Investors gained a clear idea on how upstream businesses have fared in the recently-concluded fourth quarter from the earnings announcements of energy majors like ConocoPhillips COP and Exxon Mobil Corporation XOM. With the coronavirus pandemic hitting global fuel demand, upstream players are likely to have faced a difficult quarter. Natural gas explorers and producers, however, benefited from healthy export volumes of liquefied natural gas (LNG).
Oil & Natural Gas Prices Rise in Q4
The price of West Texas Intermediate (WTI) crude oil has improved roughly 25% through the December quarter of 2020. The approval of two coronavirus vaccines in the last month of the fourth quarter by U.S. health regulators boosted investor confidence in fuel demand recovery, lifting crude price.
However, the pricing scenario was definitely not as healthy as the pre-pandemic fourth-quarter 2019 levels. In the December quarter of 2019, the price of WTI crude traded consistently above the $50-per-barrel mark. In comparison, through the fourth quarter of 2020, the commodity traded below the mark.
The business scenario was much better when it comes to natural gas. In the December quarter of 2020, the price of natural gas rose 47.5%. Moreover, the price of the commodity was healthier in the first and last month of the fourth quarter of 2020 as compared to year-ago comparable months, thanks to strong LNG exports.
What Does it Mean for Upstream Firms?
Thus, although crude price failed to cross the pre-coronavirus mark, prices improved in the fourth quarter of 2020 on positive vaccine development. This encouraged oil drillers to gradually return to the shale resources in the United States. Notably, in the week through Oct 2, 2020, the count of oil drilling rigs was 189 in U.S. resources, which increased to 267 in the week through Dec 31, 2020, per the weekly rig count data as published by Baker Hughes Company.
Hence, it is quite evident that although upstream businesses started improving in the December quarter amid the pandemic, activities couldn’t spring back to the pre-pandemic levels of the fourth quarter of 2019. Overall, lower oil price and production are likely to have affected energy majors’ upstream operations.
In the natural gas business front, Baker Hughes’ data suggested that the tally for gas drilling rigs in the United States increased to 83 in the week through Dec 31, 2020 as compared to 74 in the week through Oct 2, 2020, thanks to increased commodity price. Thus, favorable commodity price is likely to have benefited natural gas explorers and producers but the upstream firms saw a year-over-year drop in commodity volumes, probably due to the pandemic.
Key Releases
Given the backdrop, let us take a look at how the following five energy companies are placed ahead of their fourth-quarter earnings releases slated for Feb 17.
Our proprietary model clearly indicates that a company needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Based in Irving, TX, Pioneer Natural Resources Company PXD is geared up to release results, after the closing bell.
Our proven model predicts an earnings beat for Pioneer Natural this time around as it has an Earnings ESP of +4.48% and a Zacks Rank #2.
Pioneer Natural Resources Company Price and EPS Surprise
Pioneer Natural Resources Company price-eps-surprise | Pioneer Natural Resources Company Quote
Marathon Oil Corporation MRO is set to report earnings after the closing bell. The chances of Marathon Oil delivering an earnings beat this time around are low as it has an Earnings ESP of -1.94% and a Zacks Rank #3.
Marathon Oil Corporation Price and EPS Surprise
Marathon Oil Corporation price-eps-surprise | Marathon Oil Corporation Quote
Ovintiv Inc. OVV is set to report earnings after the closing bell. The chances of Ovintiv delivering an earnings beat this time around are high as it has an Earnings ESP of +0.66% and a Zacks Rank #1.
Ovintiv Inc. Price and EPS Surprise
Ovintiv Inc. price-eps-surprise | Ovintiv Inc. Quote
EQT Corporation EQT is scheduled to report earnings before the opening bell. Notably, the chances of the leading independent natural gas production company delivering an earnings beat this time around are low as it has an Earnings ESP of -4.61% and a Zacks Rank #3.
EQT Corporation Price and EPS Surprise
EQT Corporation price-eps-surprise | EQT Corporation Quote
Antero Resources AR is set to report earnings after the closing bell. The chances of Antero delivering an earnings beat this time around are low as it has an Earnings ESP of -53.85% and a Zacks Rank #2.
Antero Resources Corporation Price and EPS Surprise
Antero Resources Corporation price-eps-surprise | Antero Resources Corporation Quote
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