Dj Conocophillips Stock Rises Wednesday, Outperforms Market

U.S. energy operator Diamondback Energy FANG reported third-quarter 2024 adjusted earnings per share of $3.38, which missed the Zacks Consensus Estimate of $3.80 and decreased from the year-ago adjusted figure of $5.49. The underperformance primarily reflects a fall in overall realization.

However, revenues of $2.6 billion rose 13% from the year-ago quarter’s sales and outperformed the Zacks Consensus Estimate by 6.6% on strong production.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

FANG repurchased $515 million of shares in the third quarter and a further $185 million worth of shares in the current quarter. As previously announced, the company gave an additional $2 billion share repurchase approval.

Diamondback Energy, Inc. Price, Consensus and EPS Surprise

Diamondback Energy, Inc. price-consensus-eps-surprise-chart | Diamondback Energy, Inc. Quote

Production & Realized Prices

FANG’s production of oil and natural gas averaged 571,098 barrels of oil equivalent per day (BOE/d), comprising 56% oil. The figure was up 26.1% from the year-ago quarter and beat our estimate of 565,040.9 BOE/d. While crude and natural gas output increased 20.6% and 34.6% year over year, respectively, natural gas liquids volumes rose 33.3%.

The average realized oil price during the most recent quarter was $73.13 per barrel, 10.3% lower than the year-ago realization of $81.57 but ahead of our projection of $66.34. Meanwhile, the average realized natural gas price plunged to (26 cents) per thousand cubic feet (Mcf) from $1.62 in the year-ago period and came below our estimate of 9 cents. Overall, the upstream oil and gas company fetched $44.80 per barrel compared with $54.37 a year ago.

Costs & Financial Position

Diamondback’s third-quarter cash operating cost was $11.49 per barrel of oil equivalent (BOE) compared with $10.51 in the prior-year quarter and our projection of $12.29. The rise in costs compared to the year-ago period reflected an increase in lease operating expenses to $6.01 per BOE from $5.42 in the third quarter of 2023. Further, FANG’s gathering, processing and transportation expenses increased 10.9% year over year to $1.94 per BOE, while cash G&A expenses rose in the third quarter of 2024 to 63 cents per BOE from 51 cents during the corresponding period of 2023. Compounding the issue, production and ad valorem taxes rose 2.8% year over year to $2.91 per BOE.

Diamondback spent $688 million in capital expenditure — $633 million on drilling and completion, $52 million on infrastructure, environment and $3 million on midstream. The company booked $1 billion in free cash flow in the third quarter.

As of Sept. 30, the Permian-focused operator had approximately $373 million in cash and cash equivalents and $11.9 billion in long-term debt, representing a debt-to-capitalization of 25%.

Guidance

Diamondback Energy’s latest guidance takes into account the Endeavor merger, which was completed on Sept. 10. FANG looks to pump around 587,000-590,000 BOE/d of hydrocarbon in 2024, up from 462,000-470,000 BOE/d before. Of this, oil volumes are likely to be between 335,000 and 337,000 barrels per day (273,000-276,000 previously). This Zacks Rank #5 (Strong Sell) company also revised its forecast of a capital spending budget to between $2.88 billion and $3 billion.

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

Some Key E&P Earnings

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

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.

Natural gas producer EQT Corporation EQT reported earnings from continuing operations of 12 cents per share, which beat the Zacks Consensus Estimate of 5 cents. The better-than-expected quarterly earnings were driven by higher gas equivalent sales volume, offset partially by lower oil price realizations.

EQT’s sales volume increased to 581.4 billion cubic feet equivalent (Bcfe) from the year-ago quarter’s level of 522.7 Bcfe. The reported figure also beat our estimate of 552.7 Bcfe. Natural gas sales volume was 547.2 Bcf, up from 491.5 Bcf in the year-ago quarter. The figure also beat our estimate of 521.6 Bcf.

EOG Resources EOG, another U.S. energy operator, reported third-quarter 2024 adjusted earnings per share of $2.89, which beat the Zacks Consensus Estimate of $2.73. Better-than-expected quarterly earnings were driven by higher oil-equivalent production volumes, offset partially by decreased realizations of crude oil and condensates, and NGL prices.

