Featured Earnings Report: QEP Resources Inc. (NYSE: QEP)

DENVER, May 16, 2020 – Shares of QEP Resources Inc. (NYSE: QEP) surged 6.18% to $0.73. The stock grabbed the investor’s attention and traded 4.664M shares as compared to its average daily volume of 12.19M shares.

QEP Resources Inc. (NYSE: QEP) reported net income of $81.00M for the third quarter 2019, or $0.34 per diluted share, contrast with net income of $7.30M, or $0.03 per diluted share, for the third quarter 2018. The Company’s increase in net income in the third quarter of 2019 contrast to 2018 was mainly because of an $87.40M gain on realized and unrealized derivative contracts in the third quarter of 2019.

Adjusted EBITDA (a non-GAAP measure) for the third quarter 2019 was $193.50M contrast with $326.20M for the third quarter 2018, mainly because of the Haynesville/Cotton Valley and Uinta Basin divestitures, lower equivalent production in the Williston Basin and a 16% decrease in average field-level oil prices, partially offset by an 18% increase in equivalent production in the Permian Basin, a $33.50M decrease in realized derivative losses and an $18.70M decrease in general and administrative expenses.

Production:

Oil equivalent production was 8.40M barrels of oil equivalent (MMboe) in the third quarter 2019, a decrease of 42% contrast with the third quarter 2018. The decrease in oil equivalent production was mainly the result of the loss of 5.2 MMboe (3% liquids) of equivalent production associated with the assets sold in the Haynesville/Cotton Valley and Uinta Basin divestitures.

Oil and condensate production in the Permian Basin was 4.00M barrels (MMbbl) in the third quarter 2019, a boost of 12% contrast with the third quarter of 2018, and a Company record. The production increase was offset by lower volumes in the Williston Basin because of a reduced level of activity in the third quarter of 2019 and a loss of volumes as a result of the Uinta Basin divestiture.

Operating Expenses:

During the third quarter 2019, lease operating expense (LOE) was $38.30M, a decrease of 41% contrast with the third quarter 2018. The decrease is mainly because of the Haynesville/Cotton Valley and Uinta Basin divestitures. Excluding those divestitures, LOE reduced $14.10M, driven by a decrease in maintenance and repair expenses, labor and water disposal in the Permian and Williston basins as a result of continuing efforts to reduce operating expenses.

During the third quarter 2019, Transportation and Processing (T&P) Costs were $18.00M, a decrease of 36% contrast with the third quarter 2018. Adjusted T&P Costs (a non-GAAP measure) were $32.20M, a decrease of 26% contrast with the third quarter 2018, mainly because of the Haynesville/Cotton Valley and Uinta Basin divestitures. Excluding those divestitures, Adjusted T&P Costs increased $5.20M, mainly because of the recognition of $7.70M of firm transportation expense related to future obligations in an area in which the Company no longer has production operations as well as increased production in the Permian Basin, partially offset by reduced production in the Williston Basin.

During the third quarter 2019, general and administrative (G&A) expense was $29.60M, a decrease of 39% contrast to the third quarter 2018. During the third quarter of 2019 and 2018, QEP incurred $10.00M and $14.20M, respectively, in costs associated with the implementation of our planned programs, of which $10.40M and $12.80M, respectively, related to restructuring costs. Excluding these costs, G&A expense reduced by $14.40M, or 42%, mainly because of $12.70M lower labor, benefits and other associated costs because of the reduction in our workforce and $3.20M in lower legal and outside service costs, partially offset by a $2.20M decrease in overhead recoveries, mainly associated with our Haynesville/Cotton Valley and Uinta Basin divestitures. During the quarter the third quarter 2019, G&A was $3.52 per BOE.

During the third quarter 2019, production and property taxes were $20.00M, a decrease of 47% contrast to the third quarter 2018. The decrease in production and property taxes was mainly because of reduced revenues in the Williston Basin as well as the Haynesville/Cotton Valley and Uinta Basin divestitures.

Capital Investment:

Capital investment, excluding property acquisitions, was $128.90M (on an accrual basis) for the third quarter 2019, contrast with $203.70M for the third quarter 2018, of which $122.90M related to the drilling, completion and equipping of wells and $6.00M was related to midstream infrastructure investment. The decrease in capital expenditures was mainly related to a decrease in completion activity in the Permian Basin, partially offset by increased capital expenditures in the Williston Basin as the Company resumed drilling and completion activity in the basin.

Asset Divestitures:

QEP closed on the sale of several assets during the third quarter 2019, counting the corporate aircraft, for total net cash proceeds of about $9.80M.

Liquidity:

Net Cash Offered by Operating Activities for the third quarter 2019 was $146.30M, contrast with $298.00M for the third quarter 2018. Free Cash Flow (a non-GAAP measure) was $17.50M for the third quarter 2019, contrast with $26.20M for the third quarter 2018. Free Cash Flow was negative $66.90M for the first three quarters of 2019 contrast with negative $375.90M for the first three quarters of 2018. Although the Company generated negative Free Cash Flow during the first three quarters of 2019, $676.50M of proceeds was raised through the disposition of assets.

As of September 30, 2019, the Company had $92.40M in cash and cash equivalents, no borrowings under its revolving credit facility and $2.90M in letters of credit outstanding.

QEP has a market value of $174.50M while its EPS was booked as $1.62 in the last 12 months. The stock has 239.10M shares outstanding. In the profitability analysis, the company has gross profit margin of 79.50% while net profit margin was 33.60%. Beta value of the company was 4.91; beta is used to measure riskiness of the security. Analyst recommendation for this stock stands at 3.10.

Robert  Campbell

I am Robert Campbell and I’m passionate about capitalism and news with over 4 years in the industry starting as a writer working my way up into senior positions. I am the driving force behind Liberty Headquarters with a vision to broaden the company’s readership throughout 2016. I am an editor and reporter of free markets, conservative news and gun rights category. Address: 3516 Candlelight Drive, Houston, TX 77042, USA Phone: (+1) 281-430-8376 Email: robertcampbell@libertyheadquarters.com

Robert  Campbell

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