Centennial (CDEV) Q2 Earnings Miss on Lower Crude Prices
Centennial Resource Development, Inc. CDEV reported adjusted second-quarter 2020 loss of 33 cents per share, wider than the Zacks Consensus Estimate of a loss of 25 cents. Moreover, the company recorded adjusted earnings of 8 cents per share in the year-ago period.
Revenues from oil and gas sales fell to $90.5 million from $244.2 million a year ago. However, the top line beat the consensus mark of $83 million.
The weak quarterly earnings were primarily due to curtailed total production and lower crude price realizations. This was partially offset by decreased operating expenses, backed by lower lease operating costs.
Centennial Resource Price, Consensus and EPS Surprise
CENTENNIAL RES price-consensus-eps-surprise-chart | CENTENNIAL RES Quote
Operations:
Production
Total production for the reported quarter averaged 68,245 barrels of oil equivalent per day (Boe/d), down from 76,122 Boe/d in the year-ago period. Of the total output, 54.8% comprised crude oil. The downside can be attributed to curtailed production, triggered by market price volatility. It paused around 20% of production volumes in the month of May.
Oil production averaged 37,411 barrels per day (Bbls/d), down from 43,105 Bbls/d in second-quarter 2019. Natural gas liquids (NGLs) production was 12,264 Bbls/d, lower than the year-ago quarter’s 14,785 Bbls/d. However, natural gas production amounted to 111,419 thousand cubic feet per day (Mcf/d), up from the year-ago quarter’s 109,392 Mcf/d.
Price Realizations
The company reported average realized crude price of $21.47 a barrel (excluding the effects of derivate settlements), down from $54.63 in the June quarter of 2019. NGLs were sold at $7.72 a barrel, down from $16.24 in second-quarter 2019. However, average natural gas price rose to 87 cents per Mcf from 81 cents a year ago.
Operating Costs
Centennial incurred $183.3 million of total operating costs in second-quarter 2020, lower than $207.1 million in the year-ago period due to reduced lease operating expenses.
On a per Boe basis, the company’s second-quarter lease operating expenses were $4.16, lower than the year-ago level of $5.04. However, gathering processing and transportation costs increased to $2.78 per Boe from the year-ago period’s $2.34.
Capital Expenditure
In second-quarter 2020, it incurred capital expenditure of only $28 million, of which $21.4 million was allotted to drilling and completion activities. Notably, the company suspended drilling operations and some completion activities in the quarter due to market price volatility.
Balance Sheet
At the end of the quarter under review, cash balance totaled $7.2 million, up from the first-quarter level of $3.8 million. Total debt outstanding amounted to $1,142.9 million, rising from the first-quarter level of $1,135 million. It had a net debt to book equity capitalization of 29%. It had $370 million available under the revolving credit facility.
Guidance
Centennial expects 2020 net average daily production in the range of 64,000-68,000 Boe/d. Net oil production for 2020 is estimated in the band of 34,500-36,500 bpd. Lease operating expense for full-year 2020 is expected to be $4.60-$5.00 per Boe. Gathering, processing and transportation costs will likely be in the range of $2.80-$3.10 per Boe. It is likely to resume drilling activities with one-rig in the December quarter.
The company reduced the expected total capital budget by 60% from the original guidance to the band of $240-$270 million for 2020, the majority of which will be used in drilling and completion activities. It anticipates to complete 30-33 wells in 2020.
Zacks Rank & Stocks to Consider
The company currently has a Zacks Rank #4 (Sell). Some better-ranked players in the energy space include Noble Energy, Inc. NBL, EOG Resources, Inc. EOG and Concho Resources Inc. CXO, each holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Noble Energy’s bottom line for 2021 is expected to rise 61.7% year over year.
EOG Resources’ bottom line for 2021 is expected to soar 190.7% year over year.
Concho Resources’ bottom line for 2020 is expected to surge 35.4% year over year.
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