The Zacks Analyst Blog Highlights:Stone Energy, McGraw-Hill Financial, Exxon Mobil, Chevron and Matador Resources
CHICAGO, Sept. 27, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Stone Energy Corp. (NYSE: SGY-Free Report), McGraw-Hill Financial Inc. (NYSE: MHFI-Free Report), Exxon Mobil Corp. (NYSE: XOM-Free Report), Chevron Corp. (NYSE: CVX-Free Report) and Matador Resources Co. (NYSE: MTDR-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Thursday's Analyst Blog:
Stone Energy Upped to Strong Buy
Zacks Investment Research upgraded independent oil and gas explorer, Stone Energy Corp. (NYSE: SGY-Free Report) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Stone Energy is well placed in the industry with a widespread and high-yielding inventory. Earlier this month, the company provided an update on the deepwater Taggart prospect, including the exploratory well drilled at Mississippi Canyon 816. It has completed drilling operations in the project.
The company announced a discovery on the Taildancer prospect at Ship Shoal 113, with the well encountering 130 feet of net oil and gas pay. Also, a rig for the deepwater San Marcos prospect at Mississippi Canyon 983 has begun drilling. Stone Energy holds a holds a 25% working interest in the prospect.
The company raised the third quarter production guidance from 42–45 million barrels of oil equivalent (Mboe) per day to 46–49 Mboe per day whereas the full-year guidance has been increased from 41–44 Mboe per day to 43.5–45.0 Mboe per day.
The company's confidence in its operations can also be seen by way of its increased capex budget for 2013 – from $650 million to $710 million. Stone Energy is looking for growth and development with a major portion of the budget focused on the Gulf of Mexico deepwater shelf.
The second quarter results also paint a positive picture for Stone Energy with earnings of 78 cents per share increasing 25.8% from the year-earlier profit of 62 cents. Total operating revenue of $245.9 million was also up 8.5% year over year. Moreover, this exploration and production company has delivered an average surprise of 23.79% in the past four quarters.
The Zacks Consensus Estimate for the third quarter has moved up 2 cents (or 2.8%) to 74 cents over the last 60 days. The Zacks Consensus Estimate for the full year is currently pegged at $3.01, after moving up 14 cents (or 4.9%) in the same time frame.
Crude Tumbles on Bearish Supply Report
The U.S. Energy Department's weekly inventory release showed that crude stockpiles logged a surprise increase, as imports climbed and refiners scaled down their utilization rates. The report further revealed that within the 'refined products' category, gasoline stocks rose, while distillate supplies were down from the week-ago level.
The bearish crude data from the U.S. government, together with uncertainty looming over Federal Reserve's decision to tape the bond purchase program, pulled down the commodity below $103 a barrel.
About the Weekly Petroleum Status Report
The Energy Information Administration (EIA) Petroleum Status Report, containing data of the previous week ending Friday, outlines information regarding the weekly change in petroleum inventories held and produced by the U.S., both locally and abroad.
The report provides an overview of the level of reserves and their movements, thereby helping investors understand the demand/supply dynamics of petroleum products. It is an indicator of current oil prices and volatility that affect the businesses of the companies engaged in the oil and refining industry.
Analysis of the Data
Crude Oil: The federal government's EIA report revealed that crude inventories climbed 2.64 million barrels for the week ending Sep 20, 2013, following a decrease of 4.37 million barrels in the previous week.
The analysts surveyed by Platts – the energy information arm of McGraw-Hill Financial Inc. (NYSE: MHFI-Free Report) – had expected crude stocks to go down some 1.5 million barrels. A sharp uptick in the level of imports and drop in refinery utilization rates led to the surprise stockpile build-up with the world's biggest oil consumer even as domestic production fell from their highest level since 1989.
However, crude inventories at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – were down 412,000 barrels from the previous week's level to 32.85 million barrels. Stocks are currently at their lowest since Feb last year and 36.7% under the all-time high of 51.86 million barrels reached in Jan.
Despite the first inventory increase in 4 weeks, at 358.26 million barrels, current crude supplies are down 1.9% from the year-ago period, though it is still close to the upper limit of the average for this time of the year. The crude supply cover was up from 22.3 days in the previous week to 22.6 days. In the year-ago period, the supply cover was 25.0 days.
Gasoline: Supplies of gasoline were up for the second time in 3 weeks, as domestic consumption weakened. This was partially offset by lower imports and production.
The paltry 217,000 barrels gain – contrary to analysts' projections for a 1.5 million-barrels decrease in supply level – took gasoline stockpiles up to 216.24 million barrels. Following this build, the existing inventory level of the most widely used petroleum product is 10.4% higher than the year-earlier level and is in the top half of the average range.
Distillate: Distillate fuel supplies (including diesel and heating oil) were down 234,000 barrels last week, significantly lower than analysts' expectations for a 1 million barrels fall in inventory level. The decrease in distillate fuel stocks – the second in as many weeks – could be attributed to lower production, somewhat negated by weak demand and higher imports.
At 130.86 million barrels, distillate supplies are 2.4% above the year-ago level but is close to the lower limit of the average range for this time of the year.
Refinery Rates: Refinery utilization was down 2.2% from the prior week to 90.3%.
Stocks to Consider
Despite concerns, with spot crude price staying strong – at around $103 a barrel – brokerage analysts are likely to upgrade their forecasts on oil-weighted companies and related support plays, leading to positive estimate revisions.
While all crude-focused stocks – including behemoths like Exxon Mobil Corp. (NYSE: XOM-Free Report) and Chevron Corp. (NYSE: CVX-Free Report) – stand to benefit from rising commodity prices, companies in the exploration and production (E&P) sector are the best placed, as they will be able to extract more value for their products.
In particular, one can look at Matador Resources Co. (NYSE: MTDR-Free Report) – a small-cap, undervalued E&P player – as a good buying opportunity. Dallas TX-based Matador Resources, sporting a Zacks Rank #1 (Strong Buy), with current focus on the high-return Eagle Ford shale formation in South Texas, is expected to witness earnings growth of an astounding 394% in 2013.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
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