ConocoPhillips ( COP ) reported fourth
quarter 2012 adjusted earnings of $1.43 per share, surpassing the
Zacks Consensus Estimate of $1.41. However, the reported figure
fell almost 7.7% from the year-earlier profit of $1.55. The year
over year underperformance mainly reflects weak oil and gas
prices.CONOCOPHILLIPS (COP): Free Stock Analysis
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Revenues in the reported quarter increased to $16,366.0 million
from the year-ago level of $16,118.0 million and comfortably
surpassed our projection of $11,996.0 million.
In 2012, adjusted earnings of $5.37 per share dropped 6.6% from
the year-ago profit level of $5.75 and also missed the Zacks
Consensus Estimate of $5.87 by 8.5%.
Full-year total revenue of $62,004 million dropped 6.2% from
$66,069 million in 2011.
Exploration and Production
Daily production averaged 1.607 million barrels of oil equivalent
(MMBOE) in the quarter, up marginally by 0.6% from 1.597 MMBOE in
the year-ago quarter. The improvement was mainly attributable to
the production from new fields as well as upstream ventures from
key projects associated with higher production in China and Libya.
This was partly offset by the natural decline in fields and
Full-year production of 1.578 MMBOE per day decreased by 2.5% from
the year-earlier production level of 1.619 MMBOE/d.
Weak commodity prices across all set of categories adversely
affected the company's quarterly earnings. Overall price
realization dropped 3.6% to $67.45 per BOE from $69.99 per BOE in
the fourth quarter of 2011.
Average realized price for oil was $103.08 per barrel compared
with $105.92 in the year-earlier quarter. The price for natural gas
was $5.79 per thousand cubic feet (Mcf) versus $5.88 realized in
fourth quarter 2011, reflecting a decrease of 1.5%. Natural gas
liquids (NGL) were sold at $44.93 per barrel, a decrease of 18%
from the year-ago level of $55.06 per barrel. The company's bitumen
prices tumbled 31% year over year to $48.31 per barrel.
At the end of the fourth quarter, ConocoPhillips generated $4.27
billion in cash from continuing operating activities (excluding
working capital). As of Dec 31, 2012, the company had total cash
and cash equivalents of $3. 62 billion and $21.7 billion in debt,
with a debt-to-capitalization ratio of 31%.
ConocoPhillips also paid $3.3 billion in dividends during 2012 and
incurred $15.7 billion in capital expenditures during the
Asset Sale Program
The company has generated $2.1 billion in proceeds from asset
sales for the full year, and expects to raise an additional $9.6
billion from the disposition program by mid-2013.
For the first quarter of 2013, daily production is expected in the
band of 1,580-1,600 thousand barrels of oil equivalent (MBOE). For
full-year 2013, production is expected in the 1,475-1,525 MBOE per
The ongoing ramp-up in major North American programs, mainly in
the Eagle Ford and oil sands continue to contribute favorably to
The company also remains on track to deliver average annual
production as well as margin growth of 3% to 5%, as it focuses on
liquid-rich ventures primarily in the U.S. and Canada.
With leading positions in both natural gas and heavy crude oil in
North America, as well as a legacy position in the North Sea and
growing exposure to lucrative international regions, ConocoPhillips
expects to replace reserves and sustain production growth over the
long term. ConocoPhillips' exploration initiatives toward
liquids-rich plays are gaining momentum through the Eagle Ford,
Bakken and North Barnett shale plays.
The Houston-based company said that its preliminary proved
reserves were 8.6 billion BOE as of Dec 31, 2012, and Organic
Reserve Replacement of 2012 will likely be 156%. This addition of
proved reserve was mostly from its holdings in the Canadian oil
The company also remains on track to shift its focus to the
liquid-rich areas. In Canada and the lower 48 U.S. states, the
percentage of liquids in production surged to 48% in the fourth
quarter 2012 from 43% in the year-ago period. ConocoPhillips
remains upbeat about its output in its Eagle Ford and Bakken
holdings in the U.S.
Although the company experienced growth in production in the
quarter, its full-year production level decreased. Again,
ConocoPhillips completed the spin-off of its refining/sales
business into a separate, independent and publicly traded company,
Phillips 66 ( PSX ) last year. With
this, ConocoPhillips has shifted its total focus to upstream
operations and thus oil and gas prices play a major role in
determining its performance.
We believe that any downtrend in the global economy will affect
the supply-demand fundamentals of oil and gas, hurting the sales
prices for crude oil and natural gas.
We have a Zacks Rank #3 Rank (Hold) for ConocoPhillips - the third
biggest U.S. integrated oil company after ExxonMobil
Corporation ( XOM ) and
Chevron Corporation ( CVX ).