Oil & Gas Stock Roundup: Diamondback And Marathon Petroleum Report Q1 Earnings
Zacks Investment Research | May 15, 2019 02:21AM ET
It was a week where oil prices settled lower but natural gas futures posted a gain.
On the news front, Permian pure play Diamondback Energy, Inc. (NASDAQ:FANG) reported better-than-expected first-quarter earnings. Meanwhile, refiner Marathon Petroleum Corp. (NYSE:MPC) swung to a surprise loss.
Overall, it was a mixed week for the sector. While West Texas Intermediate (WTI) crude futures fell a marginal 0.5% to close at $61.66 per barrel, natural gas prices rose 2% for the week to finish at $2.619 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Shell (LON:RDSa), BP (LON:BP) & ConocoPhillips (NYSE:COP) Post Q1 Earnings Beat )
The U.S. crude benchmark was pressured by the escalating trade dispute between China and the United States. The recent setback in relations with China is threatening to dampen global growth and affect oil demand. This was partly offset by the Energy Department's latest inventory release showed that stockpiles recorded a larger-than-expected weekly decrease.
Meanwhile, natural gas prices gained slightly after a government report showed in-line increase in supplies. However, the injection was higher than the five-year average as the mild spring weather continues to limit heating and air conditioning demand. While the fundamentals of natural gas consumption continue to be favorable, record high production in the United States and expectations for explosive growth through 2020 means that supply will keep pace with demand.
Recap of the Week’s Most Important Stories
1. Independent oil refiner and marketer Marathon Petroleum reported weak first-quarter results on declining crude discounts. The company reported adjusted loss per share of 9 cents. The Zacks Consensus Estimate was for a profit of a penny, while in the year-ago period the company earned 8 cents per share.
The Refining & Marketing segment reported operating loss of $334 million compared with loss of $133 million in the year-ago quarter. The deterioration reflects narrower crude differentials, in addition to lower gasoline margins. This more than offset the impact of higher refining margins and rising throughputs following the 2018 acquisition of Andeavor.
In the reported quarter, Marathon Petroleum spent $1.3 billion on capital programs (62% on the Midstream segment). As of Mar 31, the company had cash and cash equivalents of $877 million and total debt of $28.1 billion, with a debt-to-capitalization ratio of 39.6%. During the first quarter, Marathon Petroleum returned $1.2 billion of capital to shareholders, including $885 million in share buybacks. (Read more Viper Energy Misses Q1 Earnings on Lower Oil Price )
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Price Performance
The following table shows the price movement of some the major oil and gas players over the past week and during the last 6 months.
Company | Last Week | Last 6 Months |
XOM | 0% | -3% |
CVX | +4% | +4% |
COP | +0.4% | -4.4% |
OXY | -5.1% | -24.9% |
SLB | -4.2% | -18.9% |
RIG | -3.9% | -23.9% |
VLO | -5.3% | -0.4% |
MPC | -11.4% | -21.5% |
The Energy Select Sector SPDR – a popular way to track energy companies – edged down 0.3% last week. The worst performer was downstream operator Marathon Petroleum whose stock slumped 11.4% following a dismal earnings report.
Longer-term, over six months, the sector tracker is down 4%. Houston-based energy explorer Occidental Petroleum (NYSE:OXY) was the major loser during this period, experiencing a 24.9% price decline.
What’s Next in the Energy World?
With the 2019 Q1 earnings season essentially over, market participants will get back to closely tracking the regular releases i.e. the U.S. government statistics on oil and natural gas - one of the few solid indicators that comes out regularly. Energy traders will also be focusing on the Baker Hughes data on rig count.
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