Why Is Hess (HES) Up 5.5% Since Its Last Earnings Report?

It has been about a month since the last earnings report for Hess Corporation HES. Shares have added about 5.5% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to its next earnings release, or is HES due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Fourth-Quarter 2017 Results

Hess Corporation reported adjusted fourth-quarter 2017 loss from continuing operations of $1.01 per share, wider than the Zacks Consensus Estimate of a loss of 90 cents, thanks to lower oil equivalent production. The bottom line was flat year over year. Following the release, the stock lost almost 4% in pre-market trading hours.

Revenues declined to $1,296 million in the quarter from $1,386 million a year ago. The top line, however, surpassed the Zacks Consensus Estimate of $1,294 million on higher commodity price realizations.

Q4 Operational Update

In the quarter under review, the Exploration and Production business incurred a loss of $2,592 million, narrower than the year-earlier loss of $3,949 million.

Quarterly hydrocarbon production was 300 thousand barrels of oil equivalent per day, down 3.5% year over year owing to unscheduled downtime.

Crude oil production was 173 thousand barrels per day compared with 190 thousand barrels in the year-ago quarter. Natural gas liquids production totaled 41 thousand barrels compared with 40 thousand barrels in the prior-year quarter. Natural gas output was 556 thousand cubic feet (Mcf) compared with 512 Mcf a year ago.   

Worldwide crude oil realization per barrel of $55.44 (including the impact of hedging) showed an increase of 20.6% year over year.

Worldwide natural gas prices rose 13.9% year over year to $3.69 per Mcf. The average worldwide natural gas liquids selling price also increased to $22.78 per barrel from $14.68 in the year-ago quarter.

Operating Expenses

Operating expenses in the fourth quarter totaled $359 million, down more than 36% from the year-ago $568 million.

Financials

Quarterly net cash flow from operations was $343 million at the end of the fourth quarter. Hess’ capital expenditures totaled $568 million, up 38% from $411 million in the prior-year quarter.

As of Dec 31, 2017, the company had approximately $4,847 million in cash and $6,397 million in long-term debt. The debt-to-capitalization ratio at the end of the quarter was 36.1%.   

Outlook

The company expects to invest $2.1 billion in 2018 for exploration and production activities. Hess also projects 2018 production between 245,000 to 255,000 (BOE/D), higher than 242,000 BOE/D recorded in 2017.

Proved Reserves

As of Dec 31, 2017, the company reported proved reserves of crude and natural gas at 1,154 million BOE, up from 1,109 BOE as of Dec 31, 2016.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

Hess Corporation Price and Consensus

 

Hess Corporation Price and Consensus | Hess Corporation Quote

VGM Scores

At this time, HES has an average Growth Score of C, however its Momentum is doing a bit better with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for momentum investors than growth investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of this revision looks promising. Interestingly, HES has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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