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Oil Companies on Slippery Ground as Harvey Hampers Production

Zacks

U.S. Gulf Coast refiners are slowly coming back online after taking a hit from Harvey. The downstream operators in the area are restarting operations while keeping a close eye on exploration and production companies to observe how much oil and gas can come to their refineries post-Harvey.

The recovery period is dependent on the extent of damages. More than seven refineries in the area are currently operating at reduced rates. The situation has compelled several companies to revise their guidance for third quarter production.

Companies That Revised Guidance


At the beginning of the month, oil explorer and producer EOG Resources, Inc. EOG reduced its third-quarter U.S. crude and condensate volume guidance range by 15,000 barrels per day as the Houston, TX-based company's operations in the Eagle Ford shale were affected by the storm. However, EOG Resources kept its guidance for the full year intact, hoping production would ramp up in due course. The company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upstream oil company Denbury Resources Inc. DNR announced that five of its six fields in Eagle Ford were affected by the storm but managed to restart operations. While the Plano, TX-headquartered oil producer made 90% of its operations online, the effect on the company's production is still estimated at around 2,000-2,200 barrels of oil equivalent per day. The company presently has a Zacks Rank of 3.

Amsterdam, Netherlands-based field service provider, Core Laboratories N.V. CLB reported that strong wind and flooding damaged parts of its operations on the U.S. Gulf Coast. The company's clients were also hit by Harvey, which disrupted Core Laboratories' operations. The Zacks Rank #3 company previously expected third-quarter 2017 revenue to be in the range of $165.5-$170 million, which has now been revised to $161 million. Earnings per share for the same time period are now expected to be 44 cents compared with the earlier guided range of 54 cents to 56 cents.

Houston-based energy company Carrizo Oil & Gas, Inc. CRZO reported that its Eagle Ford Shale assets were not affected by the storm. Nevertheless, the company's sales volume decreased temporarily as third-party midstream facilities and Gulf Coast refineries related to the company were down for a brief period owing to Harvey. Zacks #3 Ranked Carrizo will update its production guidance after collecting more information on the stalled operations.

Other Companies Affected by Harvey

Chesapeake Energy Corp. CHK paused its drilling and completion of new wells in the Eagle Ford shale and evacuated staff from the production area. ExxonMobil Corp. XOM shut its operations in some oil wells in the Eagle Ford shale region before the storm. Marathon Oil Corp. MRO released most of its personnel from its Texas operations suspending work ahead of Harvey.

Conclusion

Most of the oil companies on the U.S. Gulf Coast are still recovering, which is limiting production. This can result in more companies revising their output projections for the third quarter. Production guidance for the whole year will depend on the output levels achieved in other areas and the speed of recovery in the affected region.

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