) reported second quarter 2012 adjusted earnings of $1.22 per
share, surpassing the Zacks Consensus Estimate of $1.17. However,
earnings were down by almost 25.6% from the year-earlier profit of
$1.64, reflecting lower oil price realization, weak production
volume and the divestiture of its refining and pipelines business.
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Revenues in the reported quarter decreased to $15,166 million from
the year-ago level of $17,668 million. However, the reported figure
comfortably surpassed our projection of $9,883 million.
Recently, ConocoPhillips completed the spin-off of its
refining/sales business into a separate, independent and publicly
). Hence, the current quarter includes one month of downstream
earnings, whereas the prior-year quarter included three months of
Exploration and Production
Daily production averaged 1.54 million barrels of oil equivalent
(MMBOE), down from 1.64 MMBOE in the year-ago quarter. The decline
was mainly due to the impact of divestitures and maintenance
downtime, accompanied by reductions in North American conventional
natural gas. In addition, natural decline in fields also
contributed to the weak production that was partly mitigated by
production from key projects and drilling ventures.
Average realized price for oil was $105.56 per barrel, compared
with $112.95 in the year-earlier quarter. The price for natural gas
was $4.41 per thousand cubic feet (Mcf) versus $5.50 realized in
second quarter 2011.
As of June 30, 2012, ConocoPhillips generated $3.0 billion in cash
from continuing operating activities (excluding working capital).
At quarter end, the company had total cash of $6.0 billion and
$23.0 billion in debt, with a debt-to-capitalization ratio of 33%.
The company repurchased 52 million shares, or 4% of shares
outstanding, for $3.1 billion, thus bringing the total to 20% of
shares outstanding since the inception of the repurchase program in
2010. ConocoPhillips also paid $800 million in dividends and
incurred $4.0 billion in capital expenditures.
ConocoPhillips maintained its full-year 2012 production guidance in
the range of 1.55-1.60 MMBOE/d, depending on the timing of
disposals. Earlier, the company had disclosed that it expects
production growth to average between 3% and 5% in the next five
years, as it focuses on liquid-rich ventures primarily in the U.S.
Recommendation & Rating
We have a long-term Underperform recommendation on ConocoPhillips -
the third biggest U.S. integrated oil company, following
) - supported by a Zacks #5 Rank (short-term Strong Sell