Can Less Diversified Energy Companies Replicate Big Oil’s Success?

Earnings season for corporate America is well underway, with nearly 60% of $S&P 500 Index(.SPX.US)$ companies having returned their Q2 2022 scorecards. While a good 73% of S&P 500 companies have reported a positive EPS surprise while 66% have exceeded revenue expectations, it's the energy sector that is once again hogging the limelight, with records being set right, left and center. According to the latest earnings insights by FactSet, the positive EPS surprises reported by $Chevron(CVX.US)$ ($5.82 vs. $5.08), $Exxon Mobil(XOM.US)$ ($4.14 vs. $3.94), $Valaris(VAL.US)$ ($11.36 vs. $9.26), and $Phillips 66(PSX.US)$($6.77 vs. $5.95) have been substantial contributors to the increase in the earnings growth rate for the entire index during the week, leading to the blended earnings growth rate for the Energy sector increasing to 290.3% from 265.2%.

Meanwhile, Big Oil's cash hauls have broken several company records.

ExxonMobil, Chevron, and $Shell PLC(SHEL.US)$ together brought in $46 billion in earnings in the second quarter, with all three setting new records for quarterly earnings. In an interview Friday with CNBC, Exxon's CEO Darren Woods attributed the outsized earnings to companies investing more while competitors focused on getting money back to investors.

"What we're seeing today is that extra production that we invested in five years ago and since then, that we're in a position to bring more product to market," he said.

The million-dollar question now: can smaller energy companies replicate the success of their heavyweight brethren? The answer appears to be in the affirmative.

Three mid-cap oil and gas companies have so far reported Q2 earnings, and all have managed to comfortably exceed both revenue and earnings estimates.

$ExlService(EXLS.US)$ has reported Q2 Non-GAAP EPS of $1.50, beating by $0.18, while revenue of $346.8M (+26.1% Y/Y) beat by $17.2M.

$Range Resources(RRC.US)$ Q2 Non-GAAP EPS of $1.27 was $0.06 better than the Wall Street consensus, while revenue of $1.22B (+181.8% Y/Y) beat by $260.09M.

Meanwhile, $PBF Energy(PBF.US)$ reported some wild top-and bottom-line beats, with Q2 Non-GAAP EPS of $10.58 beating by $3.26 while revenue of $14.08B (+104.1% Y/Y) beat by $3.41B.

Here are some mid-caps to watch as they gear up to report Q2 earnings.
1. $Murphy Oil(MUR.US)$
Market Cap: $5.3B
YTD Returns: 22.3%

2. $Chesapeake Energy(CHK.US)$
Market Cap: $11.5B
YTD Returns: 39.0%

3. $Centennial Resource Development(CDEV.US)$
Market Cap: $1.9B
YTD Returns: -0.78%