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Oil & Gas Stock Roundup: Halliburton, Kinder Morgan & Baker Hughes Report Q4 Earnings

Nilanjan Choudhury

It was a week where oil futures hit the lowest levels since Oct 31 and natural gas prices ended below the psychologically important level of $2.

On the news front, energy companies Halliburton HAL, Kinder Morgan KMI and Baker Hughes BKR reported December quarter earnings.

Overall, it was a pretty bad week for the sector. West Texas Intermediate (WTI) crude futures suffered a loss of 7.5% to close at $54.19 per barrel, while natural gas prices fell 5.5% for the week to finish at 1.893 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Schlumberger's Q4, Eni's Agogo Start-Up & More)

The crude benchmark fell for the third week in a row on fears that the coronavirus outbreak in China would have a severe impact on oil demand. The health scare was enough to offset the impact of U.S. Energy Department's latest inventory release. The report showed that crude and distillate stockpiles recorded unexpected weekly declines.

Natural gas also ended sharply lower even as the U.S. Energy Department's weekly inventory release showed a larger-than-expected decrease in supplies. The bullish sentiment was overwhelmed by mild winter weather forecasts amid strong production, which led prices to trickle down to their lowest level in more than three and a half years.

Recap of the Week’s Most Important Stories

1.  Halliburton beat the fourth-quarter Zacks Consensus Estimate for earnings as robust international activity more than offset headwinds in North America. The world's second-largest oilfield services company after Schlumberger reported an adjusted profit of $285 million or 32 cents per share from October to December, surpassing the Zacks Consensus Estimate of 29 cents.

Revenues fell $745 million (or 12.6%) to $5.2 billion from $5.9 billion in the fourth quarter of 2018. In particular, revenues from North America dropped by 30.2% year over year, which highlights depressed activity in this influential region. This meant that bottom line was 22% lower than the year-ago figure of 41 cents.

Well aware of the tough operating environment, Halliburton aims to protect its cash flows. The company has pledged to spend $1.2 billion in 2020 as capital expenditure, down from $1.5 billion in 2019. (Read more Things You Should Know from Halliburton's Q4 Earnings)

2.   Energy infrastructure provider Kinder Morgan posted fourth-quarter 2019 adjusted earnings per share of 26 cents, in line with the Zacks Consensus Estimate. The bottom line improved from the year-ago quarter’s 25 cents.

The quarterly earnings were backed by increased natural gas transportation and gathering volumes. While Natural Gas Pipelines and Product Pipelines segments supported the Zacks Rank #3 (Hold) company’s results, decline in commodity prices and crude volumes affected the CO2 segment, which partially offset the same.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Kinder Morgan reaffirmed 2020 dividend at $1.25 per common share, reflecting a 25% year-over-year rise. It intends to use internally generated cash flow to fund dividend payments. The company expects adjusted EBITDA and DCF for 2020 to be $7.6 billion and $5.1 billion, respectively. For 2020, it expects to spend $2.4 billion on growth developments and joint ventures. (Read more Kinder Morgan Q4 Earnings Meet Estimates on GCX Strength)

3.   Baker Hughes Company has reported fourth-quarter 2019 adjusted earnings of 27 cents per share, which missed the Zacks Consensus Estimate of 31 cents primarily due to lower contributions from flexible pipe and surface pressure control businesses.

However, the bottom line improved marginally from the year-ago quarter’s adjusted profit of 26 cents, owing to strong growth in the oilfield services business in the Middle East, Latin America and the Asia Pacific.

