Energy Companies Set to Report Soon
Damon is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Please look into these three energy-related companies reporting this week:
Helix Energy (NYSE: HLX)
Helix will release fourth-quarter results before the bell on Wednesday, Feb. 20. Earlier this month, the company completed the sale of its oil and gas operation, netting $620 million in cash. Proceeds will be used partly to pay down long-term debt. Additionally, the company has agreements it reached in October 2012 to sell its remaining pipelay construction vessels for $240 million. The final stage of these transactions is likely to be completed in July, 2013. Helix intends to focus on its well intervention and robotics businesses going forward. Its methodologies aim to facilitate the development of offshore reservoirs and maximization of revenues from lesser utilized oil and gas fields.
With a large proportion of its revenues stemming from the Gulf of Mexico, demand had been restrained since the 2010 BP oil spill. It is now realizing improved utilization. However, well intervention demand slipped to 81% from 99% in the September quarter. ROVs (robotics vehicles) meanwhile, generated slightly higher utilization in that period of 73%, versus 67% the year before.
In all, the transactions likely provide stability to the balance sheet and income statement. I continue to recommend the shares to investors willing to bear the lack of earnings visibility, as they may benefit from the reduced level of risk. Over the long run, the upside of the well and robotics operations are that the number of subsea wells being installed is increasing and that robotics service demand will probably rise along with drilling depths as the deepwater market expands further. Thus, HLX shares have long-term appreciation potential.
Energy Transfer Partners (NYSE: ETP)
The natural gas transporter transformed itself with a merger with Sunoco, the gasoline retailer and pipeline operator, on Oct. 5, 2012. It retained a 40% interest in Sunoco through a newly created holding company. Thus, when ETP reports earnings on Feb. 20, after the close of trading the financials will represent the first full quarter essentially including the Sunoco investment.
Analysts think share earnings were $0.42, but keep in mind that results here can be very erratic. One of the profit catalysts in its core business is natural gas prices, a metric down from previous levels. If prices bounce back, it would mean improved earnings from its Interstate Transportation and Storage segment. In fact, the company sells natural gas and natural gas liquids in the states of Texas, Louisiana, New Mexico, and West Virginia, with pipelines and storage units mostly based in Texas.
At this time, ETP Limited Partnership units are mainly a high-yield holding, about 7.6% to be precise. Those seeing capital gains should sit tight for now while the impact of the Sunoco purchase becomes more clear. Please also refer to my prior blog: “Five MLPs to Consider.”
Ensco plc (NYSE: ESV)
This oil and gas services provider plans to release earnings on Feb. 21. Analysts estimate share net of $1.28. Ensco is a stock I continue to like (again, see my previous blog) in light of its expanding proportion of deepwater revenues and strong footholds in potentially lucrative geographical markets.
Ensco’s Jan. 16 fleet status report shows most deepwater rigs, including many in the Gulf of Mexico and Brazil (primarily with state oil company Petrobras) being utilized at attractive dayrates. Its midwater and jackup equipment is substantially contracted, though there were some idle jackup rigs with Pemex in Mexico because of shipyard inspection. Jackups are used for drilling in lower-depth offshore waters. Should energy prices remain stable, 2013 should be another good year.
Looking longer term, Ensco’s rigs currently under construction are apt to assist bottom-line gains. These consist of six rigs, three of those scheduled to begin service in South Korea deepwater activities between the third quarter of this year and the fourth quarter of 2014. All told, the shares are a good holding for the near or long term.
Take the time to read the earnings reports for each of these companies, including two oilfield services providers and one pipeline owner/distributor. Their earnings all sway on oil and natural gas prices to various extents. Much of the positive outlook is founded on favorable conditions for drilling in the Gulf of Mexico and other regions. As for ETP, rising natural gas prices would facilitate a profit upturn and the addition of Sunoco would need to be a boost to its results.
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