This Morning in the Oil Patch.. Earnings Away! (NOV, HES, FSLR, BP, VLO)

April 30, 2008 by Douglas A. McIntyre

This morning we have some key earnings from the likes of National-Oilwell Varco (NYSE:NOV) and Hess Corporation (NYSE:HES), and it wouldn’t be fair to pint out the solar earnings competition from First Solar, Inc. (NASDAQ: FSLR).  There was also a key analyst call on in BP plc (NYSE: BP) and Valero (NYSE: VLO).

National-Oilwell Varco (NYSE:NOV) reported earnings of $397.6 million and $1.11 EPS for the first quarter of 2008, up from $275.9 million and $0.78 EPS for the same period last year. Revenues totaled $2.685 billion, up 24% from a year ago and 1% from the fourth quarter of 2007. Analyst estimates for the first quarter were $1.09 EPS on revenues of $2.73 billion.

NOV noted a 10% increase in its backlog for drilling and other capital equipment to $9.9 billion from $9 billion in the fourth quarter of 2007. New orders during the quarter totaled $2 billion, reflecting increased demand for offshore drilling equipment. Operating profit rose more than 3% from a year ago, but dropped by 0.5% compared with the previous quarter, indicating that NOV is facing some of the same pricing pressure as others in the industry.

The company’s stock, which has dropped about 8% since April 22nd when other oilfield services competitors reported poor performance, is actually back up in positive territory this morning.

Hess Corporation (NYSE:HES) also reported first quarter numbers, and they were predictably big. Earnings more than doubled from a year ago to $759 million on revenues of $10.72 billion, and $2.34 EPS vs. $1.17 a year ago. Analysts estimates averaged $2.02 EPS on revenues of $10.55. Virtually all the increase is attributable to a $32.54/b increase in the company’s selling price of oil. Refining and marketing were off $85 million (84%). The company’s stock is up more than $3.00 in pre-open trading.

Credit Suisse has made a coverage switch here of significance in the oil patch: BP plc (NYSE: BP) was raised to Outperform from Neutral, while Valero (NYSE: VLO) was downgraded to Neutral from Outperform.

Yesterday, after the close, oil magnate and billionaire came out on CNBC and said that the equities of energy companies reflect something more like $75 oil rather than $100 oil, which is his vernacular for gross under-priced for an environment where he thinks $100 +/- is the new norm.  Pickens also noted the great need to diversify into alternative energy methods as well.

Speaking of alternative energy, shares of First Solar, Inc. (NASDAQ: FSLR) are trading up 7% at $305.00, almost at the top of its $54.20 to $308.24 trading range over the last year.  The company posted $0.57 EPS and $196.9 million in revenues, versus estimates of $0.47 EPS and $183.6 million in revenues.  The solar leader beat earnings expectations and raised guidance to $975 million to $1.05 Billion in revenues (above its prior $900 to $950 million estimate).  It has also raised its annual production to a range of 420 to 460 megawatts from a prior range of 400 to 430 megawatts.  The company is also expecting a modest rise in Q2 revenues.

Paul Ausick
April 30, 2008