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DCP Midstream (DCP) Down Marginally Despite Q2 Earnings Beat

·3-min read

DCP Midstream LP’s DCP unit price fell marginally 0.5% despite reporting strong second-quarter earnings on Aug 2. Investors are probably worried about the increasing purchases and related costs hurting DCP Midstream.

DCP Midstream reported second-quarter adjusted earnings of $1.77 per unit, beating the Zacks Consensus Estimate of $1.14. The bottom line reversed from the year-ago quarter’s loss of 12 cents per unit.

Total quarterly revenues of $4,269 million missed the Zacks Consensus Estimate of $4,490 million. However, the top line increased from $2,085 million in the year-ago quarter.

The strong quarterly earnings were primarily owing to increased NGL pipeline throughput. This was offset partially by higher operating and maintenance expenses.

DCP Midstream Partners, LP Price, Consensus and EPS Surprise

DCP Midstream Partners, LP Price, Consensus and EPS Surprise
DCP Midstream Partners, LP Price, Consensus and EPS Surprise

DCP Midstream Partners, LP price-consensus-eps-surprise-chart | DCP Midstream Partners, LP Quote

Operations

Logistics and Marketing

The segment recorded adjusted EBITDA of $205 million in the second quarter, up from the year-ago period’s $194 million. Higher NGL pipeline throughput volumes aided the segment.

The average NGL pipeline throughput in the quarter was 720 thousand barrels per day (Mbpd), higher than the year-ago quarter’s 671 Mbpd. Fractionator throughputs were recorded at 51 Mbpd, in line with the year-ago quarter.

Gathering and Processing

The segment reported adjusted EBITDA of $335 million in the second quarter, up from $197 million in the year-ago quarter. Increased wellhead volumes aided the segment.

Average natural gas wellhead volumes in the quarter increased to 4,383 million cubic feet per day (MMcf/d) from the year-ago period’s 4,338 MMcf/d. NGL gross production totaled 427 Mbpd, up from 409 Mbpd.

Total Expenses

Purchases and related costs significantly increased year over year in the quarter under review. Operating and maintenance expenses rose to $189 million from $165 million in the second quarter of 2021.

Total operating costs and expenses were $3,981 million, up from the year-ago quarter’s figure of $2,169 million.

Financials

In second-quarter 2022, total expansion capital expenditures, acquisition and equity investments were $32 million. Sustaining capital in the quarter was $23 million. DCP generated an excess free cash flow of $254 million in the reported quarter.

At the end of the second quarter, the partnership reported long-term debt of $4,622 million. Cash and cash equivalents were $8 million. It had current debt of $505 million.

Zacks Rank & Stocks to Consider

DCP Midstream currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy space are Exxon Mobil Corporation XOM, BP plc BP and Eni SpA E. Eni carries a Zacks Rank #2 (Buy), ExxonMobil and BP sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

ExxonMobil’s upstream operation is benefiting from the high oil price. XOM reported strong earnings thanks to higher realized commodity prices and solid refinery utilization, offset partially by increased ethane feed costs in North America. In 2022, ExxonMobil is likely to see earnings growth of 131%.

High oil prices are aiding BP’s upstream operations. Its sizable refining and marketing operations will protect it if the crude pricing scenario turns unfavorable again. For 2022, it is likely to witness earnings growth of 116.2%. Over the past few quarters, BP has successfully been reducing long-term debt.

Eni is expecting discovery of 700 million barrels of oil equivalent (BoE) of new exploration resources this year, suggesting an improvement from the prior guidance of 600 million BoE. For 2022, Eni is likely to witness earnings growth of 165.3%.


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