Apache, Frontier Oil among gainers; Transocean shares trade lower
By Steve Gelsi, MarketWatch
NEW YORK (MarketWatch) — Energy stocks rose Thursday on strength in shares of Denbury Resources, Apache Corp., Hess Corp. and Cliffs Natural Resources, among others, but Chesapeake Energy fell back after its earnings update.
In energy futures, crude-oil prices broke through to $86.50 a barrel, while the dollar fell and the Dow Jones Industrial Average jumped more than 1%.
Dow energy components Exxon Mobil (XOM 69.16, +1.19, +1.75%) and Chevron Corp. (CVX 84.27, +1.57, +1.90%) rose by 1% and 1.8%, respectively.
The NYSE Arca Oil Index (XOI 1,126, +24.78, +2.25%) rose 2.2% to 1,126, while the Philadelphia Oil Service Index (OSX 219.58, +3.72, +1.72%) added 1.8% to 220 and the NYSE Arca Natural Gas Index (XNG 561.95, +6.83, +1.23%) gained 1.3% to 562.
Energy components of the S&P 500 (SPX 1,212, +13.55, +1.13%) collectively rose 2.1%, outpacing the ten sub-sectors tracked by FactSet Research.
Shares of Denbury Resources (DNR 18.52, +1.08, +6.19%) jumped 5.2% after its earnings update. Other movers include Cliffs Natural Resources (CLF 70.00, +3.13, +4.69%) , up 4.7%, and Hess Corp. (HES 69.35, +2.91, +4.37%) , ahead by 4%.
Apache (APA 106.81, +4.23, +4.12%) shares jumped 4.8% to $107.51. The oil independent said third-quarter profit rose by 74% to $765 million, or $2.12 a share from $441 million, or $1.30 a share, earned in the year-ago period. Quarterly revenue reached $3.01 billion from the prior year’s $2.33 billion.
Worldwide production grew 10% to 667,460 barrels of oil equivalent per day. Wall Street analysts expected Apache to earn $2.30 a share on revenue of $3.1 billion, according to a survey by FactSet Research.
Results include production from Gulf assets acquired from Devon Energy Corp. (DVN 69.47, +1.25, +1.83%) as well as production from BP PLC’s (BP 43.37, +0.10, +2.35%) oil and gas operation in the Permian Basin of Texas and New Mexico. Apache expects to close its merger with Mariner Energy (ME 26.01, +0.75, +2.97%) after a Mariner special shareholder meeting on Nov. 10.
Also on the earnings front, Denbury said third-quarter net income rose 8% to $29.1 million, or 7 cents a share, from $26.9 million, or 11 cents a share, in the year-ago period. There were about 59% more weighted average common shares outstanding in the latest quarter.
Revenue doubled to $426.9 million from $208.1 million. Merger expenses associated with its purchase of Encore Acquisition Co. totaled $11.5 million.
Denbury’s qdjusted net income totaled 13 cents a share, in line with the consensus estimate in a FactSet-compiled survey. Denbury also did better than analysts’ consensus forecast of $448.1 million.
Shares of Chesapeake Energy (CHK 21.87, -0.44, -1.97%) fell 0.9% to $22.10. The company’s third-quarter net income rose to $515 million, or 75 cents a share, from $186 million, or 30 cents, earned in the year-ago period.
Adjusted net income totaled 70 cents a share in the latest period. Quarterly revenue increased to $2.58 billion, from $1.81 billion.
The natural-gas producer beat consensus targets of 64 cents a share and $2.1 billion, respectively, in a FactSet survey.
Chesapeake said it expects production growth of about 13% in 2010, 18% in 2011 and 18% in 2012, including liquids production growth of about 60% in 2010, 80% in 2011 and 60% in 2012.
Susquehanna Financial Group analyst Duane Grubert said Chesapeake’s combination of hedging and drilling with joint-venture partner capital allows it to continue pursuing an aggressive drilling program despite “very weak” ongoing gas markets.
Holly Corp. (HOC 33.36, -0.39, -1.16%) said the refiner’s third-quarter net income doubled to $51.2 million, or 96 cents a share, from $23.5 million, or 47 cents a share, in the year-ago period. The Dallas-based company’s revenue increased to $2.1 billion from $1.49 billion, citing higher refinery gross margins combined with increased sales volumes.
On average, analysts surveyed by FactSet had expected Holly to earn 84 cents a share on revenue of $2.23 billion. Holly shares rose 1.2%.
Transocean Ltd.’s (RIG 63.25, -0.71, -1.12%) said third-quarter profit fell by about half to $368 million, or $1.15 a share, from $710 million, or $2.19 a share, in the year-ago period. The latest period included $27 million in expenses related to the Macondo well and the April 20 Deepwater Horizon accident.
Quarterly revenue dropped to $2.31 billion, from $2.82 billion. The company’s tax rate also increased to 23.8% from 20.8%. The deepwater drilling specialist missed the Wall Street target of $1.39 a share and revenue of $2.45 billion. Transocean also took a $22 million charge for retirement of debt, $14 million in charges for legal matters and $7 million related to tax items.
Shares of Transocean fell 2% to $62.74.
For Frontier Oil Corp. (FTO 14.39, +0.79, +5.81%) , third-quarter results showed the company swinging to third-quarter net income of $8.3 million, or 8 cents a share, from a loss of $8.8 million, or 8 cents a share, in the year-ago period. Revenue increased to $1.42 billion, from $1.2 billion. Wall Street analysts had expected Frontier Oil to earn 6 cents a share on revenue of $1.28 billion, according to a survey by FactSet.
