Quick Win by the Algorithm: Weak Earnings Reports Drag EVEP Downwards

Quick Win by the Algorithm

On May 12th, 2017, the I Know First algorithm issued a bearish forecast for EV Energy Partners, L.P. (EVEP). EVEP had a signal of -570.08 and a predictability of 0.56. As a result, in accordance with the forecast, the company’s stock had a return of 38.41% within 1 month, showing a quick win by the algorithm.

Quick Win

EV Energy Partners is a master limited partnership with a focus on long term value through acquisition, operation, and development of oil and gas properties. The company keeps all its operations located in the United States. Enervest, a large operator of onshore oil and gas assets, conceived the partnership in 2006. While EnerVest is the controlling member of the company’s general partner, EVEP specializes in long-term development and management of assets.

Quick Win

On May 10th, EV Energy Partners, L.P. (NASDAQ: EVEP) released its quarterly earnings for Q1 2017. Although they were aligned with the company’s previously indicated guidelines for Q1 2017, the quarterly earnings painted a bleak picture. This likely had a strong impact on investors’ opinions on EVEP, leading to the drop over the next month.

First-quarter fiscal results for EVEP reported a net loss of $50.8 million. This was hot on the heels of a difficult loss in the fourth quarter of 2016 of $165.7 million. This is compared to a loss of $29.0 million in the first quarter of 2016. This corresponds to a loss of $1.01 per basic and diluted weighted average limited partner unit in Q1 2017. Q4 2016 corresponded to a loss of $3.31 per unit and Q1 2016 to a loss of $0.58 per unit.

Production for the first quarter of 2017 was 10.4 Bcf of natural gas, 335 Mbbls of oil and 512 Mbbls of natural gas liquids. This was a 15% from Q1 2016. Although the company attributes these losses to acquiring producing properties and decreases in drilling activity.

The oil and gas company reported ($0.32) earnings per share (EPS) for the quarter. This was $0.12 worse than the Zacks’ consensus estimate. Furthermore, EVEP had a negative net margin of 130% and a negative return on equity of 7.46%. All this led analysts to change positions on EV Energ Partners. Zacks Investment Research lowered shares from a “hold” rating to a “sell” rating. Citigroup lowered their target price from $2.50 to $1.50. Stifel Nicolaus also lowered shares to a “sell” rating and decreased their target price from $1.25 to $0.50.

In addition, the political climate has been tumultuous regarding the energy sector. This confusion has made many cautious about energy stocks decreasing. Hence, given these factors, we can see why EVEP’s stock price decreased.

This bearish forecast on EVEP was sent to current I Know First subscribers on May 12, 2017. 

Before making any trading decisions, consult the latest forecast as the algorithm constantly updates predictions daily. You can use the algorithm for intra-day trading. The predictability tends to become stronger with forecasts over longer time-horizons such as the 1-month, 3-month and 1-year forecasts.