Have a Drink, Grab a Nickel on Energy Earnings Call `Buzzwords'

(Bloomberg) -- Capital discipline. Permian differentials. Regional sand. As energy company earnings calls kick off, the buzzwords will be everywhere.

"Collect a nickel (or sip from your beverage) every time you hear the following words/phrases mentioned on an earnings call," Capital One Securities’ exploration & production analysts said in a note to clients last week.

Also on the list: share buybacks and free cash flow generation. That’s no surprise after unloved energy stocks began 2018 as a laggard relative to the S&P 500 and rising crude prices. Now that they’re the index’s third-best performing industry, analysts are getting weary of the lingo.

"Although conventional wisdom suggests capital repatriation is a sound tool for shareholder engagement, we believe retiring debt and improving liquidity are more plausible alternatives for exploration and production companies’ excess cash in 2018," Bloomberg Intelligence said in a March note. Acquisitions are another less-urgent option, while buybacks and dividend increases should be low priorities, BI adds.

Execution is also crucial, as it’s the "single most important driver of many stocks around earnings season", Capital One added. Among producers looking to gain back some "execution mojo" include Carrizo Oil & Gas Inc. and Parsley Energy Inc. They recommend owning Callon Petroleum, Concho Resources and Parsley Energy into earnings, while they’re cautious on names including Chesapeake Energy Corp. and Marathon Oil Corp.

Schlumberger Ltd and Baker Hughes are among the first to report, with results and calls on Friday morning, while ConocoPhillips kicks off the large-cap producer reports on April 26.

©2018 Bloomberg L.P.