Jagged Peak Energy Stock Is Waiting for a Catalyst

Jagged Peak Energy stock has done decently this year, rising nearly 10% so far in 2019. But the stock seems to have lost its way recently as it was once up 24% for 2019. With Jagged Peak all set to deliver its next set of earnings on May 9, will it deliver enough good news that will power the stock higher?

Let’s find out.

What to Expect?

Jagged Peak Energy’s revenue is expected to rise just 2.5% in the first quarter to $132.2 million, while earnings will remain flat year over year at $0.12 a share.

That doesn’t represent a massive improvement for Jagged Peak, especially considering that it had delivered terrific growth in 2018 on the back of a massive increase in production and lower costs. But don’t be surprised if Jagged Peak manages to surprise investors and analysts with better-than-expected results.

As the company aims to increase production this year at a lower cost base, there’s a good chance that it might be able to trump expectations.

The company expects to increase its production to the tune of 8% at the mid-point of its guidance range of 36,500 to 37,900 barrels of oil equivalent per day for 2019. Jagged Peak will achieve this improvement in its output while lowering the capital expenditure to a range of $580 million to $630 million, which would be a 12% drop at the mid-point.

So as the company aims to increase production this year at a lower cost base, there’s a good chance that it might be able to trump expectations. But for that to happen, it will need the aid of stronger oil prices.

Will Oil Prices Favour Jagged Peak?

Oil prices have recovered impressively in 2019. WTI crude oil is trading well above $60 a barrel and it traded close to that level for the first quarter of the year.

That’s good news for Jagged Peak investors as in the first quarter of 2018, the company’s average realized sales price stood at $53.52 per barrel of oil. So a combination of higher production and stronger oil prices could be a boon for Jagged Peak Energy investors when it releases its first-quarter results, as there is the potential of the stock moving up.

But more importantly, Jagged Peak is making a smart move by maintaining a conservative production and capex stance for 2019 because of the uncertainty in the oil pricing environment. The company aims to deliver sustainable and organic free cash flow to investors, which is why it plans to focus on its acreage in the southern Delaware Basin.

What’s more, don’t be surprised if the company is benefited by higher oil prices in the future. That’s because economists believe that the price of light crude oil in the U.S. will average $60.23 per barrel this year, up from the March forecast that called for a price of $58.92 per barrel.

A further increase in oil prices will be a result of an extension of OPEC’s production cuts until the end of the year, as well as lower production in Iran and Venezuela. In all, don’t be surprised if Jagged Peak Energy stock regains its momentum in the future thanks to a solid earnings report.

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The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

Harsh Singh Chauhan
Harsh Singh Chauhan has a wealth of experience evaluating publicly-traded companies across several verticals, including technology, oil and gas, retail, and consumer goods. His financial writing has been published across platforms such as The Motley Fool, TheStreet, and Seeking Alpha. Harsh's philosophy is to find great businesses for the long run based on company fundamentals and industry prospects. Address: 682 Indian Road, Toronto, Ontario, M6P 2C9. Phone: 416-721-8257.
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