TC Energy's Q3 Earnings Beat Estimates, Revenues Rise Y/Y

Northern Oil and Gas, Inc. NOG reported third-quarter 2024 adjusted earnings per share of $1.40, which beat the Zacks Consensus Estimate of $1.26. The outperformance indicates strong production. However, the bottom line declined from the year-ago reported figure of $1.73 due to weaker realized prices from crude oil and natural gas and a 17.5% increase in operating expenses.

Oil and natural gas sales of $514 million missed the Zacks Consensus Estimate of $535 million. The top line increased from the year-ago figure of $512 million.

Northern Oil and Gas, Inc. Price, Consensus and EPS Surprise

Northern Oil and Gas, Inc. price-consensus-eps-surprise-chart | Northern Oil and Gas, Inc. Quote

NOG’s adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) was $412.4 million compared with $385.5 million in the year-ago period. Additionally, the figure beat our estimate of $376.8 million.

The oil and gas exploration and production company repurchased 397,301 shares of common stock at an average price of $36.38 per share, including commissions, in the open market in this quarter. Year to date, NOG has repurchased a total of 1,841,733 shares at an average price of $37.64, including commissions.

In July 2024, the company’s board of directors concluded the previous stock repurchase program, which had been nearly exhausted, and authorized a new program to repurchase up to $150 million of its outstanding common stock.

In August 2024, NOG's board of directors declared a quarterly cash dividend of 42 cents per share on its common stock, indicating a 5% increase from the previous rate. The dividend was payable to its stockholders of record as of Sept. 27, 2024, and was paid on Oct. 31.

Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.

NOG’s Q3 Production Details

The third-quarter production increased 19% year over year to 121,815 Boe/d. Additionally, the figure beat our estimate of 121,700 Boe/d.

While oil volume totaled 70,913 Boe/d (up 12% year over year), natural gas (and natural gas liquids) amounted to 305,413 thousand cubic feet per day (up 31%). Our model estimate for oil volume and natural gas production was pegged at 70,800 Boe/d and 305,100 thousand cubic feet per day, respectively.

The average sales price for crude was $71.82 per barrel, indicating a 10% decrease from the prior-year quarter’s level of $79.48. However, the figure missed our expectation of $74.55 per barrel.

The average realized natural gas price was $1.60 per thousand cubic feet compared with $2.19 in the year-earlier period. Our model estimate for the same was pinned at $1.58 per thousand cubic feet.

NOG’s Costs & Expenses

Total operating expenses in the quarter rose to $319.7 million from $271.5 million in the year-ago period.This was mainly on account of a surge in production expenses, depletion, depreciation, amortization and accretion (DD&A) and other expenses.

In particular, the company’s lease operating expenses increased to $9.54 per Boe from the year-ago figure of $8.76. Meanwhile, depreciation outlay increased 17% year over year on a per-barrel basis. However, the figure missed our projection of $359.4 million.

NOG’s Capital Expenditures

During the third quarter, the company reported capital expenditures (CapEx) of $198 million (excluding non-budgeted acquisitions and other costs). This total included $187 million for drilling and completion (D&C) activities on organic and Ground Game assets, as well as $11.1 million for Ground Game-related activities, including pre-closing development costs. D&C spending aligned closely with expectations, caused by significant spud activity and healthy growth in the list, despite a lower number of turn-in lines. The company's weighted average gross authorization for expenditure in the third quarter was $9.1 million, slightly lower than the $9.4 million recorded in second-quarter 2024.

Of the total CapEx, 56% was allocated to the Permian Basin, 41% to the Williston Basin and 3% to the Appalachian Basin. On the Ground Game acquisition front, NOG completed six transactions during the quarter, acquiring a total of 1,259 net acres and 0.1 net current and future development wells through various deal structures.

NOG’s Financial Position

Cash flow from operations totaled $385.8 million. Excluding changes in net working capital, cash flow from operations amounted to $377.1 million, up 9% from that recorded a year ago. The company’s free cash flow for the quarter totaled $177.1 million.

