A month has gone by since the last earnings report for ConocoPhillips (COP). Shares have added about 2% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is ConocoPhillips due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
ConocoPhillips Misses Q2 Earnings on Low Crude Prices
ConocoPhillips reported second-quarter 2020 adjusted loss per share of 92 cents, wider than the Zacks Consensus Estimate of a loss of 57 cents. The company had recorded adjusted earnings of $1.01 per share a year-ago.
Based in Houston, TX, one of the world’s largest independent oil and gas producer’s quarterly revenues of $4,016 million declined from second-quarter 2019 sales of $8,380 million. Moreover, the figure missed the Zacks Consensus Estimate of $4,187 million.
The weak second-quarter results stemmed from lower realized commodity prices and production volumes. During the second quarter, the company executed production curtailment of 225 thousand barrels of oil equivalent per day (MBoe/d).
ConocoPhillips has maintained its quarterly dividend payment at 42 cents per share. The dividend will be paid on Sep 1, to stockholders of record as on Jul 20. While many leading energy firms are either considering or opted for a cut in dividend payouts amid the coronavirus outbreak, the company’s decision to maintain dividend is expected to send positive signals.
Total production averaged 981MBoe/d, down from the year-ago quarter’s 1,332MBoe/d. Of the total output, 48.3% was crude oil. The overall production was lower than the year-ago period, primarily due to planned curtailments and normal field decline. Contributions from Lower 48 Big 3 unconventional resources partially offset the negative. Libya production was under force majeure during the second quarter.
ConocoPhillips’ production of crude oil came in at 474 thousand barrels per day (MBD), lower than the year-ago quarter’s 702 MBD. Moreover, the company’s production of natural gas liquids totaled 93 MBD, lower than the year-ago quarter’s 118 MBD. Bitumen production in the quarter was recorded at 34 MBD, lower than the second-quarter 2019 figure of 51 MBD. Also, natural gas output came in at 2,277 million cubic feet per day (MMcf/d), lower than the year-ago level of 2,768 MMcf/d.
Realized Prices Decline
The average realized crude oil price during the second quarter was $25.10 per barrel, showing a decline from the year-ago realization of $64.88. Realized natural gas liquids price was recorded at $9.88 per barrel, lower than the year-ago quarter’s $21.65. Average realized natural gas price during second-quarter 2020 was $3.22 per thousand cubic feet, down from the year-ago period’s $4.76. As such, average realized oil equivalent prices fell to $23.09 per barrel from the year-ago level of $50.50.
Total Expenses Fall
ConocoPhillips’ second-quarter total expenses contracted to $3,995 million from $6,322 million in the corresponding period of 2019. Production and operating expenses fell to $1,047 million in the reported quarter from $1,418 million a year ago. Also, exploration costs decreased to $97 million in second-quarter 2020 from $122 million in the comparable period of 2019.
Balance Sheet & Capital Spending
As of Jun 30, 2020, the oil giant had $2,907 million in total cash and cash equivalents. The company had a total long-term debt of $14,852 million, representing a debt-to-capitalization ratio of 0.32.
Capital expenditures and investments totaled $876 million, and dividend payments grossed $455 million.
Owing to weak commodity prices due to coronavirus pandemic, the upstream energy player had voluntarily curtailed production volumes. With improving crude prices, it is bringing back production online. It has completely restored production in Alaska during July. The company now expects Lower 48 production to be 100% restored by September. Notably, its Montney second pad is expected to commence in the third quarter. During the September quarter, ConocoPhillips is anticipated to execute turnarounds in Alaska, Canada, APME and Norway. Overall, the company is likely to execute third-quarter production curtailment of 115 MBoe/d.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -45% due to these changes.
At this time, ConocoPhillips has a subpar Growth Score of D, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, ConocoPhillips has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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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.