Energy Weekly Digest

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Energy Weekly Digest

4Q 2019 Earnings - COP, NOV, PTEN, HP, CLB, PAA, MR 2020 guidance, COG update and NE Fleet Status Report

Exploration & Production

4Q 2019 Earnings

(COP) ConocoPhillips (-)

Quick Look (Published on Feb 4, 2020)

Summary Thoughts. COP posted EPS and CFPS just below the Street and below us, with a 2020/1Q20 outlook that is also below HES/Street on prod'n, although basically inline on capital vs. the Street (higher vs. us).  

Bottom line. Adjusted 4Q19 EPS/CFPS of $0.76/$2.42 vs. our $0.98/$2.79 and the Street's $0.80/$2.56. 4Q19 organic capital spending was $1,595MM vs. our $1,482MM and the Street's $1,525MM.

Guidance. 2020 outlook is for prod'n of 1,230-1,270 Mboe/d with midpoint 5% below our 1,320 Mboe/d and 3% below the Street's 1,285 Mboe/d; COPs outlook includes the estimated impact of a recent 3rd party pipeline outage on the Kebabangan Field in Malaysia. Capital for 2020 is planned at $6.5-$6.6B vs. our $6.3B and the Street's $6.5B.

  • 1Q20 prod'n. Guidance (ex-Libya) at 1,240-1,280 Mboe/d, light vs. HEA/Street at 1,344/1,300 Mboe/d.
  • 1Q20 capex. Capital is expected to be higher in 1Q20 vs. the rest of year largely for winter construction and exploration and appraisal activity in AK.

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Montage Resources 2020 guidance

Published on Feb 5, 2020

Montage Resources 2020 guidance (MR $3.35 - M) - MR's official budget comes with no surprise as they had previously indicated declines in prod'n from 4Q19 levels. Reduced Y/Y activity puts them on the edge of FCF generation. MR's balance sheet is in a stable position with 2019E net debt/EBITDA of 1.9x and no near-term debt maturities.

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Cabot Oil and Gas 2020 maintenance capital and 4Q19 volumes

Published on Feb 4, 2020

Cabot Oil and Gas takes 2020 to maintenance capex amidst low gas prices (COG $14.16 - FL) - As should have been expected, COG is opting for its previously indicated maintenance program given low gas prices, which continue to grind lower than the $2.25/Mcf maint price case provided by COG. 4Q19 preliminary results looked pretty good with volumes higher on lower capital, but offset by lower prices.

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Oilfield Services

4Q 2019 Earnings

(NOV) National Oilwell Varco (+)

NOV home page on
Quick Look (Published on Feb 6, 2020)

Summary thoughts - NOV delivered a phenomenal Q4 EBITDA beat, significantly outperformed their free cash flow target, and posted another quarter of relatively strong orders. While higher than expected backlog throughput drove most of the beat from CPS and RigTech, the Wellbore segment significantly outperformed margin guidance (~+250bps), and would have delivered a ~10%-11% beat vs. consensus without the help of higher CPS/RigTech backlog throughput. While 1Q20 looks likely to suffer from accelerated 4Q19 backlog throughput, we would be surprised if the midpoint of Q1 guidance falls below $180MM (HEA at $215MM, Street at $207MM). Further, considering aggregate consensus EBITDA in 4Q19-1Q20 of $431MM less 4Q19 actual EBITDA of $288MM means that 1Q20 guidance would need to fall below $143MM to deliver a miss relative to combined 4Q19/1Q20 consensus, an outcome that we see as extremely unlikely.

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(PTEN) Patterson-UTI Energy (-)

PTEN home page on
Quick Look (Published on Feb 6, 2020)

Hard to find a lot of positives. Q4 adjusted EBITDA missed by 11%, land drilling margins were well below expectations, and pressure pumping guidance seems likely to be worse than expected due to fewer expected active fleets and the operational stoppage of a major oil company customer (CVX in Appalachia?).

EBITDA comes up short. We are calling Q4 adjusted EBITDA $86MM as reported EBITDA of $97MM includes the benefit of an $11MM sales tax refund that reduced pumping operating costs. This represents an 11%/12% shortfall vs. HEA/consensus of $97MM/$98MM. Surprisingly, almost all of the shortfall was driven by the land drilling business.

