Oil & Gas Stock Roundup: Weatherford Posts Q1 Loss, to Cut 10,000 Jobs - Analyst Blog

Overall, it was a bearish week for the sector. While West Texas Intermediate (WTI) crude futures edged down 0.3% to close at $57.15 per barrel, while natural gas prices slumped around 4% to $2.53 per million Btu (MMBtu). (See the last ‘Oil & Gas Stock Roundup’ here: Schlumberger, Halliburton Withstands Crude Slump to Q1 Beat.)

Oil prices fell for the first time in 6 weeks, spooked by the U.S. Energy Department's latest inventory release that showed another increase in crude stockpiles. To a large extent, this was offset by the Baker Hughes report that showed another drop in oil-directed rigs, indicating a brake in shale drilling activities. This is seen as a precursor to a slowdown in oil production leading to a subsequent drop in the commodity’s bloated supply level.

Natural gas fared even worse amid expectations of tepid heating demand with the imminent arrival of soft spring temperature.

Recap of the Week’s Most Important Stories

1.    Leading oilfield services firm Weatherford International Ltd. reported first-quarter 2015 adjusted loss of 4 cents per share, as against the Zacks Consensus Estimate of earnings of a penny. The underperformance was due to the significant decline in the North American land rig count and pricing pressures that broadly impacted all product lines in the U.S. and Canada.

As a result of the changing market conditions, Weatherford has now increased its 2015 reduction in force exercise to target 10,000 positions, in place of the previously announced 8,000, with the bulk of the increase being in North America. The company expects its current 18% headcount reduction goal for the year to leave it with about 39,000 employees in its core businesses and 6,000 rig employees. The company plans to complete the terminations by the end of the second quarter, generating expected annualized savings of $640 million. (See More: Weatherford Posts Loss in Q1, Misses on Revenues.)

2.    Independent natural gas operator Southwestern Energy Co. SWN reported in-line first quarter earnings as increased production growth was offset by lower price realizations.

During the reported quarter, the company’s oil and gas production grew 28% year over year to 233 billion cubic feet equivalent (Bcfe) driven by increased Appalachia production. The company’s average realized gas price for the quarter, including hedges, fell to $2.99 per thousand cubic feet (Mcf) from $4.19 per Mcf in the year-ago period. Oil was sold at $30.90 per barrel, down from the year-earlier level of $100.43 per barrel. Natural gas liquids were sold at $10.35 per barrel, down from $50.16 in the year-ago period. (See More: Southwestern Energy Q1 Earnings In Line, Revenues Miss)

3.    Oil drilling equipment maker Cameron International Corp. CAM reported strong first quarter earnings, propped up by robust performance from its ‘Subsea’ and ‘Drilling’ segments that reflected robust execution and cost control initiatives. In particular, the Subsea segment operating income jumped 97% year over year to $57 million, while that for the Drilling unit more than doubled to $135 million.

However, the company expects the ongoing oil price slump to impact its revenues and operating profit through receding orders. At the same time, the oil drilling equipment provider believes that its execution strength and good cost control skills will help withstand those challenges. (See More: Cameron International Q1 Earnings Beat on Strong Execution)

4.    Oilfield equipment manufacturer FMC Technologies Inc. FTI has reported another solid quarter in terms of earnings on the strength on its Subsea Technologies business. However, the company’s revenues failed to meet the Zacks Consensus Estimate. Weakness in the North American land market and stronger U.S. dollar affected the results.

The oil price plunge took its toll on FMC Technologies’ backlog, which fell to $5,507 million, significantly lower than the prior-year quarter level of $7,842.2 million. (See More: FMC Technologies Beats on Q1 Earnings, Revenues Lag)

5.    Oilfield service behemoth Halliburton Co. HAL is drawing attention from a wide range of companies for the assets it has put up for sale, according to an article from Bloomberg. Halliburton is selling the assets to support its merger with Baker Hughes BHI. The company had been asked by the U.S. Department of Justice to sell some of the overlapping business units as a prerequisite for the $36 billion mega-merger deal.

Per the source, a large number of firms from the manufacturing industry – General Electric Co., Caterpillar Inc., Honeywell International Inc., Dover Corp., Emerson Electric Co., Danaher Corp., Siemens – are considering the prospects of Halliburton’s assets. (See More: Halliburton Assets Up for Grabs, Who Will Buy?)

Price Performance

The following table shows the price movement of the major oil and gas players over the past week and during the last 6 months.

Company

Last Week

Last 6 Months

XOM

-0.21%

-8.51%

CVX

-0.28%

-6.34%

COP

-1.87%

-4.50%

OXY

-0.95%

-6.10%

SLB

+0.09%

-4.33%

RIG

-9.11%

-45.23%

VLO

+3.30%

+20.02%

TSO

+6.66%

+31.95%

Over the course of last week, refiner Tesoro Corp. TSO was the week's best performer among the market heavyweights, adding 6.7% to its stock price. With refiners being buyers of crude, depressed commodity price has triggered hopes for better margins. On the other hand, the biggest loser was offshore driller Transocean Ltd. RIG, which fell 9.1% during the period. With oil prices down 50% since June and energy companies cutting costs by scaling back drilling, the likes of Transocean is having to deal with less orders.

Over the last 6 months too, Tesoro has been the chief beneficiary on the bourses with its shares advancing 32%. Investors have rewarded the company for its continued focus on shareholder returns. On the other hand, Transocean was again the laggard, as it witnessed a 45.2% price decline over the same time frame on the back of rig oversupply that has led the industry into a cyclical downturn.

What’s Next in the Energy World?

Apart from the usual releases in this week – the U.S. government data on oil and natural gas – market participants will be closely tracking a series of crucial economic reports, including those on consumer spending and home sales.

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