It has been about a month since the last earnings report for WPX Energy (WPX). Shares have lost about 3.8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is WPX due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
WPX Energy Q2 Earnings Beat Estimates, Revenues Miss
WPX Energy Inc.’s second-quarter 2020 earnings of 12 cents per share beat the Zacks Consensus Estimate by a whopping 500% and improved 33.3% from the year-ago reported figure of 9 cents.
On a GAAP basis, the company reported second-quarter loss of 74 cents per share versus earnings of 72 cents in the year-ago period.
WPX Energy’s quarterly revenues of $33 million lagged the Zacks Consensus Estimate of $537 million by 93.8% and dropped 95.2% from the year-ago figure. Lower realized prices of commodities and loss on derivatives adversely impacted total second-quarter revenues.
Highlights of the Release
Total second-quarter production volumes were 207,000 barrels of oil equivalents per day (Mboe/d), up 27% year over year. Liquids volumes accounted for nearly 77% of total production, reflecting the company’s increased focus on oil.
Quarterly oil production was 123.7 thousand barrels per day (Mbbl/d), nearly 26% higher than the year-ago level, courtesy of 48.8% volume growth in the Delaware basin over the past 12 months on the back of solid contribution from the acquired Felix Energy assets despite production curtailment of nearly 20,000 barrels per day (bbl/d) during the quarter.
Total costs and expenses were $504 million, up 1.9% from $514 million in the year-ago quarter.
Interest expenses for the reported quarter were $49 million, up 22.5% from the year-ago figure.
Realized Prices & Hedges
Realized oil prices were $21.85 per barrel, down 62% from the year-ago level.
Realized natural gas prices were $1.40 per thousand cubic feet, down 20% from a year ago. Realized prices for natural gas liquids were down 44% from the year-ago quarter to $7.65 per barrel. The substantial decline in natural gas and natural gas liquid prices did not allow the company to enjoy the full benefits from the increase in total production.
For the remainder of 2020, WPX Energy has 91,700 bbl/d of oil hedged at a weighted average price of $53.05 per barrel and 20,000 bbl/d with fixed price collars at a weighted average floor price of $53.33.
For 2021, the company has 59,878 bbl/d of oil hedged with fixed price swaps at a weighted average price of $40.78 per barrel and 240,000 million british thermal unit per day (MMBtu/d) of natural gas hedged with fixed price swaps at a weighted average price of $2.62 per MMBtu.
Cash and cash equivalents of WPX Energy on Jun 30, 2020 were $407 million compared with $60 million as of Dec 31, 2019. The company exited the second quarter with a total liquidity of $1.9 billion, which includes cash, cash equivalents and the available revolver capacity.
Its long-term debt on Jun 30, 2020 was $3,210 million, up from $2,202 million at the end of 2019.
Net cash from operating activities in first-half 2020 was $532 million compared with $634 million in the comparable year-ago period. During first-half 2020, capital expenditure was $598 million compared with $774 million in the corresponding period of 2019.
WPX Energy expects third-quarter oil production to be 140 Mbbl/d.
To preserve liquidity, the company has slashed 2020 capital expenditure to $1.05-$1.15 billion from the prior expectation in the range of $1.1-$1.2 billion.
WPX Energy now expects to generate $200 million of free cash flow in 2020, up from the prior estimate of $150 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 43.33% due to these changes.
At this time, WPX has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, WPX has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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