As of Sept. 30, 2024, EOG Resources had cash and cash equivalents worth $6.1 billion and long-term debt of $3.7 billion. The current portion of the long-term debt totaled $34 million. In the reported quarter, the company generated $1.5 billion in free cash flow. Capital expenditure amounted to $1.5 billion.

Zacks Investment Research

If you're interested in broad exposure to the Energy - Natural Gas segment of the equity market, look no further than the First Trust Natural Gas ETF (FCG), a passively managed exchange traded fund launched on 05/08/2007.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Natural Gas is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 16, placing it in bottom 0%.

Index Details

The fund is sponsored by First Trust Advisors. It has amassed assets over $377.86 million, making it one of the average sized ETFs attempting to match the performance of the Energy - Natural Gas segment of the equity market. FCG seeks to match the performance of the ISE-REVERE Natural Gas Index before fees and expenses.

The ISE-Revere Natural Gas Index is an equal-weighted index comprised of exchange-listed companies that derive a substantial portion of their revenues from the exploration and production of natural gas.

Costs

Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive counterparts if all other fundamentals are the same.

Annual operating expenses for this ETF are 0.60%, making it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 3.06%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Energy sector--about 97.90% of the portfolio.

Looking at individual holdings, Western Midstream Partners Lp (WES) accounts for about 4.67% of total assets, followed by Hess Midstream Lp (class A) (HESM) and Conocophillips (COP).

The top 10 holdings account for about 41.35% of total assets under management.

Performance and Risk

The ETF has gained about 6.74% and it's up approximately 6.24% so far this year and in the past one year (as of 11/12/2024), respectively. FCG has traded between $22.62 and $28.34 during this last 52-week period.

The ETF has a beta of 1.79 and standard deviation of 33.51% for the trailing three-year period, making it a high risk choice in the space. With about 45 holdings, it has more concentrated exposure than peers.

Alternatives

First Trust Natural Gas ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, FCG is a reasonable option for those seeking exposure to the Energy ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Range Global LNG Ecosystem Index ETF (LNGZ) tracks RANGE GLOBAL LNG ECOSYSTEM INDEX and the Roundhill Alerian LNG ETF (LNGG) tracks ALERIAN LIQUEFIED NATURAL GAS INDEX. Range Global LNG Ecosystem Index ETF has $0.57 million in assets, Roundhill Alerian LNG ETF has $1.27 million. LNGZ has an expense ratio of 0.85% and LNGG charges 0.65%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Zacks Investment Research

Designed to provide broad exposure to the Energy - Exploration segment of the equity market, the iShares U.S. Oil & Gas Exploration & Production ETF (IEO) is a passively managed exchange traded fund launched on 05/01/2006.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Exploration is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 16, placing it in bottom 0%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $642.16 million, making it one of the larger ETFs attempting to match the performance of the Energy - Exploration segment of the equity market. IEO seeks to match the performance of the Dow Jones U.S. Select Oil Exploration & Production Index before fees and expenses.

The Dow Jones U.S. Select Oil Exploration & Production Index is a free-float adjusted market capitalization-weighted index. The Index includes companies that are engaged in the exploration for and extraction, production, refining, and supply of oil and gas products.

Costs

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.40%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 2.85%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Energy sector--about 99.80% of the portfolio.

Looking at individual holdings, Conocophillips (COP) accounts for about 18.78% of total assets, followed by Eog Resources Inc (EOG) and Marathon Petroleum Corp (MPC).

The top 10 holdings account for about 69.42% of total assets under management.

Performance and Risk

The ETF has added roughly 7.23% so far this year and was up about 8.57% in the last one year (as of 11/12/2024). In that past 52-week period, it has traded between $87.76 and $111.94.

The ETF has a beta of 1.41 and standard deviation of 30.61% for the trailing three-year period, making it a high risk choice in the space. With about 51 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares U.S. Oil & Gas Exploration & Production ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, IEO is a good option for those seeking exposure to the Energy ETFs area of the market. Investors might also want to consider some other ETF options in the space.

Invesco Energy Exploration & Production ETF (PXE) tracks Dynamic Energy Exploration & Production Intellidex Index and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) tracks S&P Oil & Gas Exploration & Production Select Industry Index. Invesco Energy Exploration & Production ETF has $116.31 million in assets, SPDR S&P Oil & Gas Exploration & Production ETF has $2.59 billion. PXE has an expense ratio of 0.60% and XOP charges 0.35%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Zacks Investment Research