Marathon Oil (MRO) shares jumped into buy range, the only oil giant with a significant gain Thursday, while Pioneer Natural Resources (PXD) tumbled along with other top shale producers.
XLate Wednesday, Marathon Oil reported Q1 EPS of 18 cents on revenue of $1.733 billion. Analysts polled by Zacks Research were expecting EPS of 15 cents and revenue of $1.347 billion.
The company also raised its full-year guidance for production growth from its resource plays to 25%-30%, up from a prior view 20%-25%. But it kept its 2018 development capital budget forecast at $2.3 billion, noting its commitment to "financial discipline."
Pioneer Natural Resources also beat Q1 forecasts late Wednesday and said Permian Basin production growth for 2018 is tracking toward the high end of its 19%-24% forecast.
However, Pioneer CEO Tim Dove said during the company's conference call Thursday that this year's expected capital budget of $2.9 billion will likely increase.
He cited the addition of rigs, cost inflation and a ramp-up in a more intense completion process that involves higher concentrations of fluids and proppants as well as tighter spacing of wells. Based on the success of these so-called Version 3.0+ completions, the company is considering adding more of them in the second half of the year.
Dove said Pioneer will have a better handle "mid-year" on how much the spending increase will be, but the company still plans to spend within its forecast cash flow of $3.2 billion.
Shares of Marathon Oil jumped 6.3% to 19.45 on the stock market today, breaking out of a cup with handle base with an 18.76 entry point. Pioneer dropped 2.15% to 191.11, above its buy point of 190.05 after falling intraday to 188.79.
U.S. crude futures rose 0.7% to $68.43 a barrel. Brent crude advanced 0.4% to $73.62.
Last year, oil companies began stressing spending discipline over production growth, even as crude prices rallied, cheering investors who hoped more of the extra cash generated would be returned to investors instead of development budgets.
Last month, oilfield services giant Schlumberger (SLB) CEO Paul Kibsgaard said he doesn't see spending increasing across the oil and gas industry this year, even though crude prices are at the highest levels in more than three years.
Shale companies are also focusing more on the Permian Basin, where oil can be extracted and delivered at lower costs than in other shale plays.
Pioneer decided to go all in on the prolific Permian, selling off 70,000 acres in the Eagle Ford play and other assets in South Texas; Raton, New Mexico and the West Panhandle earlier this year.
"Looking forward, our deep, low-risk inventory of high-margin Permian Basin wells allows us to deliver increasing cash flow and corporate returns," Dove said in a statement Wednesday, noting the company's transition to a Permian "pure play" is progressing.
"Our balance sheet remains among the strongest in the industry, while our focus on capital discipline supports an economic, steady long-term growth profile. We believe our high Permian 'return on capital' will enhance shareholder value by delivering increasing 'return of capital' to investors."
Despite the drop in shale stocks, the earnings season has been positive for the sector so far. Along with Pioneer, Matador Resources (MTDR) and Continental Resources (CLR) reported earnings and revenue beats late Wednesday.
On Tuesday, Viper Energy Partners (VNOM), Anadarko Petroleum (APC), Noble Energy (NBL) and Concho Resources (CXO) topped quarterly estimates.
EOG Resources (EOG) and Parsley Energy (PE) will report Q1 results after the market closes Thursday.
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The post Oil Giant Jumps Into Buy Zone, Permian Play Holds On To Entry appeared first on Investor's Business Daily.
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