Earnings mixed for some of Permian’s top producers
Some of the top oil producers in the booming Permian Basin reported mixed financial results Tuesday as they seek to appease Wall Street by reining in spending and increasing oil and gas production. Diamondback Energy of Midland, Pioneer Natural Resources of Dallas and Parsley Energy of Austin all said Tuesday that they’re lowering the top end of their 2019 capital spending projections while achieving oil and gas production volumes above or near the top of their guidance. Diamondback, one of the fastest-growing Permian firms after making a series of multibillion-dollar acquisitions last year, reported a second quarter profit of $349 million, a jump of nearly 60 percent from second quarter of 2018.
After acquiring smaller Permian firms Energen and
Ajax Resources last summer, Diamondback doubled its quarterly revenues up to more than $1 billion. The company will complete more wells in 2019 than its previous estimates while lowering the top level of its capital budget.
Spinoffs, job losses
Diamondback is reducing its debt load by spinning off its pipeline and processing facilities into the brand-new Rattler Midstream Partners business and by selling more of its mature acreage to its oil and gas minerals business Viper Energy Partners.
Pioneer is aiming to right the ship after replacing its chief executive and cutting more than 500 jobs this year. The company posted a $169 million loss in the second quarter, down from a $66 million profit a year
prior. But much of that loss comes from about $150 million in one-time costs associated with the job cuts.
In May, Pioneer sold its its Eagle Ford assets in South Texas to Houston startup Ensign Natural Resources for about $475 million to make the company exclusively Permian focused.
Pioneer CEO Scott Sheffield said the company’s production is above guidance thus far for the year and that it is lowering the top end of its 2019 capital budget by $150 million, or nearly 5 percent. The company plans to maintain operating up to 23 drilling rigs in the Permian for the rest of this year.
Parsley said it will scale back from 12 rigs in the Permian to 11 because its drilling has become more efficient. Parsley’s quarterly profit of $116 million was down slightly from $119 million last year, but its revenues jumped to $499 million
from $468 million a year ago.
Parsley said it is hiking its 2019 production targets while tightening up its capital spending slightly.
Westlake’s profits fall
Westlake Chemical said its profits fell by 58 percent in second quarter as lower sales prices and global economic uncertainty dinged its earnings again.
The Houston chemical maker reported secondquarter profits of $119 million, down from $278 million the same time last year. Its sales fell 4 percent to $2.1 billion from $2.2 billion a year ago.
Earlier this year, Westlake’s executives warned that the U.S.-China trade war was eating into its profits and lowering sales prices. That conflict only seems to be escalating as the Trump administration said it would impose tariffs on another $300 billion of Chinese goods, while China allowed its currency to depreciate, which would make Chinese goods less costly in the United States and offset the impact of the tariffs.
Other chemical companies such as Huntsman Corp. of the Woodlands and LyondellBasell of Houston saw their profits slide in the second quarter. Dow Chemical cut its capital spending program by $500 million in light of slower economic growth.
“We continued to face several challenges in the second quarter,” said Westlake CEO Albert Chao said in statement. “Although it’s been a difficult start to the year, we have seen some improvements industry fundamentals that we expect will continue into the second half of the year.”
Westlake’s stock rose $1.13 a share to close at $63.05.