Earnings season kicks off this week, which means a lot of early mornings and long nights for Wall Street analysts. For us Fools, earnings season is really just a time to check in with the companies we own, in order to make sure the investment thesis remains intact. That being said, there are some companies that do need to be watched a bit more closely, which is why I'm going to be paying special attention to the following three names.
Nuverra Environmental Solutions (NYSE:NES)
It was a tough quarter for Nuverra as its name change didn't help boost its stock price, which declined by almost 33%. Other than slightly missing earnings due to weather issues, it was a fairly quiet quarter for the company. The only other real news during the quarter was the company's acquisition of a solid waste disposal site in the Bakken.
This quarter I'll be looking to see if the company changes its guidance for full-year revenue and adjusted EBITDA. The guidance numbers to watch are revenue of $750 million-$825 million and adjusted EBITDA range of $200 million-$225 million, which the company held steady even after missing guidance last quarter due to the aforementioned weather problems. If Nuverra misses again, causing it to reduce guidance, it could signal that the company is experiencing deeper problems than expected. Meanwhile, reaffirming guidance at the upper end of the range would be a welcome sign that its full-cycle environmental solution is really beginning to catch on with customers.
SandRidge Energy (NYSE:SD)
While all has been quiet at Nuverra, the same can't be said for SandRidge. The company, which was under pressure from activist investors, decided it was time to show founder and former CEO Tom Ward the door. Now with new leadership in place, SandRidge needs to move past its past and begin to live up to its promise.
That promise is as vast as its massive 1.85 million net acre position in the Mississippian Lime formation. With enough capital to develop the play through 2015, the key for the company now is to simply execute on its plan to produce high rates of return from the play. That means I'll be keeping an eye on well costs as well as oil production. The key numbers here are well costs below $3 million per well and oil production growth of at least 64% in the Mississippian. If SandRidge can remain on pace to meet or exceed those numbers this quarter, it should bode well for its future.
Magnum Hunter Resources (NYSE:MHR)
The last company I'll be watching this quarter is Magnum Hunter, which will finally be delivering its first quarter results on July 9. The company has been behind in providing investors with results this year after it fired its auditors, which caused its annual report, and subsequent first-quarter report, to be delayed.
I'll not only be interested to see what management has to say about its first quarter, which ended in March, but also what it has to say about the just ended June quarter. The key areas to watch are the company's liquidity as well as an update on its Utica drilling program. While the sale of its Eagle Ford acreage added to the company's financial flexibility, there isn't a whole lot of wiggle room looking ahead to next year. That's why it will be important to see if the company has made any progress on its non-core asset sales. Execution on those asset sales, as well as on the Utica, is key for investors if the company is to deliver solid gains in the years ahead.
Final Foolish thoughts
I'm most interested to hear what the new management team at SandRidge has to say. The company has vast potential and its trading at a real discount to that potential. The problem is that the company's checkered past seems to be clouding its future potential.
Fool contributor Matt DiLallo owns shares of SandRidge Energy and Nuverra Environmental Solutions, and has the following options: Short Sep 2013 $5 Puts on SandRidge Energy. The Motley Fool owns shares of Nuverra Environmental Solutions and has the following options: Long Jan 2014 $4 Calls on Nuverra Environmental Solutions and Short Jan 2014 $3 Puts on Nuverra Environmental Solutions. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.