Why Is WPX (WPX) Down 63.4% Since Last Earnings Report?

It has been about a month since the last earnings report for WPX Energy (WPX). Shares have lost about 63.4% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is WPX due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

WPX Energy Q4 Earnings and Revenues Miss Estimates

WPX Energy Inc.’s fourth-quarter 2019 earnings of 10 cents per share missed the Zacks Consensus Estimate of 12 cents by 16.7%. However, the bottom line increased a whopping 400% from 2 cents per share reported in the year-ago quarter.

The company reported fourth-quarter GAAP loss of 29 cents against earnings of 83 cents per share in the year-ago period. The difference between GAAP and operating earnings in the reported quarter was primarily due to a one-time loss on derivatives.

Total Revenues

WPX Energy’s quarterly revenues of $443 million lagged the Zacks Consensus Estimate of $640 million by 30.8% and declined 18.6% from the year-ago figure.

Highlights of the Release

Total production in the fourth quarter was 179.1 thousand barrels of oil equivalent per day (Mboe/d), up 15% year over year. Liquids volumes accounted for nearly 79% of total production, reflecting the company’s increasing focus on oil.

Oil production in the quarter was 111.7 thousand barrels per day (Mbbl/d), which was nearly 16% higher than the year-ago level, courtesy of 34% growth in volumes in the Williston basin over the past 12 months.

Total production in 2019 was 166.9 Mboe/d, which was at the upper end of the guided range of 162-167 Mboe/d for the year.

Total costs and expenses were $573 million, up 15.3% from $497 million in the year-ago quarter.

Interest expenses in the reported quarter were $40 million, on par with the year-ago figure.

The company initiated a program to repurchase up to $400 million shares in the next 24 months, which will further increase WPX Energy’s shareholder value. To date, the company has repurchased $58 million shares of its common stock at an average price of $10.16 per share, retiring 5.7 million shares.

Realized Prices & Hedges

Realized oil prices in the quarter were $53.59 per barrel, up 2.9% from the year-ago level.

Realized natural gas prices were 87 cents per thousand cubic feet, down 54.2% from a year ago. Realized prices for natural gas liquids were down 42.8% from the year-ago quarter to $11.53 per barrel. The substantial decline in natural gas and natural gas liquid prices did not allow the company to enjoy full benefits from increase in total production.

For 2020, WPX Energy has 65,000 barrels per day of oil hedged at a weighted average price of $57.07 per barrel.

Financial Update

Cash and cash equivalents of WPX Energy on Dec 31, 2019 were $60 million compared with $3 million in the corresponding period of 2018.

Its long-term debt on Dec 31, 2019 was $2,202 million, down from $2,485 million at the end of 2018.

Net cash from operating activities in 2019 was $1,257 million compared with $883 million a year ago. During 2019, capital expenditure was $1,357 million compared with $1,476 million in 2018.

Guidance

WPX Energy expects total output for 2020 within 241-256 Mboe/d and oil production in the range of 155-165 Mbbl/d.

Capital expenditure for 2020 is expected in the range of $1,675-$1,800 million. The 2020 capital budget supports 12 rigs in the Delaware Basin. Moreover, the company has three rigs deployed in the Williston Basin.

Post completion of the Felix acquisition, the firm intends to initiate annual dividend per share of 10 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -33.45% due to these changes.

VGM Scores

Currently, WPX has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, WPX has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.