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This Was a Huge Week for Energy Stocks

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Higher oil prices and better-than-expected fourth-quarter results fueled 25%, or higher, rallies in Continental Resources, McDermott International, Encana, Helix Energy Solutions, and Chesapeake Energy.

Published in: Economy & Finance
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This Was a Huge Week for Energy Stocks

  1. This Was a Huge Week for Energy Stocks f Image Source: Copyright © Encana Corporation. All rights reserved.
  2. The price of crude rebounded this week due to a growing ease by the market that supplies were starting to get under control. That's partially due to the draconian capital spending cuts being made by oil producers this year, with many cutting spending so steeply it will cause significant year-over-year production declines. On top of that, this was the peak week of earnings season for the energy sector, which also fueled a lot of investor activity. Add it all up, and for the most part energy stocks rocketed higher this week. Leading the way, according to S&P Capital IQ data, were Continental Resources (NYSE: CLR), McDermott International (NYSE: MDR), Encana (NYSE: ECA), Helix Energy Solutions (NYSE: HLX), and Chesapeake Energy (NYSE: CHK).
  3. What: Encana (NYSE: ECA) jumped 26% this week.
  4. So What:  Key driver: Fourth-quarter results and 2016 guidance  Encana earned $0.13 per share during the fourth-quarter, which was $0.12 per share above the consensus estimate  The company announced a revamped 2016 capex budget, which is 55% lower than last year, but will have a minimal impact on production from its initial guidance
  5. Now What:  The company also announced a 20% workforce reduction and cut its quarterly dividend from $0.07 per share to $0.015 per share  Key takeaway: Investors like the fact that Encana is getting serious about cost reductions
  6. What: Continental Resources (NYSE: CLR) jumped 28% this week.
  7. So What:  Key driver: Fourth-quarter results  Continental Resources reported a loss of $0.23 per share, which missed the consensus estimate by $0.02 per share.  Production growth, however, was strong, up 16% year-over-year for the quarter
  8. Now What:  The company reiterated its 2016 guidance, which will see it cut spending by 66% and allow its production to fall by 10%  The company said that, if needed, additional spending cuts would be made  Key takeaway: Investors saw progress and a company that is making the tough choices needed to survive the downturn
  9. What: Helix Energy Solutions (NYSE: HLX) leapt 30% this week.
  10. So What:  Key driver: Fourth-quarter results  Helix reported a loss of $0.06 per share, which was $0.03 per share better than the consensus estimate  Stronger utilization of the Q4000 and Q5000 for well intervention activities in the Gulf of Mexico were the primary drivers
  11. Now What:  The company only expects breakeven EBITDA in the first quarter, before a significant improvement in the second quarter  Key takeaway: Investors really liked the company’s better-than-expected results and forecast of improving earnings in the second quarter
  12. What: McDermott International (NYSE: MDR) surged more than 36% this week.
  13. So What:  Key driver: Fourth-quarter earnings, new contract wins, and a robust outlook  McDermott reported fourth-quarter earnings of $0.06 per share, which crushed estimates, beating the consensus by $0.17 per share.
  14. Now What:  The company has a strong contract backlog, with 80% of projected revenue for 2016 already in the backlog  It also unveiled three new contract wins and said that bidding activity remains high with strong revenue opportunities in its pipeline  Key takeaway: Investors loved the earnings beat, but not as much as they loved the optimistic outlook
  15. What: Chesapeake Energy (NYSE: CHK) surged almost 37% this week.
  16. So What:  Key driver: Fourth- quarter results and an asset sale update  Chesapeake Energy reported a fourth-quarter loss of $0.16 per share, however, that was $0.01 per share better than the consensus estimate
  17. Now What:  The company announced that its 2016 capex budget would be 57% less than 2015, causing production to decline by up to 5%  The company also announced $700 million in asset sales, along with plans to sell $500 million to $1 billion of additional assets in 2016  Key takeaway: Investors like that the company is making tangible progress on asset sales, which are a key to its ability to reduce its debt burden and strengthen its liquidity
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