A month has gone by since the last earnings report for WPX Energy (WPX). Shares have added about 44% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is WPX due for a pullback? 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 catalysts.
WPX Energy Q3 Earnings Beat Estimates, 2020 View Up
WPX Energy Inc.’s third-quarter 2020 earnings of 11 cents per share beat the Zacks Consensus Estimate by 83.3% and improved 22.2% from the year-ago reported figure of 9 cents.
Total Revenues
WPX Energy’s quarterly revenues of $473 million lagged the Zacks Consensus Estimate of $607 million by 22.1% and dropped 40.5% from the year-ago figure.
Highlights of the Release
Total third-quarter production volumes were 207,700 barrels of oil equivalents per day (Mboe/d), up 20% year over year. Liquids volumes accounted for nearly 78.3% of total production, reflecting the company’s increased focus on oil.
Quarterly oil production was 122.3 thousand barrels per day (Mbbl/d), nearly 13% higher than the year-ago level, courtesy of 51% volume growth in the Delaware basin over the past 12 months on the back of solid contribution from the acquired Felix Energy.
Total costs and expenses were $587 million, up 6.1% from $553 million in the year-ago quarter. Interest expenses for the reported quarter were $48 million, up 26.3% from the year-ago figure.
During the quarter, WPX Energy and Devon Energy entered into an agreement to combine in an all-stock merger of equals. The transaction is expected to close in first-quarter 2021, subject to necessary approvals.
Realized Prices & Hedges
Realized oil prices were $38.72 per barrel, down 28.2% from the year-ago level.
Realized natural gas prices were 57 cents per thousand cubic feet, down 25.9% from a year ago. Realized prices for natural gas liquids were up 4.5% from the year-ago quarter to $11.22 per barrel. The substantial decline in natural gas and oil 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 91,800 bbl/d of oil hedged at a weighted average price of $53.06 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 64,878 bbl/d of oil hedged with fixed price swaps at a weighted average price of $41.35 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.
Financial Update
Cash and cash equivalents of WPX Energy on Sep 30, 2020 were $195 million compared with $60 million as of Dec 31, 2019. The company exited the third quarter with a total liquidity of $1.7 billion, which includes cash, cash equivalents and the available revolver capacity.
Its long-term debt on Sep 30, 2020 was $3,213 million, up from $2,202 million at the end of 2019.
Net cash from operating activities for the first nine months of 2020 was $922 million compared with $906 million in the comparable year-ago period. During the same period, capital expenditure was $811 million compared with $1,090 million in the corresponding period of 2019.
Guidance
WPX Energy increased fourth-quarter oil production view to the range of 137-143 Mbbl/d from the prior expectation of 140 Mbbl/d.
To preserve liquidity, the company slashed 2020 capital expenditure view again by $50 million to $1.00-$1.1 billion from the prior expectation in the range of $1.05-$1.15 billion.
WPX Energy now expects to generate $300 million of free cash flow in 2020, up from the prior expectation of $200 million.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -24.07% due to these changes.
VGM Scores
Currently, WPX has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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