AILING STOCKS
Energy companies still under the weather because of COVID-19, latest results show
Big and small and public and private Oklahoma energy companies continued to deal with changing market conditions driven by the COVID-19 pandemic during the third quarter of this year, filings and releases show.
Across the board, operators lost money due to depressed values for oil, impairments on assets or hedge-related losses.
“I think we are going to see that continue,” said Steven Agee, an economics professor with about four decades of energy industry experience who is the dean of the Meinders School of Business at Oklahoma City University. “As long as this virus is around, it is going to suppress demands for energy. While we had been seeing signs that economies were beginning to open back up, it looks like now that some are going to be shut back down. We just heard from the governor of New York yesterday as he was talking about implementing a curfew, shutting down bars and restaurants at a certain time, and that is probably going on globally because of this new spike in the virus.
“It is just a continuation of what we had been seeing — the virus is a central, focal problem for all kinds of businesses, including those in the oil and gas industry.”
Companies that recently issued results for the third quarter of 2020 include Continental Resources, Tulsa-based Laredo Petroleum, SandRidge Energy and Ascent Resources Utica Holdings.
Continental Resources
Continental Resources posted a third-quarter 2020 net loss of about $79.4 million, or 22 cents per share, on total revenues of about $692.4 million. However, it also stated it generated $ 258.3 million of free cash flow during the period, and earnings before
interest, taxes, depreciation, amortization and exploration and production costs ( EBITDAX) of about $ 473.3 million.
For Continental, which doesn't hedge any of its oil production, a generally better price for the product in the third quarter helped somewhat, officials said. Plus, in anticipation of stronger natural gas pricing fundamentals in 2021, the company shifted Oklahoma rigs to gassier areas of its holdings earlier this year.
The company has about 202 million cubic feet per day of natural gas production in 2021 hedged, they added.
"As we look to year end 2020 and into 2021, we will continue our track record of delivering sustainable free cash flow alongside ongoing debt reduction, low- cost leadership and unmatched shareholder alignment, while responsibly fueling a better world through our ESG ( environmental and social governance) stewardship,” said Bill Berry, Continental Resources' CEO.
Laredo Petroleum
Tulsa- based Laredo Petroleum, a company pursuing oil and gas reserves in the Permian Basin, posted a 2020 net loss of about $237.4 million, or $20.32 per share, on total revenues of about $173.6 million.
Its earnings before interest, taxes, depreciation and amortization (EBITDA) was about $ 137.2 million and it generated a free cash flow of $71 million during the period. Drivers behind its loss were a $45.2 million loss on hedging contracts and a $ 196.1 million impairment it took on its assets.
"Since launching our revised strategy a year ago, the Laredo team has delivered on our core objectives of operational excellence, financial risk management and inventory expansion, and this quarter was no exception," commented Jason Pigott, its CEO, as part of its earnings release. "We began completions operations in Howard County ( Texas) and did not miss a beat operationally, continuing our exemplary run of efficiency gains and proving we can maintain our low drilling and completions costs in a new area.”
SandRidge Energy
SandRidge Energy reported a third-quarter 2020 net loss of about $48.8 million, or $1.36 per share, on total revenues of about $27.7 million. The main driver behind its loss was an impairment of $44 million on its assets.
Revenues from oil, natural gas and natural gas liquids sales decreased $ 30.7 million, or 52.6%, compared to the third quarter of 2019 ( primarily because of production declines involving its Mid-Continent assets in the Mississippian Lime play), the company stated as part of its filing.
“Given current economic conditions, we have reduced our capital expenditures budget for 2020 to $4.6 million, which is exclusively comprised of capital workovers. We did not drill or complete any wells during the three and nine- month periods ended September 30, 2020, and do not expect to drill or complete any wells during 2020,” the filing continued.
Ascent Resources
Ascent Resources, an Oklahoma City- based private operator in the Utica Basin supported by investors, reported encountering a thirdquarter 2020 net loss of about $552.4 million on total revenue of about $365 million, before getting hit with a $386 million cost on its hedges. The company's adjusted EBITDAX was $210 million, and its top executive stated it generated $59 million of free cash flow during the period.
"The third quarter of 2020 was yet another example of Ascent demonstrating our ability to deliver best-in-class operational results and basinleading capital efficiencies while reaffirming our ability to generate sustainable positive free cash flow," said Jeff Fisher, its CEO.
Looking forward
Agee said he expects that the nation's energy industry still has at least another six tough months ahead as the world waits for badly needed treatments and a viable vaccine to combat COVID-19.
“The oil and gas industry has ups and downs all the time. They are going to have to hunker down and keep their costs under control. The main thing they will have to do is work their way through time until we get a vaccine that is effective and gets distributed and people get inoculated. If that isn't until the second quarter of 2021, that is what they have to look forward to. Even when demand returns, it will take time to filter through to the operators. A long, cold winter would help natural gas producers, but it is all about variables the companies can't control.”