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ESTE

Earthstone Energy NYSE:ESTE Stock Report

Last Price

US$11.68

Market Cap

US$1.4b

7D

-21.8%

1Y

8.3%

Updated

06 Jul, 2022

Data

Company Financials +
ESTE fundamental analysis
Snowflake Score
Valuation2/6
Future Growth2/6
Past Performance2/6
Financial Health2/6
Dividends0/6

ESTE Stock Overview

Earthstone Energy, Inc., an independent oil and gas company, engages in the acquisition, exploration, development, and production of oil and natural gas properties in the United States.

Earthstone Energy Competitors

Price History & Performance

Summary of all time highs, changes and price drops for Earthstone Energy
Historical stock prices
Current Share PriceUS$11.68
52 Week HighUS$22.25
52 Week LowUS$7.01
Beta2.15
1 Month Change-42.63%
3 Month Change-14.31%
1 Year Change8.35%
3 Year Change79.42%
5 Year Change20.04%
Change since IPO3,637.60%

Recent News & Updates

Jul 01

Earthstone Energy: Growth Ahead

Earthstone Energy will double in size the second quarter. Management is firmly focused on growing company operations. Management will likely sell the company for the right price. Dividends are not important to the long-term plan. Mr. Market demands proof before revaluing the company stock as to the profitability of the newly combined company. That should be easy. This is yet another group of insiders buying production because it is cheap to do so. (Note: This article appeared in the newsletter on May 7, 2022, and has been updated with current information as needed.) Earthstone Energy, Inc. (ESTE) has done a lot of acquisitions. In fact, management just announced another large acquisition. They join several companies I follow in buying production because it is much cheaper than growing production and can be less risky for experienced buyers. I have followed this management through the building and sale of several companies through the years. Their experience in building and selling companies is very seldom matched. That makes the recent acquisition binge less risky than it would normally be. But Mr. Market is going to demand evidence that the newly amalgamated company will work as planned. That should be a straightforward exercise for this very experienced management. Earthstone Management Second Quarter Production Guidance And Map Of Operating Area (Earthstone Management First Quarter 2022, Investor Conference Call Slides) It may take some time for some nonrecurring activities to get through the quarterly reports so that quarterly reports solely reflect operating activities. There are obviously some cost savings to be achieved even when the leases held are spread out. The slide above is not pro forma for the recent acquisition announcement. The big deal on the slide above was the six acquisitions and the guidance (which will now get revised with the latest acquisition). The slide above is now basically limited to the second quarter report in the near future. Note that this management uses stock in its deals to keep that debt ratio down as it grows. That does mean there is a lot of new stock either ready to sell or to be converted to stock that the owner can sell. That can temporarily hold back the price of the stock until the market adjusts to more shares outstanding. Clearly, management has what it aimed to get. Therefore, the onus is on management for the acreage to meet profitability goals. Management has four rigs running currently. The latest acquisition is likely to result in a fifth rig as long as commodity prices remain strong. The key will be to see how production performs given the intended operations. In the eyes of the market, meeting guidance for a few quarters will be the first hurdle. Right now, the common appears priced for a fair amount of trouble. That should limit the downside action should trouble actually occur. However, given that this management has done acquisitions many times in the past, a likely expected reaction will be a significant upward re-evaluation of the enterprise value of the company as management meets goals. Earthstone Energy Relative Valuation and Production Levels (Earthstone Energy First Quarter Conference Call Slides May 2022) The key to any slide like this is to remember that the different companies on the slide have different strategies. Ironically, the company with a production mix closest to Earthstone is likely to be Diamondback Energy (FANG). Some companies like Pioneer (PXD) have a higher percentage of oil production so that they will be worth more. Earthstone is likely to be a bargain. But management gets to choose the comparison. Therefore, it is up to investors to decide the valuation of the company based upon the production, profitability and growth prospects. The investor may come to a different conclusion than what the slide suggests. But the investor could still conclude that this is a bargain. This management is paying about twice EBITDAX for the latest acquisition. That makes it very easy for management to hedge to protect the first two years of EBITDAX should that prove to be necessary. More importantly, the sales price is decent relative to proved reserves. Those reserves were developed at far more conservative prices than the current market prices. So, there should be a safety cushion for this purchase. Earthstone Energy Projection Of Costs And Margin Compared To A Selection Of Peers (Earthstone Energy First Quarter 2022, Earnings Conference Call Slides May 2022.) A similar argument can be made about a margin comparison. Probably the best margin that I ever saw came with the high percentage oil producers. Secondary recovery companies often have excellent margins. But the volumes of secondary recovery operations often restrict overall profitability when compared to capital invested despite the great margins. Investors need to remember that typical upstream companies are usually the most profitable. After that oil is gone, then secondary recovery is a possibility. But secondary recovery is actually more costly and hence generally less profitable. So, the investors may have to wait to see what the profitability history is for the combined company. Mr. Market will want proof that the great margin translates into superior profitability. This management has experience doing just that. So, the risk of management not meeting profitability goals is pretty small. The low-cost structure is probably necessitated by the production mix. The percentage of oil produced is on the low side. It could end up similar to Laredo Petroleum (LPI). Laredo Petroleum has acquired higher oil production leases to raise the company average of oil produced. Earthstone Energy has purchased leases that should have low production costs. But like Laredo Petroleum, a lean management is essential to good quarterly results. The management costs of Earthstone have so far pointed to a very lean management cost structure. But there is a risk of management costs ballooning skyward should unexpected challenges arise. This is another area where Mr. Market will be watching for good controls remaining in place in the future. The main strategy of just about any company I follow that is growing significantly by acquisition is to find bargains. That generally implies that the acreage is not top-notch prime acreage (or if it is great acreage, the holding is too small for adequate cost savings). Managements like this one will piece together subpar holding so that the combined acquisitions are more profitable as one entity than were the pieces. These managements usually produce superior results by increasing profitability of the purchases both through bolt-on acquisitions and economies of scale. That is then combined with very efficient operations.

