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Survey: A mixed bag for U.S. independents Reflects lower profits for 2004 second quarter, increased net income versus a year ago Ray Tyson Petroleum News Houston Correspondent
U.S. exploration and production independents are expected to report lower earnings on average for the 2004 second quarter compared to the previous quarter. But industry analysts also believe the group should see profits climb into double digits vs. last year’s second quarter.
Conclusions were based on a Petroleum News survey of Thompson-First Call analysts’ consensus estimates for 20 leading U.S. 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 do not include charges against earnings and other special items. Profits expected to slide from first quarter Profits for independents during the 2004 second quarter are expected to slide about 7 percent from the first quarter but increase roughly 17 percent compared to last year’s second quarter. However, profits for this year’s third quarter beginning July 1 also are expected to slide another 5.8 percent from the second quarter.
Despite the anticipated decrease in quarterly profits, independents continue to ride high on robust commodity prices. None of the 20 companies surveyed, unless they report unanticipated charges, was expected to lose money in the recent quarter ending June 30, according to analysts’ estimates.
However, only seven of the 20 leading independents surveyed are expected to report 2004 second-quarter earnings exceeding previous quarter. And among the 11 largest independents, only Pioneer Natural Resources, Apache and XTO Energy should see profit increases quarter-over-quarter. Pioneer, Apache and XTO expected to be up Pioneer should report earnings of around 70 cents per share, up a healthy 40 percent from prior-quarter earnings of 50 cents per share. Earnings for the second quarter also would be up about 7.6 percent from the year-ago period of 65 cents per share.
Apache’s earnings for the 2004 second quarter should increase about 2 cents to around $1.08 per share from $1.06 per share in the prior quarter and increase about 20 cents from 88 cents earned in the year- ago period.
XTO, compared to the prior quarter, also should see a slight increase of 2 cents to 53 cents per share in 2004 second quarter and an increase of 7 cents from 33 cents per share in last year’s second quarter. Most larger independents will be down Among the larger U.S. independents, Kerr-McGee, Anadarko Petroleum, Devon Energy, Unocal, Chesapeake Energy, EOG Resources, Noble Energy and Burlington Resources were expected to weigh in with lower earnings in the 2004 second quarter vs. the previous quarter.
Kerr-McGee’s profit in the recent quarter is expected to drop about 26 percent to $1.09 per share from $1.48 per share in the prior quarter, according to analysts’ estimates. Still, the company should do about 2 cents better than the $1.07 per share it earned a year earlier.
Analysts believe Noble’s net income for the 2004 second quarter will fall about 20 percent to $1.04 per share from $1.30 per share in this year’s first quarter. However, the company is expected to nearly double its profit from last year’s 54 cents per share.
Anadarko, which is in the process of restructuring itself following several troubled years, could see its net income fall about 13 percent in the 2004 second quarter to $1.50 per share from $1.72 per share in the previous quarter. However, the company still should do about 30 cents better vs. last year’s $1.20 per share.
Devon, the largest U.S.-based exploration and production independent, also could see its profit drop about 7 percent to $1.86 per share in the recent quarter from $2 per share in the prior quarter. Like its large-cap peers, the company is expected to do significantly better than a year ago when it earned $1.56 per share.
Big natural gas producer Burlington is expected to report 2004 second-quarter earnings of about 80 cents per share, down roughly 10 percent from 89 cents in the first quarter but up about nearly 16 percent from 69 cents per share a year earlier.
Chesapeake’s net income also is expected to slide to 29 cents per share in the 2004 second quarter from 44 cents per share in the first quarter. That would translate into earnings about 2 cents lower than last year’s 31 cents per share.
EOG is expected to post 2004 second-quarter net income of about 95 cents per share, down from the prior quarter’s $1.06 per share and roughly flat to 94 cents reported in the year ago period. Some smaller independents up Five of the nine smaller independents surveyed — Pogo Producing, Spinnaker Exploration, St. Mary Land & Exploration, Magnum Hunter Resources and Forest Oil — are expected to report 2004 second-quarter net income higher than the previous quarter, according to the consensus.
Newfield Exploration, Tom Brown, Evergreen Resources and Cabot Oil & Gas were expected to check in with lower earnings in the 2004 second quarter vs. the previous quarter
Pogo’s net income for the 2004 second quarter could increase around 23 percent to $1.38 per share from $1.12 per share in the previous quarter. Compared to the $1.24 per share earned for the same period last year, company net income could be up about 11 percent.
Forest is looking to net about 51 cents per share for the 2004 second quarter, up about 42 percent from 36 cents earned in the previous quarter and up roughly 6 percent from 48 cents per share in the year-ago period.
Spinnaker’s profit is expected to come in around 46 cents per share, an increase of 15 percent from the prior quarter’s 40 cents per share and a hefty increase of 53 percent from last year’s 30 cents per share.
St. Mary’s net income could be about 68 cents for the 2004 second quarter, up marginally from the prior quarter’s 66 cents per share but down slightly from last year’s 71 cents per share.
Magnum Hunter’s profit is expected to be around 29 cents per share, roughly flat to the prior quarter’s 28 cents per share but up more than two-fold from the 9 cents per share the company earned during the same period last year. Newfield, Tom Brown, Evergreen and Cabot down On the negative side, Newfield should net about $1.24 per share in the 2004 second quarter, down about 17 percent from the previous quarter. However, compared to the $1.03 per share earned for the same period last year, company profit is expected to increase about 20 percent.
Tom Brown, which is being acquired by big Canadian independent EnCana, was expected to report 2004 second-quarter earnings of about 63 cents per share, representing a decrease of around 28 percent from the prior quarter’s 88 cents per share. Compared to last year’s second quarter net of 53 cents per share, the company’s profit for the recent quarter should be up nearly 19 percent.
Evergreen, which is being acquired by Pioneer, should check in with net income of about 41 cents per share, down from 44 cents per share earned in the prior quarter and down from 46 cents in the year-ago period.
Cabot is expected to weigh in with 2004 second-quarter net income of about 55 cents per share, down from the previous quarter’s 59 cents per share and roughly flat to last year’s 56 cents per share.
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