Earnings season for the energy sector for the second quarter of 2012 continues this week with several large energy companies set to report financial results. Investors should pick through these reports and management commentary carefully to further assess the strength and direction of the current energy cycle, with particular attention towards conditions in North America.
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Marathon Oil (NYSE:MRO) reports before the market opens on Wednesday, Aug. 1, 2012, with analysts looking for earnings of 59 cents per share in the quarter, according to Yahoo! Finance (Nasdaq:YHOO). The company will hold a conference call later that day and investors should look for commentary on the company's operations in various onshore areas in the United States to help gauge the strength of the current onshore drilling cycle.
Also reporting that day will be Phillips 66 (NYSE:PSX), with analysts expecting earnings of $1.77 per share. This will be the company's first report as a separate company after being spun off by Conoco Phillips (NYSE:COP) earlier in 2012.
Murphy Oil (NYSE:MUR) reports after the market closes on Wednesday, with a consensus earnings estimate of $1.33 per share. The company is a diversified oil and gas company with operations in Malaysia, the Gulf of Mexico and the onshore U.S. It may have insightful commentary on conditions in the Eagle Ford Shale, where it has an extensive development program.
Other important large capitalization exploration and production companies reporting this week will be Anadarko Petroleum (NYSE:APC) and Comstock Resources (NYSE:CRK) which report after the market closes on Monday, Jul. 30, 2012. The market is expecting earnings of 77 cents and 34 cents, respectively.
SEE: Oil And Gas Industry Primer
Devon Energy (NYSE:DVN) reports earnings before the market opens on Wednesday, Aug. 1, 2012, with analysts estimating earnings per share of 81 cents. Devon Energy is active in five New Venture plays in the onshore U.S. and the market will be focused on any new disclosures on these areas.
Most of the major oil services companies have already reported, but investors will still see some volatility this week with Superior Energy Services (NYSE:SPN) set to report on Jul. 30, 2012, after the market closes, followed by Oil States International (NYSE:OIS) the next day. The consensus estimates for these two companies are 82 cents and $1.87 per share, respectively.
Last Week Recap
Earnings season for the second quarter of 2012 began last week on an optimistic note for the energy sector as Halliburton (NYSE:HAL) beat analysts' estimates for the second quarter, on the continued strength of the company's international business. In the U.S., Halliburton reported pricing pressure in its hydraulic fracturing business, but stable pricing in other oil service lines.
SEE: Uncovering Oil And Gas Futures
Mergers and Acquisitions
Last week saw a major acquisition in the Energy sector as CNOOC Ltd. (NYSE:CEO), announced the purchase of Nexen (NYSE:NXY) for $27.50 per share in cash. The deal price represented a 61% premium for Nexen, and was yet another purchase of oil and gas assets by a Chinese oil company.
The industry also continued to discover new supplies of oil and gas with Chevron Corporation (NYSE:CVX) reporting a successful natural gas well in Australia. The Pontus-1 exploration well found 97 feet of net gas pay and will be tied into the company's huge Gorgon project at a later date.
TransCanada (NYSE:TRP) reported receiving the final regulatory permit for the southern part of the Keystone XL pipeline. This part of the pipeline will transport crude oil in Texas and Oklahoma and is part of the larger pipeline designed to bring Canadian crude oil down to the U.S.
SEE: The Keystone XL Pipeline Explained
The Bottom Line
This week will be another volatile one for energy investors as a number of important oil services and exploration and production companies are set to report earnings for the second quarter of 2012. Investors should use the volatility to reassess their investment thesis on the sector and adjust positions accordingly.
At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.