Shareholder Returns

ESTEUS Oil and GasUS Market
7D-21.8%-6.3%0.7%
1Y8.3%27.3%-18.4%

Return vs Industry: ESTE underperformed the US Oil and Gas industry which returned 27.3% over the past year.

Return vs Market: ESTE exceeded the US Market which returned -18.4% over the past year.

Price Volatility

Is ESTE's price volatile compared to industry and market?
ESTE volatility
ESTE Average Weekly Movement13.5%
Oil and Gas Industry Average Movement9.1%
Market Average Movement8.2%
10% most volatile stocks in US Market16.9%
10% least volatile stocks in US Market3.4%

Stable Share Price: ESTE is more volatile than 75% of US stocks over the past 3 months, typically moving +/- 13% a week.

Volatility Over Time: ESTE's weekly volatility (13%) has been stable over the past year, but is still higher than 75% of US stocks.

About the Company

FoundedEmployeesCEOWebsite
196981Robert Andersonhttps://www.earthstoneenergy.com

Earthstone Energy, Inc., an independent oil and gas company, engages in the acquisition, exploration, development, and production of oil and natural gas properties in the United States. The company’s asset portfolio includes the Midland Basin of West Texas, Delaware Basin in New Mexico, and the Eagle Ford trend of south Texas. As of December 31, 2021, it operated 120 gross Eagle Ford wells, as well as had 147,587 thousand barrels of oil equivalent (MBOE) of total proved reserves comprised 93,575 MBOE of proved developed reserves and 54,012 MBOE of proved undeveloped reserves.

Earthstone Energy Fundamentals Summary

How do Earthstone Energy's earnings and revenue compare to its market cap?
ESTE fundamental statistics
Market CapUS$1.35b
Earnings (TTM)US$7.84m
Revenue (TTM)US$540.22m

117.9x

P/E Ratio

1.7x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
ESTE income statement (TTM)
RevenueUS$540.22m
Cost of RevenueUS$94.80m
Gross ProfitUS$445.42m
Other ExpensesUS$437.58m
EarningsUS$7.84m

Last Reported Earnings

Mar 31, 2022

Next Earnings Date

n/a

Earnings per share (EPS)0.099
Gross Margin82.45%
Net Profit Margin1.45%
Debt/Equity Ratio50.2%

How did ESTE perform over the long term?

