Oil, Gas, and Offshore Drilling Earnings Reports Mixed (COP, CNX, DO, OXY)

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CONSOL Energy (NYSE:CNX) today reported first quarter earnings of $75.1 million and EPS of $0.41. This is down from first quarter 2007 earnings of $113.3 million and EPS of $0.61. Revenue reached $1.03 billion for the quarter, up from $915.2 million a year ago. Analyst estimates averaged $0.50/share on revenue of $985.9 million. CNX has a very high P/E of 56.24, probably reflecting confidence in the company’s plans for new gas drilling. CNX also announced yesterday that it has completed initial studies for a new type of coal gasification plant in conjunction with Synthesis Energy Systems (NASDAQ:SYMX). The process uses waste coal, of which CONSOL has plenty, as feedstock. Turning garbage into cash always has a certain appeal.

Diamond Offshore (NYSE:DO) reported first quarter earnings of $290.6 million and EPS of $2.09. For the same period last year, DO reported net income of $224.1 and EPS of $1.64. Revenue grew year-over-year from $608.2 million to $786.1 million. Average analyst estimates were $2.12/share on revenue of $792.2 million. DO is contract driller specializing in deepwater offshore projects. More than half the company’s revenue and income come from its intermediate semi-submersibles. Those rigs are still in high demand. The day rate for a semi in the first quarter of 2007 was $150,000. For this quarter, the day rate has jumped to $249,000, and utilization has remained around 85%. DO also today declared a special cash dividend of $1.25/share and a regular quarterly dividend of $0.125/share to be paid on June 2 to shareholders of record on May 2.

Occidental Petroleum (NYSE:OXY) reported  first quarter earnings of $1.85 billion and EPS of $2.23, up from $1.21 billion and $1.43/share for the same period last year. Revenue for the period increased from $4.015 billion a year ago to $6.02 billion this year. Analysts estimated $1.97/share on revenue of $6.28 billion. The profit increase was almost entirely due to record prices for oil and natural gas. The company’s Dolphin project in Qatar has also come on line since the first quarter of 2007. Dolphin contributed 200 million cubic feet (about 36 million BOE) of natural gas to the company’s total production, which increased from 560 million BOE to 607 million BOE. Production from existing wells increased by 11 million BOE, just less than 2%.

ConocoPhillips NYSE: COP) reported  first quarter earnings of $4.139 billion and EPS of $2.62, up from $3.546 billion and $2.12 for the same period a year ago. Revenue increased to $54.9 billion from $41.3 billion a year ago. Analysts estimated $2.42/share and revenue of $198.6 billion. Higher prices for the company’s oil and gas contributed $558 million to the earnings increase. Refining and marketing income fell by more than 50%, from $1.136 billion in 2007 to $520 billion this year. The company blames lower refining margins and unplanned downtime at the refineries for the decrease. Worldwide crude oil refining utilization for the quarter came in at 89%, down from 94% a year ago and 95% in the fourth quarter of 2007.

A quick look at the Forward P/E for each company is interesting. CONSOL’s is 28.59; Diamond’s is 13.07; Occidental’s is 11.3; and ConocoPhillips’ is 7.87. Out of the sector as a whole, CONSOL is much higher and COP is much lower.

Paul Ausick
April 24, 2008