnings ESP of +10.15% and carries a Zacks Rank #3.

Houston, TX-based Ensco plc ESV is a leading supplier of offshore contract drilling services to the oil and gas industry. The company has an Earnings ESP of +3.65% and a Zacks Rank #3.

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Lilis Energy Inc. (LLEX): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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