Feb 13: EQT Corp. (EQT) will be reporting Q4 results after the markets close.
> Per First Call (Reuters) Revenues are expected to be $1.57 Billion (my forecast of $1.472 billion does not include mark-to-market gain on their hedges, which should be significant).
> First Call's Adjusted earnings per share forecast is $0.52 for the quarter and $2.36 for the year. < My forecast is $0.36 Adjusted EPS for Q4.
> EQT is a large-cap "gasser". My forecast is that total production for the 4th quarter will be ~5,978,000 Mcfepd (94.9% dry gas, 4.6% NGLs and just 0.5% crude oil).
> My revenue and EPS forecasts are based on a realized dry gas price of $2.56/mcf, including the cash settlements paid to them on their hedges.
> For Q4, I expect EQT to report operating cash flow of ~$689 million, with free cash flow of approximately $140 million, depending on their D&C capex spending during the quarter. TipRanks' CFPS forecast for Q4 is $1.68, which is slightly higher than my forecast.
TipRanks: "In the last 3 months, 11 ranked analysts set 12-month price targets for EQT. The average price target among the analysts is $45.18. The 11 price targets range from $39 to $51."
Things to focus on:
> Update on how the assets from Tug Hill & XcL that were acquired on 8/22/2023 are doing.
> Production forecast for Q1 2024. How much did weather (well freeze offs in January) impact production?
> Capital program for 2024 and their full year production forecast. My 2024 forecast is based on production of 6,014,700 mcfepd, flat in first half of the year with a small ramp up into Q4.
> Update on Mountain Valley pipeline expected completion date.
> Overall outlook on natural gas and NGL markets and prices.
> Update on hedges in place for 2024 and 2025.
S-16 that will report Q4 results this week
S-16 that will report Q4 results this week
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: S-16 that will report Q4 results this week
Feb 14: Magnolia Oil & Gas (MGY) is expected to announced Q4 results and 2024 outlook after the markets close on Wednesday.
> My forecast is that MGY will report $321 million of revenues for Q4, Adjusted Net Income of approximately $116 million, $0.63/share. First Call's forecasts are $329 million of revenues, $0.53 Earnings per share.
> Operating cash flow should be approximately $233 million for Q4, $868 million for the full year 2023. < Free cash flow s/b over $435 million for the year. MGY uses FCF to pays dividends ($0.13/quarter), buyback stock and make bolt-on acquisitions in their two core areas.
> MGY's production guidance for Q4 was 85,000 Boepd, which is an increase of 2,349 Boepd over Q3 production.
> I expect Q4 production mix to be approximately 40% crude oil, 28% NGLs and 32% natural gas. < 89% of revenues are from liquid sales.
> MGY was expected to close a bolt-on acquisition within their Giddings area during December, but I have not seen an actual closing date. It was expected to add ~5,000 Boepd of production (~70% oil) and additional development drilling locations. < The Effective Date was early in Q4, so a late closing date really does not impact cash flow.
> None of their Q4 production was hedged.
TipRanks: "In the last 3 months, 8 ranked analysts set 12-month price targets for MGY. The average price target among the analysts is $24.71. The 8 price targets range from $18 to $32."
Things to focus on:
> When did the Giddings bolt-on acquisition close?
> Any weather-related operational issues in Q1?
> Update on stock buyback plan, which has been significant. Lowering outstanding stock from 215 million in 2022 to 185.6 million at 9-30-2023. Aggressive stock buybacks can have a material impact on my stock valuation.
> Well results in Q4.
> Do they plan to hedge any production in 2024 or 2025?
> Capital program for 2024, which I expect to be under $500 million and focus drilling on more oil prone areas.
> MGY has generated steady production growth of 14.1% in 2022 and ~9% in 2023.
From Feb 5 press release:
"The increase in the dividend is supported by our record of executing on our strategy and improving the business in 2023, during which Magnolia’s total production grew 9 percent and our share repurchase activities reduced our outstanding shares 4 percent," said Chris Stavros, Magnolia’s President and CEO. "Magnolia’s principles of maintaining low leverage with disciplined capital spending, generating modest annual production growth and sustaining high pre-tax margins delivers steady and consistent free cash flow. This strategy improves Magnolia’s dividend per share payout capacity, allowing for above average and consistent annual dividend growth that is superior to that of our peers. Importantly, Magnolia’s dividend is secure at significantly lower product prices, which will appeal to long-term investors who value dividend safety through commodity cycles. Delivering a sustainable, safe and growing dividend is a key component of Magnolia’s total shareholder return strategy."