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Follow-Up (Published on Feb 7, 2020)

What changed. It's hard to argue that PTEN's sharp selloff (down 16% vs. OIH down 2.5%) wasn't warranted to a large degree given the magnitude of the looming negative estimate revisions. Our 2020/2021 EBITDA estimates are declining by 15% to $372MM/$492MM from $439MM/$577MM. Virtually every one of PTEN's business lines is starting the year with a markedly worse outlook than we expected. We view the cost issues impacting the drilling business as transient and expect 2H20 to normalize. However, pressure pumping has gone from bad to worse and we now struggle to see how PTEN will breakeven on its maintenance capex for that business given its abysmal start to the year. Finally, the cash return story appears to have lost some momentum as our lower EBITDA estimates are not accompanied by lower than expected capex, resulting in a reduced FCF outlook.

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(HP) Helmerich & Payne, Inc. (+) (F1Q20)

HP home page on
Quick Look (Published on Feb 4, 2020)

Positive quarter overall. Positive overall quarter with FQ1 EBITDA 5% ahead of our estimate, Q2 guidance that implies EBITDA ahead of current consensus, and continued market share gains in US land. The one negative was FCF was only $66MM (HEA at $88MM), although this appears to be primarily timing driven and is expected to recover in the coming quarters.

International drives EBITDA upside. Q1 EBITDA of $157MM was better than HEA/consensus at $150MM with the upside versus our estimate (and previous guidance) coming primarily from International where gross margins/day of $7.2K were nearly 2X the guidance of $3-4K/day.

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Follow-Up (Published on Feb 5, 2020)

What changed. +5-6% move to our fiscal year 2020/2021 EBITDA estimates as HP's US Land business holding up better than we expected. The company continues to take market share, pricing for super-spec rigs remains steady, and the company is having early success driving incremental daily margins through the use of performance-based contracts. We continue to model realized pricing erosion totaling an additional $700/day over the next several quarters off of the guided FQ2 range. However, this is beginning to feel more like a downside case given the relative stability of HP's US Land margins over the last several quarters.

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(CLB) Core Laboratories

Follow-up (Published on Feb 4, 2020)

What changed. Our new 2020/2021 EPS estimates of $1.79/$2.01 are virtually unchanged from the immediate aftermath of the company's 4Q19 pre-announcement. However, we have greater confidence in CLB's Q1 EPS guidance of $0.39-$0.41 as the typical seasonal decline in Reservoir Description is expected to be largely offset by international project work that had previously been expected during Q4. The downside risk we foresaw from multiple compression in our January 6, 2020 downgrade seems less acute following the recent slide in the stock. However, the stock's 6.2% FCF yield on our 2020 estimates and dividend yield of 2.9% continue to screen pretty middle of the pack vs. our coverage universe.

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Noble Corp. Fleet Status Report

Published on Feb 7, 2020

From Noble Corp

Negative update, in our view, given the potential earlier release date of jackup Noble Lloyd Noble equating to ~$38MM of revenue at risk in '20. Overall contract adjustments added ~100 days of jackup backlog and ~30 days of floater backlog, while one new floater contract added ~45 days of backlog for semisub Clyde Boudreaux at $135k/d, below our estimate of $155k/d. Absent potential risk to the Lloyd Noble contract, our '20E EBITDA would only decline $3MM following the FSR. However, NE disclosed that the Lloyd Noble contract - which is earning $451k/d - could be completed as early as 9/1/20, vs. the previously reported expiration date of late Nov '20. We are splitting the difference and estimate the contract conclusion on 10/15/20. We are reducing our '20E EBITDA to $245MM from $271MM, compared to Street at $294MM. Our 4Q19E EBITDA is unchanged at $57MM (same as Street), as is our '21E EBITDA at $274MM (Street at $385MM).

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4Q 2019 Earnings

(PAA) Plains All American Pipeline (+)

PAA home page on

Quick Look (Published on Feb 4, 2020)

Summary thoughts. Big 4Q19 beat but no improvement to 2020 guidance issued in early November. The quarterly beat was driven by seasonal strength on the NGL side of the marketing business. Given subsequent weakness in NGL prices in January, PAA is likely staying conservative with their difficult-to-predict S&L segment guidance. PAA announced a $600MM asset sales target including the announced sale of Saddlehorn interests and a binding agreement for LA terminals totaling $300MM combined. The remaining $300MM is in advanced negotiations, and these sales offset a $300MM bolt-on acquisition of Felix MIdstream gathering. The sales should help our concerns about potential degradation of the balance sheet in 2020. We continue to think PAA's 2020 guidance looks very beatable, but we remain concerned that the company's very high recent spending level has not generated significant growth....yet.

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