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Profits expected to drop on lower natural gas prices More oil-weighted independents had a slight edge on West Texas intermediate crude prices up from last year Petroleum News
Third-quarter earnings on average for the leading U.S.-based exploration and production independents are expected to slide nearly 11 percent from the second quarter, largely because of eroding natural gas prices during the three-month period.
However, earnings for the sector were expected to rise more than 100 percent compared to the same third-quarter period last year, before natural gas prices began spiking to robust levels last winter.
Nymex prices on average fell to around $4.81 per thousand cubic feet in the 2003 third quarter from $5.76 per mcf in the second quarter and from $5.86 per mcf in the first quarter. Still, 2003 third-quarter prices were up roughly 50 percent compared $3.19 per mcf in the 2002 third quarter.
Independents that were more weighted to oil would gain a slight edge on the earnings front, as West Texas Intermediate crude prices in this year's third quarter averaged $30.10 per barrel, up from $28.95 per barrel in the prior quarter and up from $28.20 in the year-ago period.
Leading independents surveyed by Petroleum News were Devon Energy, Unocal, Burlington Resources, Anadarko Petroleum, Apache, Pioneer Natural Resources, Kerr-McGee, EOG Resources, Noble Energy, XTO Energy, Chesapeake Energy, Newfield Exploration, Forest Oil, Tom Brown and Evergreen Resources.
Apache, XTO, Forest, expected to report higher earnings All but three of the companies — Apache, XTO and Forest — are expected over the coming weeks to report 2003 third-quarter earnings below the prior quarter, according to Thompson/First Call analysts' estimates. Virtually every company surveyed is expected to post higher earnings compared to the same period last year. On a quarter-over-quarter basis, however, most should post lower earnings, with Burlington and Kerr-McGee taking the biggest hits.
Gas-leveraged Burlington is expected to weigh in with third-quarter earnings of around 99 cents per share, down 28 percent from the prior quarter's $1.38 per share. Kerr-McGee should see 79 cents per share, down 26 percent from $1.07 per share in the prior quarter.
Similarly, Tom Brown's third-quarter earnings could slide nearly 19 percent versus the second quarter, from 53 cents per share to 43 cents per share, according to consensus estimates. EOG's earnings are expected to fall 22 percent, from 94 cents per share to 73 cents per share.
Analysts' consensus for Devon Energy, the largest U.S.-based independent, is for the company to earn $1.45 per share in the third quarter, down around 7 percent from last quarter's $1.56 per share. Noble could see its earnings down nearly 15 percent, from 54 cents per share to 46 cents per share.
Anadarko, under an investor cloud because of a rumored sale of the company, is expected to report third-quarter earnings of $1.15 per share, down just 4 percent from the prior quarter's $1.20 per share. In an effort to save about $100 million a year, the big independent recently cut its workforce by 15 percent and closed two offices in Texas.
In spite of Pioneer's rapidly building production base, the company is expected to suffer a 12.3 percent drop in third-quarter earnings, from 65 cents per share to 57 cents per share, according to First Call estimates. Newfield's earnings were expected to slide 8.7 percent to 94 cents per share, compared to $1.03 per share in the second quarter.
Other independents expected to see a sequential drop in earnings are Unocal at 70 cents per share, down from 73 cents per share; Chesapeake at 30 cents per share, down from 31 cents per share; and Evergreen at 42 cents per share, down from 46 cents per share.
The remaining three independents surveyed by Petroleum News are expected to post only modest increases in third quarter earnings compared to the prior quarter. XTO could see earnings of 44 cents per share, up from 40 cents per share; Forest 50 cents per share, up from 48 cents per share; and Apache $1.77 per share, up from $1.76 per share.
Early First Call consensus estimates for the 2003 fourth quarter have earnings increasing 6.7 percent from the third quarter.
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