> My forecast is that MGY will report $321 million of revenues for Q4, Adjusted Net Income of approximately $116 million, $0.63/share. First Call's forecasts are $329 million of revenues, $0.53 Earnings per share.
> Operating cash flow should be approximately $233 million for Q4, $868 million for the full year 2023. < Free cash flow s/b over $435 million for the year. MGY uses FCF to pays dividends ($0.13/quarter), buyback stock and make bolt-on acquisitions in their two core areas.
> MGY's production guidance for Q4 was 85,000 Boepd, which is an increase of 2,349 Boepd over Q3 production.
> I expect Q4 production mix to be approximately 40% crude oil, 28% NGLs and 32% natural gas. < 89% of revenues are from liquid sales.
> MGY was expected to close a bolt-on acquisition within their Giddings area during December, but I have not seen an actual closing date. It was expected to add ~5,000 Boepd of production (~70% oil) and additional development drilling locations. < The Effective Date was early in Q4, so a late closing date really does not impact cash flow.
> None of their Q4 production was hedged.
TipRanks: "In the last 3 months, 8 ranked analysts set 12-month price targets for MGY. The average price target among the analysts is $24.71. The 8 price targets range from $18 to $32."
Things to focus on:
> When did the Giddings bolt-on acquisition close?
> Any weather-related operational issues in Q1?
> Update on stock buyback plan, which has been significant. Lowering outstanding stock from 215 million in 2022 to 185.6 million at 9-30-2023. Aggressive stock buybacks can have a material impact on my stock valuation.
> Well results in Q4.
> Do they plan to hedge any production in 2024 or 2025?
> Capital program for 2024, which I expect to be under $500 million and focus drilling on more oil prone areas.
> MGY has generated steady production growth of 14.1% in 2022 and ~9% in 2023.
From Feb 5 press release:
"The increase in the dividend is supported by our record of executing on our strategy and improving the business in 2023, during which Magnolia’s total production grew 9 percent and our share repurchase activities reduced our outstanding shares 4 percent," said Chris Stavros, Magnolia’s President and CEO. "Magnolia’s principles of maintaining low leverage with disciplined capital spending, generating modest annual production growth and sustaining high pre-tax margins delivers steady and consistent free cash flow. This strategy improves Magnolia’s dividend per share payout capacity, allowing for above average and consistent annual dividend growth that is superior to that of our peers. Importantly, Magnolia’s dividend is secure at significantly lower product prices, which will appeal to long-term investors who value dividend safety through commodity cycles. Delivering a sustainable, safe and growing dividend is a key component of Magnolia’s total shareholder return strategy."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: S-16 that will report Q4 results this week
Antero Resources (AR) and Antero Midstream (AM) will also be announcing Q4 results and 2024 guidance after the markets close on Feb 14. I will be updating my forecast/valuation models for both of them on Thursday.
AR is a large-cap "Gasser", but it also sells a lot of NGLs. I expect AR's Q4 Adjusted Net Income to beat First Call's current EPS forecast of $0.21 for the quarter. The Company's Reported Net Income (GAAP) should include a big mark-to-market gain on their hedges. Rising propane prices ($0.92/gallon at the time of his post) and their hedging program should keep AR free cash flow positive in 2024, but I still hope that the tap the brakes on this year's drilling program.
AM is a midstream company in our High Yield Income Portfolio. Its growth is tied to AR's production growth. AM's dividend of $0.225/quarter ($0.90/Yr) should be sustainable if AR just holds production flat.
1H 2024 will be tough for AR and all of the gassers, but there is light at the end of this tunnel.
TipRanks: "In the last 3 months, 8 ranked analysts set 12-month price targets for AR. The average price target among the analysts is $27.88. The 8 price targets range from $26 to $32, with the 2 most recent reports from Jefferies and Tudor Pickering both rating AR a BUY with $32 price targets."
AR is a large-cap "Gasser", but it also sells a lot of NGLs. I expect AR's Q4 Adjusted Net Income to beat First Call's current EPS forecast of $0.21 for the quarter. The Company's Reported Net Income (GAAP) should include a big mark-to-market gain on their hedges. Rising propane prices ($0.92/gallon at the time of his post) and their hedging program should keep AR free cash flow positive in 2024, but I still hope that the tap the brakes on this year's drilling program.
