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


conocophillips workers offshore

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.

 

ConocoPhillips Q2 Earnings Preview

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' first quarter production,averaged 1.224 million barrels of oil equivalent per day (BOE/D) and was above the high end of its 1.18 million to 1.22 million BOE/D guidance range. Heading into the second quarter, the company anticipates output averaging 1.17 million to 1.21 million BOE/D, which is lower due to seasonal maintenance activities.

Should ConocoPhillips match ot beat then it is on schedule to produce between 1.2 million to 1.24 million BOE/D for the full year, which would be 5% higher than 2017 and slightly above its initial forecast. This is despite the third-party gas pipeline issue in Malaysia will keep output from that region offline all year. 

Investors will focus on $COP's share repurchase program. Conoco Phillips recently 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 set its capital budget at $5.5 billion for 2018, which has seen production growt 5% versus last year. With Crude over $70 Brent and $65 WTI look for the company to increase 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 also 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.

Previous Earnings: 

 

ConocoPhillips Earnings Q1 Recap

Earnings

Earnings per share excluding special items at 96 cents, beating consensus estimate of 76 cents. Revenues of $8,961 million beat the consensus estimate of $8,601.4 million.

Highlights

  • Total production during the first-quarter 2018 1,269 thousand barrels of oil equivalent per day (MBOE/D), down from 1,593 MBOE/D in the year ago quarter period.
  • For first-quarter 2018, the total realized price of hydrocarbon was recorded at $50.49 per barrel of oil equivalent (BOE), higher than $36.18 per BOE in the January to March quarter of 2017.
  • Average realized price for oil was $65.49 a barrel, up from $50.97 in the year-earlier quarter.
  • 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 yesterday 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.

Previous Earnings

ConocoPhillips $COP Beat Earnings and Revenue on Higher Prices

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, Bloomberg

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