A month has gone by since the last earnings report for Hess (HES). Shares have added about 19.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Hess due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Hess Beats Q4 Earnings Estimates, Proved Reserves Fall
Hess Corporation reported adjusted fourth-quarter 2020 loss per share of 58 cents, narrower than the Zacks Consensus Estimate of a loss of 67 cents and the year-ago quarter’s loss of 60 cents.
Notably, quarterly revenues declined to $1,417 million from $1,699 million a year ago. However, the top line beat the Zacks Consensus Estimate of $1,251 million.
Higher production from Bakken play and lower operating expenses led the company to report better-than-expected results in the fourth quarter. This was offset partially by lower realized oil and gas prices.
Q4 Operational Update
Exploration and Production
In the quarter under review, the Exploration and Production business reported an adjusted net loss of $118 million compared with a loss of $124 million a year ago. The business was favored by higher production from Bakken play, offset partially by lower realized oil and gas prices.
Quarterly hydrocarbon production was 321 thousand barrels of oil equivalent per day (MBoe/d), down from 338 MBoe/d in the year-ago period on lower contributions from Gulf of Mexico – offshore U.S. resources. This was offset partially by higher production from prolific Bakken play.
Crude oil production decreased from 183 thousand barrels per day (MBbls/d) in fourth-quarter 2019 to 167 MBbls/d. However, natural gas liquids production totaled 64 MBbls/d, up from 52 MBbls/d in the prior-year quarter. But natural gas output was 538 thousand cubic feet per day (Mcf/d), down from 618 Mcf/d a year ago.
Worldwide crude oil realization per barrel of $39.45 (excluding the impact of hedging) declined from $55.05 in the year-ago period. Moreover, worldwide natural gas prices fell to $3.35 per Mcf from the year-ago $3.48. However, the average worldwide natural gas liquids selling price rose to $15.80 per barrel from $13.87 a year ago.
From the midstream business, the company generated adjusted net earnings of $62 million, significantly up from $49 million a year ago. The rise can be attributed to improvement in tariff rates and volumes.
Operating expenses for the fourth quarter totaled $313 million, down from the year-ago $365 million. Marketing costs also decreased to $281 million from $428 million a year ago. Moreover, exploration expenses decreased to $60 million from $106 million in the year-ago period.
Total costs and expenses declined to $1,372 million from $1,763 million in fourth-quarter 2019.
Quarterly net cash flow from operations was $486 million for the fourth quarter, reflecting a significant improvement from the year-ago figure of $286 million. Hess’ capital expenditures for exploration and production activities totaled $371 million, down from $876 million in the prior-year quarter.
As of Dec 31, 2020, the company had $1,739 million in cash & cash equivalents. Its long-term debt was recorded at $8,286 million at fourth quarter-end. Current maturity of the long-term debt is $10 million. Debt to capitalization at quarter-end was 57.5%.
The company’s year-end proved reserves were recorded at 1,170 million Boe, down from 1,197 million Boe at Dec 31, 2019.
Hess projects its capital expenditures for exploration and production activities at $1.9 billion, suggesting an increase from $1.8 billion in 2020. Notably, the company expects its 2021 net production (excluding Libya) at 310,000 Boe/d.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 47.83% due to these changes.
Currently, Hess has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Hess has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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