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ConocoPhillips reported better than expected third quarter earnings before the market opened Thursday. Houston based $COP is the largest U.S. based independent exploration and production firm based on production volumes. 


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ConocoPhillips Q3 Earnings

Conoco Phillips Inc. (NYSE: $COP) Reported Earnings Before Open Thursday

$1.36 Beat $1.17 EPS Forecast And $10.2 Billion Beat $9.45 Bil Revenue Forecast

Earnings

ConocoPhillips (COP) reported third-quarter 2018 adjusted earnings per share of $1.36 on revenue of $10,2 billion higher than  third-quarter 2017 sales of $5.4 billion. The reuslts beat analysts consensus estimates for third-quarter earnings of $1.17 per share on third-quarter revenues of $9,456 million, a rise of 31.4% from the year-ago quarter’s figure.

ConocoPhillips NYSE: $COP

Market Reaction $68.02 USD +2.35 (+3.58%) @ Close

Highlights

  • ConocoPhillips’ third-quarter total expenses increased 11% from the corresponding period of 2017 to $7.3 billion.
  • The company received $3 45 million during the quarter as part of its $2 billion arbitration award with Venezuela's state-run PDVSA.

Production

  • The production of oil and natural gas averaged 1,261 thousand barrels of oil equivalent per day (64% liquids), up 2.9% from last year beat estimate of 1,247 thousand barrels of oil equivalent per day.
  • 48% growth in COP’s Big 3 unconventional assets (Eagle Ford, Bakken and Delaware).
  • ConocoPhillips’ production for oil, natural gas liquids (NGLs) and bitumen was 806 thousand barrels per day, while natural gas output came in at 2,732 million cubic feet per day.
  • The average realized crude oil price during the third quarter was $73.05 per barrel, representing an increase of 47.9% from the year-ago realization of $49.39.
  • Meanwhile, the average realized natural gas price during the September quarter of 2018 was $5.81 per thousand cubic feet, up 41.4% from the year-ago period.

Balance Sheet & Capital Spending

  • As of Sep 30, 2018, the oil giant, with a market capitalization of around $76 billion, had $3.9 billion in total cash, cash equivalents and restricted cash.
  • The company had long-term debt of nearly $15 billion, representing a debt-to-capitalization ratio of 32%.
  • In the reported quarter, ConocoPhillips generated $3.4 billion in cash from operating activities.
  • Capital expenditures and investments totaled almost $1.6 billion and dividend payments grossed $334 million.

Guidance

  • ConocoPhillips raised its 2018 capital spending projection from $6 billion to $6.1 billion.
  • For the October-to-December quarter of this year, the company projects production in the range of 1,275-1,315 thousand barrels of oil equivalent per day.

 

What Analysts Will Be Watching

ConocoPhillips explores for, produces, transports, and markets crude oil, bitumen, natural gas, LNG, and natural gas liquids (NGLs) worldwide.

  • ConocoPhillips production of oil equivalent per day (BOE/D)  to BOE/D guidance range. 
  • Seasonal maintenance activities.
  • Update on third-party gas pipeline issue in Malaysia
  • $COP's share repurchase program. Conoco Phillips this year announced a 50% increase in this year's share buyback plan to $3 billion. The company also reported it reduced debt by $2.1 billion during Q2 and has already reached its 2019 year-end debt target of $15 billion.
  • ConocoPhillips capital budget, look for changes in CapEx.

ConocoPhillips' big three shale plays, Bakken, Eagle Ford, and Permian Basin are its key growth drivers in 2018, delivering 20% production growth versus last year. Haliburton in their earnings report warned that pipeline constraints in the Permian have had producers rethinking their plans.

ConocoPhillips has in the past hinted that it might reduce its drilling activities in the Permian due to the pipeline issues. CEO Ryan Lance said last month he is "not sure it makes sense to drill into that headwind."  Will $COP reallocate capital away from the Permian and toward the Bakken and Eagle Ford.

Conoco’s portfolio includes resource-rich North American tight oil and oil sands assets; lower-risk legacy assets in North America, Europe, Asia and Australia; various international developments; and an inventory of conventional and unconventional exploration prospects. $COP has reloaded portfolio depth in the Bakken and Eagle Ford, and with visibility on future growth from a sizable position in the Permian. 

Conoco Phillips Inc. (NYSE: $COP) Q2 Earnings Recap

Conoco Phillips Inc. (NYSE: $COP) Reported Mixed Earnings Before Open Thursday

$1.09 Beat $1.06 EPS But $9.24 billion Missed $9.74 billion forecast in revenue 

Earnings 

ConocoPhillips second-quarter net income of $1.64 billion, after reporting a loss in the same period a year earlier. Net income of $1.39. Earnings, adjusted for non-recurring gains, came to $1.09 per share ahead of expectations.of $1.06 per share. Revenue of $9.24 billion under the expected $9.79 billion.

ConocoPhillips NYSE: $COP

Market Reaction Pre-Market $70.88  - 0.60 (-0.84%)

Highlights

ConocoPhillips issued an updated 2018 capital guidance of $6.0 billion, rising from the prior budget of $5.5 billion due to $65/bbl WTI prices. The prior budget was based upon $50/bbl pricing.

Cash Position and Buybacks

ConocoPhillips reported second quarter 2018 cash provided by operating of $3.34 billion, which exceeded capital spending, dividends and share repurchases for the quarter. Conoco's total capital spending for the quarter was $1.5 billion, rising from first quarter spending of $1.0 billion.

During the quarter, COP repurchased $0.6 billion in common shares, bringing first half 2018 repurchases to $1.1 billion. They also paid down $2.1 billion in balance sheet debt, achieving their debt reduction target 18-months ahead of schedule.

  • Natural gas liquids were sold at $28.37 a barrel, up from $24.87 in the year-ago quarter.
  • The price of natural gas was $5.13 per thousand cubic feet, up from $3.84 in first-quarter 2017.

Outlook

  • ConocoPhillips reiterated its 2018 capital spending at $5.5 billion.
  • For the April-to-June quarter of this year, the company projects production in the range of 1,170-1,210 MBOED.
  • For 2018, the company’s production projection was raised from 1,195 -1,235 MBOED to 1,200-1,240 MBOED.

ConocoPhillips reported that in the first quarter of 2018 they bought back $0.5 billion in common stock and increased their buyback program by 33% to $2 billion.

ConocoPhillips wins $2bn arbitration against Venezuela

ConocoPhillips announced earlier in the year it won a $2bn arbitration hearing against Venezuelan state oil company PDVSA relating to a change in contract terms on two heavy oil projects in which ConocoPhillips invested in 2007.

The ruling by an International Chamber of Commerce panel is final and binding, and represents more than 20% of the Venezuelan government's foreign currency reserves,  according to Bloomberg.

ConocoPhillips is pursuing separate legal action against Venezuela under the World Bank investment dispute mechanism. The World Bank has already ruled that Venezuela broke international law when it nationalized Conoco s stakes in the two fields, and proceedings to determine a level of compensation are ongoing.

Venezuela faces 22 additional arbitration cases at theWorld Bank.

About ConocoPhillips

ConocoPhillips explores for, produces, transports and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG) and NGLs worldwide. Conoco’s portfolio includes resource rich North American tight oil and oil sands assets; lower-risk legacy assets in North America, Europe, Asia and Australia; various international developments; and an inventory of conventional and unconventional exploration prospects.

Source: ConocoPhillips

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