QEP Resources (QEP) Stock Marches Higher On Earnings

QEP Resources Inc (NYSE: QEP) is making a run for the top in the market this morning, trading on gains of more than 60%. While the oil and energy sector seems to be in the green as a whole, this stock is definitely outperforming its peers so far today as investors react to the company’s financial results. Here’s what’s going on:

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QEP Stock Heads Up On Quarterly Results

In the press release issued late last night, QEP Resources said it generated net income of $367.4 million in the first quarter. That works out to $1.54 per share, showing vast improvement over the loss of $0.49 per share in the first quarter of 2019.

The company said that the gain in net income was primarilly due to a $631.6 million increase in realized and unrealized derivative gains, which was partially offset by a $178.3 million increase in income tax expense.

In the first quarter, QEP said that adjusted EBITDA came in at $173.9 million for the quarter. That figure showed strong year over year growth from $119.8 million.

Importantly, given current market conditions as a result of the COVID-19 pandemic, the company is making several moves. First and foremost, it has reduced drilling activity to one rig in the Permian Basin for the remainder of the year. The company has also suspended all completion operations in the Permian Basin until at least 2020.

Moreover, refrac and other non-essential operations have been ceased in the Willston Basin for the remainder of the year and the company increased its remaining 2020 hedge position to 13.1 million barrels of oil at an average price of $56.50 per barrel.

In a statement, Tim Cutt, President and CEO At QEP, had the following to offer:

The novel coronavirus disease (COVID-19) has created unprecedented challenges for our industry, customers and employees. We took swift and decisive action to reduce activity in the face of rapidly deteriorating market conditions, reducing drilling and completion activity across both of the basins in which we operate. These steps prioritize profitability and financial discipline over production growth and help to ensure the business delivers Free Cash Flow, while also preserving liquidity, even at historically low commodity prices in 2020.

We believe the initiatives we have undertaken over the last 18 months to optimize our business, including lowering operating and G&A expense and focusing on Free Cash Flow generation, will enable us to successfully navigate the current environment and emerge as a stronger company. While we realize there is more work to do, we are confident that we are well positioned for success due to our quality of inventory, strong base of production, top-tier cost structure and committed workforce. I would like to acknowledge our entire team for their continued support during these challenging times.

The Bottom Line

The bottom line here is that while the first quarter has been a rough time for the oil industry, QEP actually seemed to do relatively well. The company saw strong growth in net income and made key moves to reduce expenses through the market lull. All in all, the company seems to be making all of the right moves at all of the right times, and that’s exciting to investors!

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