We compiled second quarter earnings per share, revenue, EBITDA and cash flow per share analyst consensus estimates on 185 oil and natural gas exploration and production [E&P] and OilService companies in our database.
The median OilService company earnings estimate for the quarter ending June 30, 2012, is $0.44 per share compared to actual earnings per share of $0.40 and $0.34 for Q1 2012 and Q4 2011, respectively. The median E&P earnings estimate for the quarter ending June 30, 2012, is $0.19 per share compared to actual earnings per share of $0.14 and ($0.07) for Q1 2012 and Q4 2011, respectively.
Click here for the full earnings estimate spreadsheet.
Visit the Oil and Gas 360® industry events and earnings calendar to keep track of the upcoming earnings conference calls: http://oilandgas360.com/Calendar.htm
ENERGY COMMODITY PRICES
WTI oil price averaged $93.30, $102.99, and $94.03 per barrel during Q2 2012, Q1 2012 and Q4 2011 respectively, while the Henry Hub natural gas price averaged $2.29, $2.44 and $3.33 per MMBtu over the same time periods.
Crude Oil. The average near-term futures price for WTI in June 2012 declined to $82.41 per barrel, or -13.0% lower than the prior month and -14.4% lower than the same month last year. The five-year strip at June 29, 2012, was $87.14 per barrel, 0.6% higher than the previous month.
U.S. oil consumption in April 2012 was up 0.6% compared to the prior month at 18.2 MMBOPD, and 1.8% lower than the same month last year. The April data point was the thirteenth consecutive month in which consumption lagged the prior year's levels.
The average price of gasoline (all grades, all formulations) in June 2012 was $3.60 per gallon, -5.1% lower than the previous month and -3.9% lower than the same month last year.
Brent crude continued to trade at a premium to WTI, as it has since Q3'10. In June 2012, the average near-term futures price for Brent was $95.93, -13.0% lower than the prior month and 16.4% higher than the average WTI near-month futures price.
The median analyst estimate at the beginning of June for 2012 NYMEX oil was $95.00 per barrel with a high of $111.00 per barrel and a low of $80.00 per barrel, down 4.0% from the June 2012 estimates.
Natural Gas. In April 2012, total natural gas consumption was 64.8 Bcf/d, down 4.8% from the prior month and 6.5% higher from the same month last year. For the first four months of 2012, natural gas consumption was 2.2% lower than the same period in 2011.
Consumption by consuming sector for the first four months of 2012 compared to the same period in 2011 was, industrial (-1.2%), commercial (-16.6%), power generation (+32.0%) and residential (-20.6%).
The market continues to be oversupplied. Dry gas production in April 2012 was 65.7 Bcf/d, up 1.8% from March 2012 and up 4.6% over the same month last year. For the month of April 2012 (the most recent data point), the EIA reported that the U.S. imported an average of 0.25 Bcf/d of LNG marking the lowest level since the EIA has collected data starting in January 1999.
Rig Count. The U.S. land rig count sourced from RigData at June 29, 2012 stood at 2,104 rigs, an increase of 29 rigs from Q1'12. The aggregate increase resulted from a reduction in rigs drilling for gas (-111) offset by an increase in rigs drilling for oil (+76), gas/oil (+29) and other (+35).
On June 29, 2012, there were 1,211 horizontal rigs in the U.S., an increase from 1,191 in Q1'2012. On June 29, 2012, the number of rigs targeting natural gas exclusively dropped from December 31, 2011 by 126 rigs to 270 for a decline of 32%. The number of rigs targeting oil exclusively increased from December 31, 2011 by 44 rigs to 242 for an increase of 22%.
By play and as compared to Q1'12 , rig count changes include Haynesville (-36 rigs, or -43%), Fayetteville Shale (-10 rig, or -36%), Woodford Shale (-7 rigs, or -47%), Appalachian Basin (-20 rigs, or -12%), Williston Basin (+19 rigs, or 10%), Eagle Ford Shale (+16 rigs, or +7%), DJ Niobrara (+6 rigs, or +29%), Permian Basin (+34 rigs, or +8%).
On June 29, 2012, 58% of working rigs were drilling horizontally, up from 57% in Q1 2012 and up from 56%, 55% and 55% in Q4'11, Q3'11 and Q2'11, respectively.
In June 2012, the energy sector outperformed the broad markets month-over-month as the S&P 500, XNG and XOI changed by 4.0%, 6.0%, 6.7% and -14.8%, respectively. The OSX had the largest year-over-year decrease losing 24.9% compared to a 3.1% year-over-year increase for the S&P 500.
