Centennial Resource Development reported $15.8 million, or $0.05 per share, of net income during the first quarter. While that was an improvement from a net loss of $34.6 million, or $0.12 per share, in the year-ago period, it was well below the analyst consensus estimate that it would earn $0.36 per share. That's mainly due to a $129.5 million loss on its hedging contracts because of higher-than-expected oil prices.
On a more positive note, Centennial generated record free cash flow of $89 million during the first quarter. That enabled the company to fully repay all the borrowings under its credit facility, allowing it to reduce leverage for the fourth straight quarter.
However, because the company has continued to focus on reducing debt, it didn't begin its shareholder-return program. It launched a $350 million share-repurchase program earlier this year, supported by its improving balance sheet and higher oil prices.
Centennial Resource Development's oil hedging strategy has backfired this year, limiting its upside to higher oil prices. However, the company is still generating a growing stream of free cash flow, a portion of which it eventually intends to return to investors. That could give its stock the fuel to rally if oil prices remain high.