As of Sept. 30, Northern had $34.4 million in cash and cash equivalents. The company had a long-term debt of $2 billion, with a debt-to-capitalization of 45.8%.

2024 Guidance for Northern Oil and Gas

The company has reiterated its capital expenditure and production guidance, with adjustments made to certain line items. For 2024, capital expenditures are expected between $825 million and $900 million. Production taxes have been updated to indicate revised expectations for the remainder of the year. Production expenses are expected to be in the range of $9.15-$9.40 per Boe, while production taxes are anticipated to be 8.5% to 9% of oil and gas sales. DD&A is expected to range from $15.5-$17.5 per Boe.

Adjustments to natural gas realizations and oil differentials are being made based on year-to-date results. Additionally, per-unit cash general and administrative (G&A) expenses are being reduced, due to lower external costs and the continued benefits of higher production volumes. G&A expenses, excluding transaction costs, are expected to be between 72 cents and 77 cents per Boe, with 25 cents to 27 cents of this being non-cash.

Annual oil production is anticipated in the range of 73,000-76,000 barrels per day, while total production is expected to reach between 120,000 Boe/d and 124,000 Boe/d.

NOG currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Important Energy Earnings So Far

Right in the middle of earnings season, there have been a few key energy releases so far. Let us glance through a couple of them.

Liberty Energy LBRT, the Denver-CO-based oil and gas equipment company, announced an adjusted net income of 45 cents per share, which missed the Zacks Consensus Estimate of 55 cents. This was primarily due to poor equipment and services execution and lower activity in the reported quarter. Additionally, the bottom line declined from the year-ago quarter’s reported figure of 86 cents due to a year-over-year increase in costs and expenses.

Ahead of the earnings release, LBRT’s board of directors announced a dividend of 8 cents per common share payable on Dec. 20, to its stockholders of record as of Dec. 6. This dividend represents a 14% increase from the prior regular quarterly dividend of 7 cents per share. In the quarter, Liberty returned $51 million to its shareholders through a combination of share repurchases and cash dividends.

Energy infrastructure provider,Kinder Morgan, Inc. KMI reported third-quarter adjusted earnings per share of 25 cents, which missed the Zacks Consensus Estimate of 27 cents. The bottom line was flat year over year. The weakness in quarterly results was caused by lower contributions from the Products Pipelines and CO2 business segments.

KMI also announced a quarterly cash dividend of 28.75 cents per share for the third quarter of 2024 (annualized dividend of $1.15), implying a 2% increase from the third-quarter 2023 level. The dividend is payable on Nov. 15, 2024, to its shareholders of record as of Oct. 31.

Schlumberger Limited SLB, a Houston, TX-based oil and gas equipment and services provider announced third-quarter earnings of 89 cents per share (excluding charges and credits), which beat the Zacks Consensus Estimate of 88 cents. The bottom line also increased from the year-ago quarter’s 78 cents. The strong quarterly earnings were primarily driven by broad-based earnings growth and margin expansion, especially in the Middle East, Asia and offshore North America. Additionally, cost optimization, greater adoption of digital solutions and contributions from long-cycle deepwater and gas projects played significant roles.

SLB reported a free cash flow of $1.81 billion in the third quarter. As of Sept. 30, the company had approximately $4.46 billion in cash and short-term investments. At the end of the quarter, it registered a long-term debt of $11.86 billion.

Zacks Investment Research

Kinder Morgan (KMI) has been one of the most searched-for stocks on Zacks.com lately. So, you might want to look at some of the facts that could shape the stock's performance in the near term.

Shares of this oil and natural gas pipeline and storage company have returned +9.6% over the past month versus the Zacks S&P 500 composite's +3.3% change. The Zacks Oil and Gas - Production and Pipelines industry, to which Kinder Morgan belongs, has gained 6.3% over this period. Now the key question is: Where could the stock be headed in the near term?