Total orders from all business segments in fourth-quarter 2019 were $6.9 billion, up 1% year over year, owing to growth in two of the four segments. The company generated free cash flow of $1.1 billion in the reported quarter, improving from $876 million in the year-ago period. Baker Hughes’ capital expenditure in the fourth quarter totaled $304 million. As of Dec 31, 2019, the company had cash and cash equivalents of approximately $3,249 million, and a long-term debt of $6,301 million, representing a debt-to-capitalization ratio of 16.1%. (Read more Baker Hughes Misses Earnings & Revenue Estimates in Q4)

4.   Permian-focused upstream player Parsley Energy, Inc. PE recently announced quarterly dividend payout of 5 cents per share, reflecting a 66.7% increase from the prior dividend payout of 3 cents. The new dividend is payable on Mar 20 to shareholders of record as of Mar 10. It also outlined its 2020 development program and provided fourth quarter and 2019 activity overview.

In the fourth quarter, Parsley brought 37 gross operated horizontal wells online, with more than 50% in December alone. Thanks to lower well costs and quarter-over-quarter decline in facilities and infrastructure spending, capital expenditure during the quarter was around $275 - $285 million, which brings the full year spending below the low end of the guided range of $1.4 - $1.47 billion. Net oil production is expected to have been around 89.5 - 89.7 thousand barrels of oil per day.

Parsley aims at deploying 15 development rigs and four-to-five frac spreads on average in 2020. While it has maintained pro-forma 2020 oil production at 125-133 MBo/d, it has lowered the 2020 capital budget owing to a drop in development expenses to $1.6 - $1.8 billion (the previous outlook: $1.6 - $1.9 billion). (Read more Parsley Hikes Dividend, Outlines 2020 Plans, Cuts Capex)

5.   Eni S.p.A. E and Sharjah National Oil Corporation (“SNOC”) have made a successful discovery of an inland gas field in the Emirate of Sharjah. The new natural gas and condensate field called Mahani, located in the Area B Concession, marks the first onshore discovery of gas in the Emirate in more than three decades. It is also the first exploration well drilled by SNOC, since Sharjah's most reliable energy provider acquired a new 3D seismic survey covering the territory.

Mahani-1 exploration well was drilled to a total measured depth of 14,597 feet that led to the discovery of gas with the associated capacitors within the Thamama, the primary target for the well. The size of the discovery will be further evaluated with additional appraisal drilling in due course.

Eni has maintained its discovery streak in the past few months. With the recent addition of onshore of Sharjah, Eni’s total exploration acreage in the UAE stands at over 12,000 square kilometers gross, including offshore areas of Abu Dhabi and Ras Al Khaimah.(Read more Eni Discovers First Gas Field In Sharjah in 37 Years)

Price Performance

The following table shows the price movement of some the major oil and gas players over the past week and during the last 6 months.

Company

Last Week

Last 6 Months

XOM

-3.3%

-14.1%

CVX

-3.2%

-11.1%

COP

-3.8%

+4.9%

OXY

-7.9%

-19%

SLB

-6.8%

-13.4%

RIG

-14.6%

-14%

VLO

-2.1%

+1.2%

MPC

-4.2%

-6.2%

 

The Energy Select Sector SPDR – a popular way to track energy companies – fell 4.2% last week. The worst performer was offshore driller Transocean Ltd. whose stock slumped 14.6%.

Longer-term, over six months, the sector tracker is down 11.5%. Houston-based oil and gas producer Occidental Petroleum was the major loser during this period, experiencing a 19% price decline.

What’s Next in the Energy World?

As usual, market participants will be closely tracking the regular releases i.e. the U.S. government statistics on oil and natural gas - one of the few solid indicators that comes out regularly. The Baker Hughes data on rig count will also be on the energy traders' radar, plus the 2019 Q4 earnings, with supermajors ExxonMobil XOM and Chevron CVX coming out with quarterly results.

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Click to get this free report Baker Hughes Company (BKR) : Free Stock Analysis Report Halliburton Company (HAL) : Free Stock Analysis Report Exxon Mobil Corporation (XOM) : Free Stock Analysis Report Eni SpA (E) : Free Stock Analysis Report Chevron Corporation (CVX) : Free Stock Analysis Report Kinder Morgan, Inc. (KMI) : Free Stock Analysis Report Parsley Energy, Inc. (PE) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research