Independent oil & gas operator WPX Energy Inc. WPX reported a loss of 11 cents per share in the second quarter of 2015, a penny wider than the Zacks Consensus Estimate of a loss of 10 cents. The company had reported earnings of 3 cents per share in the year-ago quarter.

The reported quarter was primarily affected by significantly lower commodity prices and a net unrealized derivative loss related to WPX Energy’s hedging positions.

On a GAAP basis, WPX Energy reported a loss of 14 cents per share compared with 66 cents per share in the year-ago quarter. The difference between the GAAP and operating figures in the reported quarter was due to unrealized mark-to-market gains, gains and losses on asset sales, impairments, contract termination and early rig release expenses, severance and relocation costs, and acquisition costs.

Total Revenue

WPX Energy’s quarterly revenues of $284 million lagged the Zacks Consensus Estimate of $560 million by 49.3%. Total revenues were lower than the year-ago figure of $727 million by 60.9%.

Highlights of the Release

Total average daily production in the second quarter was 989 million cubic feet equivalent per day (MMcf/d), down 4.9% from 1,040 MMcf/d in the year-ago quarter. However, accounting for 108 MMcfe/d of Piceance and Marcellus divested volumes, WPX’s overall equivalent volumes would have increased 6% year over year in the reported quarter.

Oil production shot up 38.0%, while natural gas trended down nearly 15%.

Total expenses were $290 million, down 68.6% from the year-ago level of $925 million.

Interest expenses in the reported quarter were $32 million, increasing 14.3% from $28 million in the year-ago quarter.

Realized Prices

Realized oil prices in the quarter were $48.60 per barrel, down 45.5% from $89.24 per barrel in the year-ago quarter. Realized prices for natural gas liquids were down 59.0% to $13.76 per barrel from $33.58 per barrel in the year-ago quarter.

Natural gas price realization was down 43.2% year over year to $2.08 per thousand cubic feet (Mcf) from $3.66 per Mcf in the year-ago quarter.

Financial Update

WPX Energy had $317 million of cash and cash equivalents as of Jun 30, 2015, compared with $41 million at the end of 2014. The significant increase was due to proceeds from the sale of some Marcellus Shale assets.

Long-term debt as of Jun 31, 2015, was $2,000 million, down from $2,280 million as of Dec 31, 2014.

Net cash from operating activities in the first half was $430 million compared with $520 million in the first half of 2014.

Guidance

The company raised its 2015 total production guidance to a range of 163–168Mboe/d from the earlier estimate of 152–160Mboe/d. The new guidance takes into account synergies from the pending acquisition of RKI Exploration & Production.

WPX Energy raised its capital expenditure guidance to a band of $825–$925 million from $675–$775 million earlier. The anticipated increase in capital activity in the Permian Basin led to the upward revision in the guidance.

Other Company Releases

Murphy Oil Corporation MUR reported a second-quarter 2015 loss of 48 cents per share, narrower than the Zacks Consensus Estimate of a loss of 54 cents. This amounted to a positive surprise of 11.1%.

Noble Energy, Inc. NBL reported adjusted earnings of 26 cents per share in the second quarter of 2015, surpassing the Zacks Consensus Estimate by 333.3%

Anadarko Petroleum Corporation APC reported second-quarter 2015 adjusted earnings of 1 cent per share. The Zacks Consensus Estimate was at a loss of 54 cents.

Our View

WPX Energy like other oil and gas players in the space has suffered from the ongoing softness in commodity prices.

The company expects to maximize returns and margins by scaling down its historically gas-weighted portfolio to make room for more oil production and oil inventory. The acquisition of RKI Exploration & Production will give WPX Energy entry into the oil rich Permian Basin.

A significant presence in several oil rich basins and ability to lower operating expenses will help the company to improve its performance over the long term.

WPX Energy has a Zacks Rank #2 (Buy).

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