Although media reports or rumors about a significant change in a company's business prospects usually cause its stock to trend and lead to an immediate price change, there are always certain fundamental factors that ultimately drive the buy-and-hold decision.

Revisions to Earnings Estimates

Rather than focusing on anything else, we at Zacks prioritize evaluating the change in a company's earnings projection. This is because we believe the fair value for its stock is determined by the present value of its future stream of earnings.

Our analysis is essentially based on how sell-side analysts covering the stock are revising their earnings estimates to take the latest business trends into account. When earnings estimates for a company go up, the fair value for its stock goes up as well. And when a stock's fair value is higher than its current market price, investors tend to buy the stock, resulting in its price moving upward. Because of this, empirical studies indicate a strong correlation between trends in earnings estimate revisions and short-term stock price movements.

For the current quarter, Kinder Morgan is expected to post earnings of $0.33 per share, indicating a change of +17.9% from the year-ago quarter. The Zacks Consensus Estimate has changed -3% over the last 30 days.

For the current fiscal year, the consensus earnings estimate of $1.18 points to a change of +10.3% from the prior year. Over the last 30 days, this estimate has changed -1%.

For the next fiscal year, the consensus earnings estimate of $1.21 indicates a change of +3.2% from what Kinder Morgan is expected to report a year ago. Over the past month, the estimate has changed -0.8%.

With an impressive externally audited track record, our proprietary stock rating tool -- the Zacks Rank -- is a more conclusive indicator of a stock's near-term price performance, as it effectively harnesses the power of earnings estimate revisions. The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #3 (Hold) for Kinder Morgan.

The chart below shows the evolution of the company's forward 12-month consensus EPS estimate:

12 Month EPS

Projected Revenue Growth

While earnings growth is arguably the most superior indicator of a company's financial health, nothing happens as such if a business isn't able to grow its revenues. After all, it's nearly impossible for a company to increase its earnings for an extended period without increasing its revenues. So, it's important to know a company's potential revenue growth.

For Kinder Morgan, the consensus sales estimate for the current quarter of $3.97 billion indicates a year-over-year change of -1.7%. For the current and next fiscal years, $15.15 billion and $15.75 billion estimates indicate -1.2% and +3.9% changes, respectively.

Last Reported Results and Surprise History

Kinder Morgan reported revenues of $3.7 billion in the last reported quarter, representing a year-over-year change of -5.3%. EPS of $0.25 for the same period compares with $0.25 a year ago.

Compared to the Zacks Consensus Estimate of $3.82 billion, the reported revenues represent a surprise of -3.11%. The EPS surprise was -7.41%.

Over the last four quarters, the company surpassed EPS estimates just once. The company topped consensus revenue estimates just once over this period.

Valuation

Without considering a stock's valuation, no investment decision can be efficient. In predicting a stock's future price performance, it's crucial to determine whether its current price correctly reflects the intrinsic value of the underlying business and the company's growth prospects.

While comparing the current values of a company's valuation multiples, such as price-to-earnings (P/E), price-to-sales (P/S) and price-to-cash flow (P/CF), with its own historical values helps determine whether its stock is fairly valued, overvalued, or undervalued, comparing the company relative to its peers on these parameters gives a good sense of the reasonability of the stock's price.

The Zacks Value Style Score (part of the Zacks Style Scores system), which pays close attention to both traditional and unconventional valuation metrics to grade stocks from A to F (an An is better than a B; a B is better than a C; and so on), is pretty helpful in identifying whether a stock is overvalued, rightly valued, or temporarily undervalued.

Kinder Morgan is graded D on this front, indicating that it is trading at a premium to its peers. Click here to see the values of some of the valuation metrics that have driven this grade.

Bottom Line

The facts discussed here and much other information on Zacks.com might help determine whether or not it's worthwhile paying attention to the market buzz about Kinder Morgan. However, its Zacks Rank #3 does suggest that it may perform in line with the broader market in the near term.

Zacks Investment Research