Colombia stocks higher at close of trade; COLCAP up 0.14%

Petroleo Brasileiro S.A., or Petrobras PBR, announced third-quarter earnings per ADS of 93 cents, ahead of the Zacks Consensus Estimate of 82 cents and higher than the year-ago profit of 86 cents. The strong performance can be attributed to solid cost control measures.

Recurring net income, which strips out one-time items, came in at $5,937 million compared with $5,577 million a year earlier. Petrobras’ adjusted EBITDA fell to $11,480 million from $13,551 million a year ago.

Brazil's state-run energy giant reported revenues of $23,366 million, which fell 8.6% from the year-earlier sales of $25,552 million due to lower downstream sales and oil realizations. However, it beat the Zacks Consensus Estimate of $22,838 million.

Along with the third-quarter earnings announcement, PBR added that it plans to shell out RMB 17.12 billion in dividends and equity interests.

Petroleo Brasileiro S.A.- Petrobras Price, Consensus and EPS Surprise

Petroleo Brasileiro S.A.- Petrobras price-consensus-eps-surprise-chart | Petroleo Brasileiro S.A.- Petrobras Quote

Coming back to earnings, let's take a deeper look at the recent performances of PBR’s two main segments: Upstream (Exploration & Production) and Downstream (or Refining, Transportation and Marketing).

Upstream: The Rio de Janeiro-headquartered company’s average oil and gas production during the third quarter reached 2,689 thousand barrels of oil equivalent per day (MBOE/d) — 79% liquids — down from 2,877 MBOE/d in the same period of 2023.

Compared with the year-ago quarter, Brazilian oil and natural gas production — constituting approximately 99% of the total output — decreased 6.6% to 2,654 MBOE/d. The downside primarily reflected falling production rates in the pre-salt fields and other operational areas.

In the July to September period, the average sales price of oil (or the average Brent crude price) fell 7.6% year over year to $80.18 per barrel. The decrease in crude prices, together with lower production, had a negative effect on upstream unit sales. Overall, the segment’s revenues dropped to $15,383 million in the quarter under review from $17,922 million in the year-ago period.

As far as the bottom line is concerned, it was further dented by an uptick in pre-salt lifting costs (which rose 8.7% from the year-ago period to $6.10 per barrel). Consequently, the upstream unit recorded a net income of $5,416 million, down 13.7% from third-quarter 2023 earnings of $6,275 million.

Downstream (or Refining, Transportation and Marketing): Revenues from the segment totaled $21,739 million, 8.2% lower than the year-ago figure of $23,691 million, due to lower volumes. Petrobras' downstream unit recorded a profit of $255 million, which compared unfavorably with earnings of $814 million in the third quarter of 2023. Apart from a decline in refined products sales and output, the unit’s income was affected by higher refining cost.

Costs

During the period, Petrobras’ sales, general and administrative expenses were $1,602 million, 4.8% lower than the year-ago quarter. Selling expenses also fell from $1,288 million a year ago to $1,193 million. Moreover, a 28.4% increase in “other expenses” led to a marginal $15 million increase in total operating expenses.

While costs remained essentially flat, the decrease in revenues led to a drop in PBR’s operating income to $8,400 million in the third quarter of 2024 compared with $9,980 million a year ago.

Financial Position

During the three months ended Sept. 30, 2024, Petrobras’ capital investments and expenditures totaled $4,433 million compared with $3,392 million (excluding signature bonus) in the prior-year quarter.

Importantly, the Zacks Rank #3 (Hold) company generated a positive free cash flow for the 38th consecutive quarter, with the metric coming in at $6,857 million. However, it fell from $8,364 million recorded in last year’s corresponding period.

You can see the complete list of today’s Zacks #1 Rank stocks here.

At the end of the third quarter of 2024, Petrobras had a net debt of $44,251 million, up from $43,725 million a year ago but down from $46,160 million as of June 30, 2024. The company ended the quarter with cash and cash equivalents of $8,694 million.

Petrobras’ net debt to trailing 12-month EBITDA ratio deteriorated to 0.95 from 0.83 in the previous year. It was 0.95 at the end of the previous quarter too.

Some Key Energy Earnings

While we have discussed PBR’s third-quarter results in detail, let’s see how some other energy companies have fared this earnings season.

Oil supermajor Chevron CVX reported adjusted third-quarter earnings per share of $2.51, beating the Zacks Consensus Estimate of $2.47. The outperformance stemmed from higher-than-expected U.S. production in the company’s key upstream segment, as volume from the Permian Basin reached an all-time high. The unit’s domestic output of 1,605 thousand oil-equivalent barrels per day (MBOE/d) came in slightly above the consensus mark of 1,602 MBOE/d.

CVX recorded $9.7 billion in cash flow from operations, the same as the year-ago period, as a drop in earnings and a one-time outgo was somewhat offset by higher dividends from equity affiliates and lower working capital. Chevron’s free cash flow for the quarter was $5.6 billion.

ConocoPhillips COP, one of the world’s largest independent oil and gas producers, reported third-quarter 2024 adjusted earnings per share of $1.78, which beat the Zacks Consensus Estimate of $1.68. The outperformance can be attributed to higher oil equivalent production volumes and decreased total costs and expenses.

