U.S.-based exploration and production independents, whose balance sheets continue to ride high on strong oil and gas prices, seem to have reached an earnings plateau in the 2004 third quarter.
Conclusions were based on a Petroleum News survey of Thompson-First Call analysts’ consensus estimates for 20 leading exploration and production independents.
A consensus estimate represents the average earnings of all analysts polled on a particular company. Individual estimates can be higher or lower than the consensus and tend to change as the reporting season approaches. Estimates generally exclude one-time charges against earnings and other special items.
Company profits for the third quarter ending Sept. 30 are expected to be roughly flat to slightly down from the previous quarter but up around 30 percent compared to last year’s third quarter, according to survey averages. Net income for the 2004 fourth quarter also could be up about 5 percent versus the third quarter.
Impact of Ivan unknown
Still unknown is the financial impact on many independents due to production shut-ins and facility damages caused by Hurricane Ivan, which swept through the Gulf of Mexico in mid-September.
Major independents surveyed were Burlington Resources, Pioneer Natural Resources, Kerr-McGee, Anadarko Petroleum, Devon Energy, Unocal, Apache, Chesapeake Energy, XTO Energy, EOG Resources and Noble Energy.
Others included in the survey were Newfield Exploration, Forest Oil, Pogo Producing, Spinnaker Exploration, Cabot Oil & Gas, Magnum Hunter, Saint Mary Land & Exploration, Remington Oil & Gas and The Houston Exploration Co. Tom Brown and Evergreen Resources have been acquired by large independents so were excluded from the survey.
No major earnings changes expected
None of the large independents is expected to report a major earnings increase or decline in the 2004 third quarter versus the previous quarter, the survey indicated. Higher oil prices during the recent quarter were offset by lower but already lofty natural gas prices.
Burlington, typically the first of the large independents to report, is expected to check in with 2004 third-quarter net income of about 90 cents per share, down from 96 cents per share earned in the previous quarter but up substantially from 67 cents per share in the year-ago period. The company should do slightly better in this year’s final quarter versus the previous quarter with 91 cents per share, according to the consensus estimate.
Pioneer is expected to weigh in with a 2004 third-quarter profit of about 63 cents per share compared to 58 cents per share in the prior quarter and 74 cents per share in the year-ago quarter. Company earnings could climb to around 68 cents per share in this year’s fourth quarter.
Kerr-McGee’s expected 96 cents per share in the 2004 third quarter would be below the $1.09 per share the company earned in the previous quarter but above the 76 cents per share registered in the year-ago third quarter. The company’s 2004 fourth-quarter profit was expected to improve over the third quarter to roughly $1.03 per share.
Apache was expected to report a 2004 third-quarter profit of $1.31 per share, up from $1.21 per share posted in the second quarter and well above 91 cents per share reported in last year’s third quarter. The early consensus has the company earning about $1.28 per share in this year’s fourth quarter.
Anadarko in midst of restructuring
Anadarko, in the midst of a major company restructuring, is expected to report net income of about $1.61 per share in this year’s third quarter. That would be above the $1.59 per share reported in the previous quarter and well above the $1.20 per share reported a year earlier. However, earnings for this year’s fourth quarter were expected to slip versus the third quarter to around $1.49 per share.
Devon, the largest of the U.S.-based independents, should weigh in with net income of about $1.94 per share in the 2004 third quarter, less than the $2.02 per share earned in the previous quarter but heads above the $1.71 per share earned in the year-ago third quarter. The company should earn about $1.96 per share in the 2004 fourth quarter, according to early analysts’ estimates.
Unocal’s expected 86 cents per share in the 2004 third quarter would shadow the company’s 86 cents per share performance in the second quarter, but would score above its 72 cents per share performance in last year’s third quarter. Unocal is expected to earn about 82 cents per share in this year’s fourth quarter.
XTO’s expected 55 cents per share in the 2004 third quarter also would shadow the company’s 55 cents per share performance in the previous quarter, but also would register above the 39 cents per share earned in last year’s third quarter. Net income is expected to improve to around 60 cents per share in the final quarter of this year.
EOG’s expected $1.03 per share in the 2004 third quarter would be slightly below the $1.04 per share the company earned in the previous quarter, but would be above the 80 cents per share earned a year earlier. Analysts believe the company could earn about $1.21 per share in this year’s fourth quarter.
Noble’s earnings expected to be down
Noble is expected to report net income of about $1.15 per share in the 2004 third quarter, which would be down from $1.22 per share in the previous quarter but well above the 57 cents per share earned a year earlier. The company is expected to report earnings of about $1.22 per share in the 2004 fourth quarter.
Chesapeake’s expected 30 cents per share in the 2004 third quarter would be slightly below the 33 cents per share earned in the previous quarter and down from 34 cents per share earned in last year’s third quarter. The company is expected to report net income of about 33 cents per share in this year’s final quarter.
Among the middle and small independents, Newfield should see earnings improvements across the board, according to analysts’ estimates.
Newfield is expected to report 2004 third-quarter earnings of about $1.26 per share, up strongly from $1.17 per share posted in the prior quarter and up from the $1.04 per share earned in the year-ago quarter. Newfield also should report additional profit gains in the 2004 fourth quarter of $1.57 per share.
Pogo is another independent expected to net consistent gains of $1.45 per share in the 2004 third quarter compared to $1.12 per share in the prior quarter and $1.06 in last year’s third quarter. Net income of $1.29 per share is expected in the final quarter of the year.
Forest could weigh in with 2004 third-quarter earnings of about 57 cents per share, an increase from 52 cents per share in the previous quarter and 54 per share cents in the year-ago period. The company is expected to further improve to around 62 cents per share in the 2004 fourth quarter, according to analysts’ estimates.
Spinnaker’s expected profit of 37 cents per share in the 2004 third quarter would be well below the 51 cents per share earned in the previous quarter, but would be well ahead of the 14 cents per share earned in the year-ago third quarter. The company could earn about 56 cents per share in the fourth quarter of this year.
Cabot expected to have strong showing
Cabot is expected to turn in strong net income of about 65 cents per share in the 2004 third quarter. That would compare to 59 cents per share in the previous quarter and 68 cents per share in last year’s third quarter. Net income of about 84 cents per share is expected in this year’s fourth quarter, according to analysts’ estimates.
Magnum Hunter’s expected profit of about 29 cents per share in the 2004 third quarter also would be below the 33 cents per share earned in the previous quarter, but would be substantially higher than the 10 cents per share earned a year earlier. The company is expected to earn about 29 cents per share in this year’s final quarter.
Saint Mary’s estimated net income of 63 cents per share in the 2004 third quarter also would be below 69 cents per share earned in the previous quarter, but would be well ahead of the 41 cents per share earned in last year’s third quarter. Net income of around 62 cents per share is expected in the final quarter of the year.
Remington should earn about 60 cents per share in the 2004 third quarter, up from 53 cents per share in the second quarter and well above the 36 cents per share earned a year earlier. Net income of about 60 cents per share is expected in the fourth quarter of this year.
Houston Exploration’s expected 2004 third-quarter profit of $1.50 per share would compare to $1.60 per share earned in the previous quarter and $1.11 per share earned in the year-ago period. Net income of $1.57 per share is expected in the final quarter of this year.
