The majority of companies in the energy sector have reported earnings for the third quarter of 2012 and the wide range of results have caused even more price volatility than usual in this part of the market.
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Third Quarter of 2012
Chesapeake Energy (NYSE:CHK) disappointed investors when the company announced that some of its planned asset divestitures would be delayed until 2013. The company is in the midst of a program to reduce leverage with the goal of achieving a net long-term debt level of $9.5 billion by the end of 2012. Chesapeake Energy now expects to reach this level by early 2013.
Kodiak Oil and Gas (NYSE:KOG) is a pure play on the Bakken and Three Forks formations in the Williston Basin and recently reduced guidance on oil and gas production for 2012. The company now expects production to average from 15,500 to 17,500 barrels of oil equivalent (BOE) per day in 2012. Although this guidance is down considerably from the previous range of 17,000 to 21,000 BOE per day, Kodiak Oil and Gas is still growing rapidly and expects to exit 2012 producing 27,000 BOE per day.
Investor reaction to the lowered production guidance range was further aggravated by an increase in expected capital spending for 2012. Kodiak Oil and Gas has spent $576 million during the first three quarter of 2012, compared to its original full-year guidance of $585 million. The company now expects 2012 capital spending to reach $750 million.
Exxon Mobil (NYSE:XOM) reported capital spending of $27.4 billion during the first nine months of 2012, a record level for the company. Despite this spending, the company reported a year-over-year oil and gas production decline of 7.5% from the third quarter of 2011. Even after Exxon Mobil adjusted the growth to exclude the impact of entitlement volumes, OPEC quota effects and divestments, production declined 3%.
SEE: A Guide To Investing In Oil Markets
Several large capitalization exploration and production companies are set to release earnings this week for the third quarter of 2012. EOG Resources (NYSE:EOG) will report on Monday, Nov. 5, after the market closes and hold a conference call the following morning. Analysts are looking for earnings of $1.12 per share for the company.
Devon Energy (NYSE:DVN) will hold its conference call to discuss third quarter earnings on Wednesday, Nov. 7. Consensus estimates for Devon Energy are for earnings of $0.68 per share.
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Ultra Petroleum (NYSE:UPL) is focused on the Marcellus Shale and the Pinedale field in Wyoming and has been exploring other formations present on its extensive footprint in the Appalachian Basin. The company put into production two wells in Pennsylvania drilled into the Upper Devonian Geneseo shale. Ultra Petroleum has participated in five gross wells to date in the Geneseo shale and expects this formation to be commercially viable across much of its leasehold in Pennsylvania.
The Bottom Line
Earnings season for the energy sector for the third quarter of 2012 comes to an end this week and as expected, the group has its share of winners and losers, and this has created extra price volatility for investors to deal with.
At the time of writing, Eric Fox did not own any shares in any company mentioned in this article.