AM is a midstream company in our High Yield Income Portfolio. Its growth is tied to AR's production growth. AM's dividend of $0.225/quarter ($0.90/Yr) should be sustainable if AR just holds production flat.
1H 2024 will be tough for AR and all of the gassers, but there is light at the end of this tunnel.
TipRanks: "In the last 3 months, 8 ranked analysts set 12-month price targets for AR. The average price target among the analysts is $27.88. The 8 price targets range from $26 to $32, with the 2 most recent reports from Jefferies and Tudor Pickering both rating AR a BUY with $32 price targets."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: S-16 that will report Q4 results this week
Comstock Resources (CRK) is going to announce Q4 results after the markets close today.
It is going to be interesting to see how the market reacts because their Q4 results should be quite good since HH ngas did average more than $3.00 during Q4.
My forecast is for Adjusted Net Income to be close to $56.7 million ($0.20/share), compared to First Call's EPS forecast of $0.13.
Reported Net Income (GAAP) will include a large mark-to-market gain on their hedges.
Analysts will want to hear Comstock say that they are going to tap the brakes on their aggressive drilling program. I sure would not be completing those high IP rate Haynesville wells with gas selling under $2.00.
It will be interesting to hear the update on the Western Haynesville. They should have all the good leasehold tied up by now.
Today Neal Dingmann at Truist Financial lowered his price target by $1 to $9 per share.
Comstock is the most highly exposed upstream to natural gas prices.
> In 2022 they generated $1,705,807 ($7.23/share) net of preferred stock dividends, when their realized natural gas price was $4.50/mcf.
Keep in mind that Comstock has a solid balance sheet and no near-term debt problems. At the current NYMEX strip prices for HH ngas ($2.28/mcf), Comstock should generate over $700 million of operating cash flow.
It is going to be interesting to see how the market reacts because their Q4 results should be quite good since HH ngas did average more than $3.00 during Q4.
My forecast is for Adjusted Net Income to be close to $56.7 million ($0.20/share), compared to First Call's EPS forecast of $0.13.
Reported Net Income (GAAP) will include a large mark-to-market gain on their hedges.
Analysts will want to hear Comstock say that they are going to tap the brakes on their aggressive drilling program. I sure would not be completing those high IP rate Haynesville wells with gas selling under $2.00.
It will be interesting to hear the update on the Western Haynesville. They should have all the good leasehold tied up by now.
Today Neal Dingmann at Truist Financial lowered his price target by $1 to $9 per share.
Comstock is the most highly exposed upstream to natural gas prices.
> In 2022 they generated $1,705,807 ($7.23/share) net of preferred stock dividends, when their realized natural gas price was $4.50/mcf.
Keep in mind that Comstock has a solid balance sheet and no near-term debt problems. At the current NYMEX strip prices for HH ngas ($2.28/mcf), Comstock should generate over $700 million of operating cash flow.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: S-16 that will report Q4 results this week
My take on CRK: There is a massive shortfall in DUCs. If my reading is correct they actually turned more wells to sales than they drilled in the quarter. The growing debt may lead to an appointment of BOD and officers to the Obiden Treasury Department. My sense is they may be bumping up to the 3.5 debt to EBITDA threshold in Q1 of 2024. Sadly they are complicit in the self inflicted pain to the natural gas companies.
Re: S-16 that will report Q4 results this week
Comstock
“How did you go bankrupt?"
Two ways. Gradually, then suddenly.”
― Ernest Hemingway, The Sun Also Rises
“How did you go bankrupt?"
Two ways. Gradually, then suddenly.”
― Ernest Hemingway, The Sun Also Rises
crk very concerning!