See historical performance and comparison
We’ve recently updated our valuation analysis.

Valuation

Is ESTE undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

2/6

Valuation Score 2/6

  • Price-To-Earnings vs Peers

  • Price-To-Earnings vs Industry

  • Price-To-Earnings vs Fair Ratio

  • Below Fair Value

  • Significantly Below Fair Value

  • PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for ESTE?

Other financial metrics that can be useful for relative valuation.

ESTE key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue3.7x
Enterprise Value/EBITDA12.3x
PEG Ratio24.4x

Price to Earnings Ratio vs Peers

How does ESTE's PE Ratio compare to its peers?

ESTE PE Ratio vs Peers
The above table shows the PE ratio for ESTE vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
CompanyPEEstimated GrowthMarket Cap
Peer Average22.6x
MNRL Brigham Minerals
17.2x2.7%US$1.5b
KRP Kimbell Royalty Partners
60.6x26.5%US$996.4m
CPE Callon Petroleum
4.6x0.8%US$2.2b
LPI Laredo Petroleum
8.1x29.5%US$1.1b
ESTE Earthstone Energy
117.9x4.8%US$1.4b

Price-To-Earnings vs Peers: ESTE is expensive based on its Price-To-Earnings Ratio (117.9x) compared to the peer average (22.6x).


Price to Earnings Ratio vs Industry

How does ESTE's PE Ratio compare vs other companies in the US Oil and Gas Industry?

Price-To-Earnings vs Industry: ESTE is expensive based on its Price-To-Earnings Ratio (117.9x) compared to the US Oil and Gas industry average (11.3x)


Price to Earnings Ratio vs Fair Ratio

What is ESTE's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

ESTE PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio117.9x
Fair PE Ratio14.8x

Price-To-Earnings vs Fair Ratio: ESTE is expensive based on its Price-To-Earnings Ratio (117.9x) compared to the estimated Fair Price-To-Earnings Ratio (14.8x).


Share Price vs Fair Value

What is the Fair Price of ESTE when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: ESTE ($11.68) is trading below our estimate of fair value ($20.15)

Significantly Below Fair Value: ESTE is trading below fair value by more than 20%.


Price to Earnings Growth Ratio

PEG Ratio: ESTE is poor value based on its PEG Ratio (24.4x)


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Future Growth

How is Earthstone Energy forecast to perform in the next 1 to 3 years based on estimates from 7 analysts?

Future Growth Score

2/6

Future Growth Score 2/6

  • Earnings vs Savings Rate

  • Earnings vs Market

  • High Growth Earnings

  • Revenue vs Market

  • High Growth Revenue

  • Future ROE


4.8%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: ESTE's forecast earnings growth (4.8% per year) is above the savings rate (1.9%).

Earnings vs Market: ESTE's earnings (4.8% per year) are forecast to grow slower than the US market (13% per year).

High Growth Earnings: ESTE's earnings are forecast to grow, but not significantly.

Revenue vs Market: ESTE's revenue (9.6% per year) is forecast to grow faster than the US market (7.9% per year).

High Growth Revenue: ESTE's revenue (9.6% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: Insufficient data to determine if ESTE's Return on Equity is forecast to be high in 3 years time


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Past Performance

How has Earthstone Energy performed over the past 5 years?

Past Performance Score

2/6

Past Performance Score 2/6

  • Quality Earnings

  • Growing Profit Margin

  • Earnings Trend

  • Accelerating Growth

  • Earnings vs Industry

  • High ROE


23.2%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: ESTE has a high level of non-cash earnings.

Growing Profit Margin: ESTE became profitable in the past.


Past Earnings Growth Analysis

Earnings Trend: ESTE has become profitable over the past 5 years, growing earnings by 23.2% per year.

Accelerating Growth: ESTE has become profitable in the last year, making the earnings growth rate difficult to compare to its 5-year average.

Earnings vs Industry: ESTE has become profitable in the last year, making it difficult to compare its past year earnings growth to the Oil and Gas industry (102.2%).


