Earnings season in the oil patch is in full swing, with several U.S.-focused drillers due to report this week. Those reports can make shares of oil companies bounce around quite a bit, especially if the numbers come in significantly above or below expectations.
Three oil stocks that have a history of reporting strong numbers are Devon Energy (NYSE:DVN), Marathon Oil (NYSE:MRO), and EOG Resources (NYSE:EOG). Here's a quick look at what to watch when each of these drillers unveils first-quarter results this week.
Keep an eye on Devon's shale output
Devon Energy expects to report its first-quarter results after markets close on Tuesday. The oil driller has a history of making big moves after posting earnings. The major factor that drives Devon's stock is production. If its output comes in below expectations, the company tends to miss analysts' earnings estimates, which can weigh on the share price.
Devon currently expects to produce between 478,000 and 514,000 barrels of oil equivalent per day (BOE/D) during the first quarter, which includes 206,000 to 224,000 BOE/D from assets that it intends to sell. Because of that, investors should focus on the 272,000 to 290,000 BOE/D Devon expects from its four major U.S. shale plays. Ideally, output will be at or above the midpoint of that range, which would show that its strategy is paying dividends.
Check out Marathon's output and cash returns
Marathon Oil expects to unveil its first-quarter results after markets close on Wednesday. The U.S.-focused shale driller has also made some notable moves after posting earnings in the past, which could happen again this quarter. Like Devon, Marathon Oil's drilling machine needs to deliver on expectations so that it doesn't disappoint investors.
Marathon anticipates producing between 380,000 and 400,000 BOE/D during the first quarter, including 295,000 to 305,000 BOE/D from its U.S. shale assets. Ideally, its output will come in at or above the middle of that guidance range, which would keep it on track to achieve its full-year forecast.
Another thing to watch at Marathon is its free cash flow. The company needs oil to average only $45 a barrel this year to support its growth plan. With crude now in the mid-$60s, Marathon should have generated a boatload of free cash during the first quarter. Hopefully, the company not only did that but also returned the bulk of the money to investors through its share buyback program. If Marathon delivered strong production and cash flow as well as repurchased more shares, that trio of catalysts could fuel a rally in the stock this week.
Look at EOG's production and exploration progress
EOG Resources will follow its peers and report results on Thursday evening. While the leading shale producer isn't usually as volatile as its oil-producing peers after announcing earnings, there's always the possibility that it could make a big move.
The company historically underpromises and overdelivers when it forecasts quarterly production. Because of that, it's highly likely that EOG will produce at or above the high end of its first-quarter guidance range. The main number to watch is how it performs versus its forecast for U.S. oil output, which is 426,600 to 434,200 barrels per day for the quarter. If it unexpectedly misses that projection, shares could slump.
Another thing to watch this quarter is its exploration efforts. EOG Resources has a knack for finding new sources of low-cost oil, which keeps its growth engine well fueled. The company boosted its budget for finding new potential drilling locations from about $186 million last year to $315 million for 2019. While the company doesn't typically disclose where it's exploring, we do know that it is one of several companies testing wells in the Louisiana Austin Chalk. Because of that, investors should see if the company has any updates on its exploration program. If EOG unveils another high-return oil play and posts strong production numbers, its stock could rally this week.
A big week for oil stocks
Oil prices rebounded sharply during the first quarter, which should boost earnings across the sector. Drillers could have captured even higher profits if they delivered strong production results, which is why that's a key number to watch across the industry. Those dual fuels, when combined with other potential catalysts, could cause oil stocks to make some big moves this week.