I think the balance sheet is weak for crk
Negative FCF
Realized price in q4 was only 2.51 after hedging
Enterprise value
equity 277 m shares o/s at 7 = 1,939
Debt 2,699
Total 4,638
Required FCF for 10 % 464
Actual FCF q4 ................... -120 m
For the year ................... -567
q 4 cap ex 350 m
Production q4 121 bcf
Since production was 121 and FCF was negative -120 they need another $1 to break even FCF
Realized price was 2.51 + 1 they need 3.51 to break even and another $ 1 to make 10 % on enterprise value 4.50. Using
Conclusion they are not profitable until NG is 3.50 or better. Q1 is 1.75. They are screwed unless prices improve
Finally, they may have a covenant problem. Can't be more than 3.5 x , they are at 2.9 x. 2799/35 = 771 LTM required. They are 928. In q1 2024, q1 2023 drops off and replace with q1 2024. they will be down 120 m just on q1 prices..very very bad..ebitda last year q1 was 293. next qtr i estimate 136 down 157 m. 928 less 157= 771 right at the limit
Negative FCF
Realized price in q4 was only 2.51 after hedging
Enterprise value
equity 277 m shares o/s at 7 = 1,939
Debt 2,699
Total 4,638
Required FCF for 10 % 464
Actual FCF q4 ................... -120 m
For the year ................... -567
q 4 cap ex 350 m
Production q4 121 bcf
Since production was 121 and FCF was negative -120 they need another $1 to break even FCF
Realized price was 2.51 + 1 they need 3.51 to break even and another $ 1 to make 10 % on enterprise value 4.50. Using
Conclusion they are not profitable until NG is 3.50 or better. Q1 is 1.75. They are screwed unless prices improve
Finally, they may have a covenant problem. Can't be more than 3.5 x , they are at 2.9 x. 2799/35 = 771 LTM required. They are 928. In q1 2024, q1 2023 drops off and replace with q1 2024. they will be down 120 m just on q1 prices..very very bad..ebitda last year q1 was 293. next qtr i estimate 136 down 157 m. 928 less 157= 771 right at the limit
Re: S-16 that will report Q4 results this week
Maybe JJ will want to sell his 80% to you, Fraser.
crk comments
Will he take iou.
First thing I do
1. fire mgt
2 stop adding land, they cant drill on what they got
3. shut in wells
4. cash out hedges
5 Hire Aegis, Their hedging sucks. They locked in low prices , then ng soared to 10.00. Then when it was 10, they didnt lock in and rode it to 1.60
Beg of 2023, thy said they would live to cash flow they didnt
Todays call they said the same thing. there is no way in hell they wont have to borrow this year
Some analyst picked up on the covenant issue I previously mentioned
Phillips Johnston
Hey, guys. Thanks. My first question is on your 3.5 times max leverage ratio covenant. At current strip prices, our model shows that you might be close to reaching that later this year, would you also see that as a possible risk, and if so, how easy would that -- how easy would it be to get a waiver from the banks?
Answer Roland Burns
We don't see that. So we don't think that we come that close to that, Phillips. So I think we just continue to monitor our spending level and not use much more of the credit facility.
That's an out right lie with current prices. I don't respect Burns
How can he say that, they were - 120 m last qtr and current prices are 1 buck lower
Another great question here
Charles Meade
I look at the futures curve here, and we don't get up two bucks until July, and so from my seat, it looks to me like the right number of completion crews to be running right now for at least the next several months is zero. And I recognize that's not a realistic case, but can you bridge the pieces -- to kind of bridge the view -- it looks like the right number is zero, but why the right number for you guys is 1.7 or one to two for the next several months?
So they are rushing to sell ng at 1.60, late in year its over 3, wtf is the rush? Shut it in and sell it later
First thing I do
1. fire mgt
2 stop adding land, they cant drill on what they got
3. shut in wells
4. cash out hedges
5 Hire Aegis, Their hedging sucks. They locked in low prices , then ng soared to 10.00. Then when it was 10, they didnt lock in and rode it to 1.60
Beg of 2023, thy said they would live to cash flow they didnt
Todays call they said the same thing. there is no way in hell they wont have to borrow this year
Some analyst picked up on the covenant issue I previously mentioned
Phillips Johnston
Hey, guys. Thanks. My first question is on your 3.5 times max leverage ratio covenant. At current strip prices, our model shows that you might be close to reaching that later this year, would you also see that as a possible risk, and if so, how easy would that -- how easy would it be to get a waiver from the banks?
Answer Roland Burns
We don't see that. So we don't think that we come that close to that, Phillips. So I think we just continue to monitor our spending level and not use much more of the credit facility.
That's an out right lie with current prices. I don't respect Burns
How can he say that, they were - 120 m last qtr and current prices are 1 buck lower
Another great question here
Charles Meade
I look at the futures curve here, and we don't get up two bucks until July, and so from my seat, it looks to me like the right number of completion crews to be running right now for at least the next several months is zero. And I recognize that's not a realistic case, but can you bridge the pieces -- to kind of bridge the view -- it looks like the right number is zero, but why the right number for you guys is 1.7 or one to two for the next several months?
So they are rushing to sell ng at 1.60, late in year its over 3, wtf is the rush? Shut it in and sell it later