QEP: Attractive Dividend But This E&P Has Some Real Risks

Seeking AlphaQEP: Attractive Dividend But This E&P Has Some Real RisksSep. 28, 2020 1:32 PM ET|| About: QEP Resources, Inc. (QEP), Includes: CLR, COG, NOG, OAS, RIG, RRCby: Power HedgePower Hedge Energy Profits in DividendsIn-depth Research on underfollowed dividend stocks with 7%+ yieldsSummaryQEP is active in some of the most resource-rich basins in the United States and its production is mostly crude oil.
The company has taken some steps to preserve its finances and should therefore generate about $100 million in FCF this year.
It will take all of this and the cash on the balance sheet to cover its 2021 debt maturities if the market remains lukewarm to the company's debt.
The company has even more debt maturing in 2022 and it is difficult to see how it will cover this if the market does not substantially improve in the next several months.
The 4% yield is attractive but the risks here are too great for an investor looking for a long-term income play.
QEP Resources, Inc. (QEP) is a midsized independent exploration and production company focused on the Williston Basin in North Dakota and the Permian basin in Texas. Curiously though, the company is actually headquartered in Denver, Colorado despite not having any operations in that region. Independents like this have been among the most vulnerable to the weakness that we have been seeing in energy prices and its stock price performance certainly reflects this. This may make some investors believe that the company is a bargain at the current price but I am not so sure. There are some very real risks here that a smart investor will want to pay attention to.
About QEP Resources
As stated in the introduction, QEP Resources operates in the Williston Basin and the Permian Basin:

Source: QEP Resources, Inc.
These are among the two wealthiest resource basins in the world so these are certainly reasonable areas for the company to operate in from that regard. One thing that we note though... Read more