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ConocoPhillips (COP) Beats Q4 Earnings Estimates, Hikes VROC

·5 min read

ConocoPhillips COP reported fourth-quarter 2021 adjusted earnings per share of $2.27, comfortably beating the Zacks Consensus Estimate of $2.20. Further, the figure significantly improved from an adjusted loss of 19 cents per share a year ago.

Based in Houston, TX, one of the world’s largest independent oil and gas producers, ConocoPhillips’ quarterly revenues of $15,963 million increased from fourth-quarter 2020 sales of $6,049 million. Also, the figure beat the Zacks Consensus Estimate of $13,415 million.

The strong fourth-quarter results were aided by increased production volumes and realized oil equivalent prices.

Along with the quarterly results, ConocoPhillips reported a second-quarter variable return of cash (VROC) payment of 30 cents per share. This reflects an increment of 50% from the first-quarter VROC.

Another energy major that reported strong quarterly results this week is Exxon Mobil Corporation XOM. The fourth-quarter results of ExxonMobil were aided by improved realized oil and natural gas prices as well as higher refining and chemical margins.

ExxonMobil initiated share repurchases at the beginning of the March quarter of this year. The buybacks are associated with the repurchase plan announced earlier, representing the program of repurchasing up to $10 billion over the next 12 to 24 months.

Production

Total production averaged 1,608 thousand barrels of oil equivalent per day (MBoe/d), up from the year-ago quarter’s 1,169 MBoe/d. Of the total output, almost 52% was crude oil. Overall production was higher than the year-ago period, primarily due to significantly increased output in the Lower 48.

ConocoPhillips’ production of crude oil came in at 836 thousand barrels per day (MBbls/d), significantly higher than the year-ago quarter’s 595 MBbls/d. Natural gas output came in at 3,058 million cubic feet per day (MMcf/d), higher than the year-ago level of 2,394 MMcf/d. Bitumen production for the quarter was recorded at 68 MBbls/d, lower than the fourth-quarter 2020 figure of 69 MBbls/d. ConocoPhillips’ production of natural gas liquids totaled 194 MBbls/d, higher than the year-ago period’s 106 MBbls/d.

Realized Prices

Average realized oil equivalent prices rose to $65.56 per barrel from the year-ago level of $33.21.

The average realized crude oil price for the fourth quarter was $76.76 per barrel, reflecting an increase from the year-ago realization of $40.89. Realized natural gas liquids price was recorded at $37.72 per barrel, higher than the year-ago quarter’s $17.98. Average realized natural gas price for fourth-quarter 2021 was $8.66 per thousand cubic feet, up from the year-ago period’s $3.23. Average realized bitumen price was recorded at $40.74 per barrel, which reflects an increase from the year-ago level of $19.41.

Total Expenses

ConocoPhillips’ fourth-quarter total expenses rose to $11,627 million from $7,135 million in the corresponding period of 2020.

Production and operating expenses rose to $1,543 million for the reported quarter from $1,161 million a year ago. Similarly, the cost of purchased commodities rose to $6,498 million for the quarter from $2,448 million a year ago. Nonetheless, exploration costs decreased to $138 million for the December quarter of 2021 from $1,047 million in the comparable period of 2020.

Balance Sheet & Capital Spending

As of Dec 31, 2021, ConocoPhillips had $5,028 million in total cash and cash equivalents. The company had a total long-term debt of $18,734 million. It had a debt-to-capitalization ratio of 0.31. At fourth quarter-end, the company had short-term debt of $1,200 million.

Capital expenditures and investments totaled $1,557 million, and dividend payments grossed $609 million. Net cash provided by operating activities was recorded at $5,868 million.

Reserves

ConocoPhillips reported preliminary 2021 year-end proved reserves at 6.1 billion BoE. COP added its total reserve replacement ratio at 377%.

Guidance

ConocoPhillips projects its 2022 production at 1.8 million barrels of oil equivalent per day (MMBoe/d). For the March quarter of this year, ConocoPhillips projects production in the band of 1.75 MMBoe/d to 1.79 MMBoe/d.

COP expects capital budget for 2022 at $7.2 billion.

ConocoPhillips revised higher its expected 2022 return of capital to shareholders. The new guidance is at $8 billion, reflecting an increase from the prior projection of $7 billion. The incremental returns to stockholders will get distributed through share repurchases and VROC tiers.

Zacks Rank & Stock to Consider

ConocoPhillips carries a Zacks Rank #3 (Hold). Better-ranked players in the energy space include Murphy USA Inc. MUSA and APA Corporation APA. While Murphy USA sports a Zacks Rank #1 (Strong Buy), APA Corporation carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Murphy USA is well-positioned to gain from improving gasoline demand in the coming months since it is a prominent retailer of gasoline and convenience merchandise. With a network of retail gasoline and convenience stores in 27 states, Murphy USA serves an estimated 2 million customers every day.

In the past 30 days, Murphy USA has witnessed upward earnings estimate revisions for 2022.

APA Corporation is well poised to gain from the latest spike in crude oil and natural gas prices, banking on its exploration and production activities in the United States, Egypt and the U.K.

In the past seven days, APA Corporation has witnessed upward earnings estimate revisions for 2022. The Zacks Consensus Estimate for APA Corporation’s 2022 earnings of $6.40 per share suggests year-over-year improvement of more than 59%.


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