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

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