Why EPE Is the Third-Worst-Performing Upstream Stock Year-to-Date



EP Energy’s year-to-date performance

On December 1, 2017, EP Energy (EPE) was the third-worst-performing stock in 2017 from the oil and gas production—or upstream—sector in the US. Year-to-date, EPE has fallen sharply from its 2016 close of $6.55 to $1.80 on December 1, 2017—a sizeable decrease of ~73.0%.

Year-to-date in 2017, EPE has grossly underperformed crude oil (SCO), natural gas (UNG) (UGAZ), and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP). Year-to-date, crude oil has risen ~9% whereas natural gas has fallen ~18%.

Year-to-date, XOP has fallen ~12.0%. In comparison, the SPDR S&P500 ETF (SPY) has risen ~18.0% in 2017.

EP Energy’s revenues and earnings

In 9M17, EP Energy (EPE) reported revenues of ~$842.0 million—about 45.0% higher than its 9M16 revenues of ~$579.0 million. Despite higher revenues, EPE reported a steep decline in net income in 9M17 when compared with 9M16.

In 9M17, EPE reported a net loss of $79.0 million, a decrease from its net profit of ~$121.0 million in 9M16. EPE’s free cash flows turned negative in 9M17 when compared with 9M16.

In 3Q17, EPE reported total debt of ~$3.9 billion, which is higher than its total debt of ~$3.7 billion at the end of 2016.

Next, we’ll compare the year-to-date returns from Denbury Resources (DNR) with the broader market and energy commodities. We’ll also analyze its fundamental metrics.

More From Market Realist