From EnerCom's E&P Database: For June 29, 2012 year-to-date, large-cap, mid-cap, small-cap and micro-cap E&P stocks lost 8.5%, 10.6%, 10.5 and 9.5%, respectively. Year-to-date, oil-weighted companies finished down 9.2% as compared to a loss of 14.7% for gas-weighted companies.
By region as of June 29, 2012 year-to-date, Bakken, Diversified and Gulf of Mexico E&P stocks lost 15.2%, 0.5% and 7.5%, respectively. Midcontinent had a year-to-date gain of 1.0%.
From EnerCom's OilService Database: As of June 29, 2012 year-to-date, OilService large-cap, mid-cap, small-cap and micro-cap stocks lost 5.6%, 10.6%, 10.6% and 1.2%, respectively.
The capital markets have been busy year-to-date. Year-to-date through June 30, 2012, oil and gas companies raised $44.8 billion. Of that amount, 79% ($35.4 billion) was corporate debt, 15% secondary equity offerings ($6.7 billion) and 6% was in seven IPOs that raised $2.7 billion.
The table below summarizes oil and gas capital markets activity in the United States and Canada during the first six months of 2011 and 2012.
Corporate debt placements have almost doubled in the first half of 2012 in the oil and gas industry as compared to the same period last year. E&P and OilService companies combined have raised $35.4 billion so far in 2012, 79% higher than the $19.8 billion in the first half of 2011. Debt offerings of $1 billion or more were pulled off by Newfield Exploration (NFX) ($1 billion), Devon Energy Corporation (DVN) ($1 billion), Southwestern Energy Company (SWN) ($1 billion), Apache Corp (APA) ($1.5 billion), Occidental Petroleum Corp (OXY) ($1.25 billion), Chesapeake Energy (CHK) ($1.3 billion) and Linn Energy LLC (LINE) ($1.8 billion).
Micro-cap and small-cap names with strong assets also dipped into the corporate debt till. Resolute Energy Corp (REN) ($250 MM) and Northern Oil & Gas Inc. (NOG) ($300 MM) completed their first high-yield offerings in the first half of 2012. Oasis Petroleum (OAS) decided to raise another round of high-yield debt in late June, selling another $400 MM in notes to investors. The offering was over-subscribed, as evidenced by the fact that the deal was originally announced as a $300 MM raise. Newly-minted IPO Laredo Petroleum (LPI) and QEP Resources (QEP) each raised $500 MM in the first half of 2012, bolstering their balance sheets.
What passes for "high-yield" in today's debt market has changed. In an environment where the Fed is keeping interest rates at all-time lows, investors seeking any meaningful yield have proved eager to snap-up debt offered by companies with strong balance sheets producing a highly marketable commodity like crude oil and/or natural gas. For example, the aforementioned Oasis notes were priced at an annual coupon rate of 6.875%, which to those with memories going back to the 1980s (or earlier), that rate would have been considered downright cheap (even cheaper on an after-tax basis)!
Total capital raised in secondary offerings by oil and gas companies in 2012 was down 25% in the first six months of 2012 as compared to the first half in 2011, as the appetite for risk assets in the energy sector dropped. Initial public offerings have been a positive surprise, being up 121% for the first half of 2012 as compared to 2011. While oil and gas companies have not strayed away from entering the equity markets or raising capital through debt offerings, it seems most CFOs are probably not looking to use equity as the primary financing vehicle at a time when E&P valuations are low.
Companies with near-term cash needs have elected to engage in non-core asset sales to generate cash rather than engage in equity offerings. Equity offerings, even with positive use of proceeds, have taken their toll on corporate valuations more so than in previous periods. Even the expectation of near term equity offerings has seemingly penalized companies that have posted positive news announcements.
EXPECTED THEMES ON FIRST QUARTER CONFERENCE CALLS
Below are some themes and thoughts we expect to take prominence on this quarter's conference calls.
- Takeaway capacity and infrastructure concerns
- Lower utilization rates and project backlogs
- Margins and pricing in the North American market veering international
- International business outlook
- Balance sheet strength and liquidity
- Economic outlook
- Asset Impairments
- Debt redeterminations and liquidity
- Takeaway capacity and infrastructure concerns
- OilService cost trends across the lower 48
- Oil vs. NGL vs. gas weighting of capital expenditure budgets and the future of commodity prices
- New play activity (Tuscaloosa, Utica, Mississippian, etc.)
- Status of drilling carries in joint ventures
- Economic outlook - macro and micro
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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.