As of Sept. 30, 2024, ConocoPhillips had $5.2 billion in cash and cash equivalents. The company had a total long-term debt of $16.99 billion and a short-term debt of $1.3 billion as of the same date. Capital expenditure and investments totaled $2.92 billion. Net cash provided by operating activities was $5.8 billion.

Finally, we have refiner Marathon Petroleum’s MPC third-quarter adjusted earnings per share of $1.87, which comfortably beat the Zacks Consensus Estimate of 97 cents. The outperformance primarily reflects the stronger-than-expected performance of its Refining & Marketing segment. Operating income of the segment totaled $298 billion, surpassing the consensus mark, calling for a loss of $64 million on the back of strong product sales and throughput.

Marathon Petroleum’s total refined product sales volumes were 3,685 thousand barrels per day (mbpd), up from 3,596 mbpd in the year-ago quarter. Throughput rose marginally from 2,959 mbpd in the year-ago quarter to 2,991 mbpd and outperformed the Zacks Consensus Estimate of 2,852 mbpd. MPC’s operating costs per barrel increased from $5.14 in the year-ago quarter to $5.30.

Zacks Investment Research

EOG Resources, Inc. EOG, a leading exploration and production company, has witnessed upward earnings estimate revisions for 2025 in the past seven days.

Factors Working in Favor of EOG

The price of West Texas Intermediate crude is approaching the $70 per barrel mark again, which is highly favorable for upstream operations. EOG Resources, currently carrying a Zacks Rank #3 (Hold), is well-placed to capitalize on the promising business scenario. It has significant undrilled premium locations, resulting in a brightened production outlook. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

EOG Resources is strongly committed to returning capital to shareholders. Since transitioning to premium drilling, the company has returned significant cash to its stockholders. The company has a rich history of dividend payments for 27 years. It has never suspended or lowered its dividend, even during business turmoil, reflecting solid underlying business.

With the employment of premium drilling, EOG will be able to reduce its cash operating costs per barrel of oil equivalent, aiding its bottom line.

EOG’s Vulnerability to Oil Price Volatility

However, being an upstream energy player, the company’s overall operations are exposed to oil and natural gas price volatility. Some other exploration and production players that are also exposed to commodity price volatility are ConocoPhillips COP, Diamondback Energy, Inc. FANG and Matador Resources Company MTDR.

ConocoPhillips has secured a solid production outlook thanks to its decades of drilling inventories across its low-cost and diversified upstream asset base. The resource base represents the company’s strong footprint in prolific acres in the United States, comprising Eagle Ford shale, the Permian Basin and Bakken shale.

Diamondback Energy, a leading pure-play Permian operator, has reported ongoing enhancements in the average productivity per well in the Midland Basin. Thus, the exploration and production company will likely continue witnessing increased production volumes.

Matador Resources is a well-known exploration and production company with a strong footprint in the prolific Wolfcamp and Bone Spring plays in the oil-rich Delaware Basin.

Zacks Investment Research

EQT Corporation EQT has gained 16% year to date, outpacing the 11.3% improvement of the composite stocks belonging to the industry.

What's Favoring the EQT Stock?

EQT, a leading natural gas producer in North America, carries a Zacks Rank #3 (Hold) and has established a strong presence in the highly productive Appalachian Basin. The company's production prospects are robust, with numerous prime drilling locations throughout this gas-rich region. As natural gas is a cleaner-burning fossil fuel, EQT is well-positioned to benefit from the growing demand for clean energy sources. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moreover, the U.S. Energy Information Administration (“EIA”) forecasts that the price of natural gas will increase to an average of $2.80 per million British thermal units (MMBtu) in the first quarter of 2025 from $2.20 per MMBtu in October, driven by heightened demand for heating fuel. As a major gas producer, the company stands to benefit significantly from this anticipated rise in commodity prices.

Notably, the company is at the forefront among its peers when it comes to establishing emissions reduction goals. EQT’s ambitious goal is to achieve net zero scope 1 and scope 2 greenhouse gas emissions by 2025 or sooner.

Risks to EQT’s Business

EQT Corporation has experienced a notable increase in its total debt, which rose to $13.8 billion as of Sept. 30, 2024, from $5.8 billion at the end of 2023. This substantial increase raises questions about the company's financial flexibility and its ability to pursue strategic objectives effectively.

Also, EQT's engagement in exploration and production activities leaves it vulnerable to significant fluctuations in oil and gas prices, resulting in a highly unpredictable business environment for this upstream energy company. Some other major exploration and production firms that are also exposed to commodity price volatility are ConocoPhillips COP, Diamondback Energy, Inc. FANG and EOG Resources EOG.

ConocoPhillips has secured a solid production outlook thanks to its decades of drilling inventories across its low-cost and diversified upstream asset base. The resource base represents the company’s strong footprint in prolific acres in the United States, comprising Eagle Ford shale, the Permian Basin and Bakken shale.

Diamondback Energy, a leading pure-play Permian operator, has reported ongoing enhancements in the average productivity per well in the Midland Basin. Thus, the exploration and production company will likely continue witnessing increased production volumes.

In the United States, EOG Resources is one of the foremost explorers and producers of oil and gas, with its crude reserves spanning across the United States and Trinidad. The company possesses an extensive inventory of high-quality drilling wells in low-cost, premium resources, ensuring a strong business outlook.

Zacks Investment Research