Return on Equity

High ROE: ESTE's Return on Equity (1.6%) is considered low.


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Financial Health

How is Earthstone Energy's financial position?

Financial Health Score

2/6

Financial Health Score 2/6

  • Short Term Liabilities

  • Long Term Liabilities

  • Debt Level

  • Reducing Debt

  • Debt Coverage

  • Interest Coverage

Financial Position Analysis

Short Term Liabilities: ESTE's short term assets ($116.9M) do not cover its short term liabilities ($385.6M).

Long Term Liabilities: ESTE's short term assets ($116.9M) do not cover its long term liabilities ($693.4M).


Debt to Equity History and Analysis

Debt Level: ESTE's net debt to equity ratio (50.2%) is considered high.

Reducing Debt: ESTE's debt to equity ratio has increased from 5.9% to 50.2% over the past 5 years.

Debt Coverage: ESTE's debt is well covered by operating cash flow (44.1%).

Interest Coverage: ESTE's interest payments on its debt are well covered by EBIT (3.3x coverage).


Balance Sheet


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Dividend

What is Earthstone Energy current dividend yield, its reliability and sustainability?

Dividend Score

0/6

Dividend Score 0/6

  • Notable Dividend

  • High Dividend

  • Stable Dividend

  • Growing Dividend

  • Earnings Coverage

  • Cash Flow Coverage

Dividend Yield vs Market

Notable Dividend: Unable to evaluate ESTE's dividend yield against the bottom 25% of dividend payers, as the company has not reported any recent payouts.

High Dividend: Unable to evaluate ESTE's dividend yield against the top 25% of dividend payers, as the company has not reported any recent payouts.


Stability and Growth of Payments

Stable Dividend: Insufficient data to determine if ESTE's dividends per share have been stable in the past.

Growing Dividend: Insufficient data to determine if ESTE's dividend payments have been increasing.


Earnings Payout to Shareholders

Earnings Coverage: Insufficient data to calculate payout ratio to determine if its dividend payments are covered by earnings.


Cash Payout to Shareholders

Cash Flow Coverage: Unable to calculate sustainability of dividends as ESTE has not reported any payouts.


Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

4.9yrs

Average management tenure


CEO

Robert Anderson (60 yo)

4.25yrs

Tenure

US$3,249,700

Compensation

Mr. Robert J. Anderson has been the President of Earthstone Energy, Inc. since April 2, 2018 and serves as its Chief Executive Officer since April 01, 2020 and serves as its Director since July 20, 2021. H...


CEO Compensation Analysis

Compensation vs Market: Robert's total compensation ($USD3.25M) is below average for companies of similar size in the US market ($USD5.51M).

Compensation vs Earnings: Robert's compensation has been consistent with company performance over the past year.


Leadership Team

Experienced Management: ESTE's management team is considered experienced (4.9 years average tenure).


Board Members

Experienced Board: ESTE's board of directors are considered experienced (6.7 years average tenure).


Ownership

Who are the major shareholders and have insiders been buying or selling?


Insider Trading Volume

Insider Buying: ESTE insiders have only sold shares in the past 3 months.


Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have been diluted in the past year, with total shares outstanding growing by 44.3%.


Top Shareholders

Company Information

Earthstone Energy, Inc.'s employee growth, exchange listings and data sources


Key Information

  • Name: Earthstone Energy, Inc.
  • Ticker: ESTE
  • Exchange: NYSE
  • Founded: 1969
  • Industry: Oil and Gas Exploration and Production
  • Sector: Energy
  • Implied Market Cap: US$1.351b
  • Market Cap: US$923.910m
  • Shares outstanding: 113.36m
  • Website: https://www.earthstoneenergy.com

Number of Employees


Location

  • Earthstone Energy, Inc.
  • 1400 Woodloch Forest Drive
  • Suite 300
  • The Woodlands
  • Texas
  • 77380
  • United States

Listings


Company Analysis and Financial Data Status

All financial data provided by Standard & Poor's Capital IQ.
DataLast Updated (UTC time)
Company Analysis2022/07/06 00:00
End of Day Share Price2022/07/06 00:00
Earnings2022/03/31
Annual Earnings2021/12/31


Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.