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What's in the Cards for ConocoPhillips' (COP) Q3 Earnings?

ConocoPhillips COP is scheduled to report third-quarter 2020 results on Oct 29, before the opening bell.

In the last reported quarter, the upstream energy company’s adjusted loss of 92 cents per share was wider than the Zacks Consensus Estimate of a loss of 57 cents, primarily due to lower realized commodity prices and production volumes. The firm beat earnings estimates twice in the trailing four quarters and missed on the other two occasions, delivering an average surprise of 13%.

ConocoPhillips Price and EPS Surprise

ConocoPhillips Price and EPS Surprise

ConocoPhillips price-eps-surprise | ConocoPhillips Quote

Let’s see how things have shaped up prior to the earnings announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for third-quarter loss per share of 33 cents has witnessed two upward and five downward revisions by firms in the past 30 days. This estimate is indicative of a 140.2% decline from the year-ago reported figure.

The Zacks Consensus Estimate for third-quarter revenues is pegged at $4.4 billion, suggesting a decline of 56.4% from the year-ago reported figure.

Factors Driving Third-Quarter Earnings

Being primarily involved in the exploration and production of oil and natural gas, ConocoPhillips’ earnings and revenues are directly related to commodity prices. As the demand for energy products was destroyed by the coronavirus pandemic, commodity prices were in the bearish territory. The WTI Crude price averaged $40.71, $42.34 and $39.63 per barrel in July, August and September, respectively, in 2020. The crude price level was significantly lower year over year, which averaged $57.35, $54.81 and $56.95 per barrel for the three months of third-quarter 2019.

During September-end, it provided some preliminary operational and financial updates for the third quarter of 2020. Its overall production, excluding Libya, is estimated in the range of 1,050-1,070 thousand barrels of oil equivalent per day (MBoe/d). The company reported production of 1,366 MBoe/d in the year-ago quarter. Third-quarter Libya production is expected to be 1 MBoe/d.

Due to low oil prices and an oversupplied market, production curtailment on a net basis in the quarter was around 90 MBoe/d. The curtailment in the Lower 48 was 65 MBoe/d, while the same was 15 MBoe/d in Surmont operation in Canada. The remaining curtailments were in Malaysia and Norway.

Hence, a year-over-year decrease in crude prices and hydrocarbon production in the third quarter is expected to have affected the upstream company’s profits. The company expects third-quarter adjusted operating costs within $1,180-$1,250 million. Capital expenditures for the quarter are estimated in the range of $750-$820 million. Moreover, capital used for acquisition purposes is estimated at $385 million.

What the Quantitative Model Suggests

Our proven model does not conclusively predict an earnings beat for ConocoPhillips this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here as you will see below.

Earnings ESP: ConocoPhillips has an Earnings ESP of +6.63%. This is because the Most Accurate Estimate for the quarter is currently pegged at a loss of 31 cents, narrower than the Zacks Consensus Estimate of a loss of 33 cents per share. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: ConocoPhillips currently carries a Zacks Rank #4 (Sell).

Stocks That Warrant a Look

Here are some companies from the Energy space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming quarterly reports:

EOG Resources, Inc. EOG has an Earnings ESP of +48.62% and is a Zacks #3 Ranked player. The company is scheduled to release third-quarter results on Nov 5. You can see the complete list of today’s Zacks #1 Rank stocks here.

DCP Midstream, LP DCP has an Earnings ESP of +4.77% and a Zacks Rank of #1. It is scheduled to report third-quarter results on Nov 4.

Southwestern Energy Company SWN has an Earnings ESP of +18.13% and holds a Zacks Rank #3. It is set to report third-quarter results on Oct 29.

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Southwestern Energy Company (SWN): Free Stock Analysis Report
 
ConocoPhillips (COP): Free Stock Analysis Report
 
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DCP Midstream Partners, LP (DCP): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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