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ConocoPhillips (COP) Q3 Earnings Miss on Low Crude Prices

Zacks Equity Research
·5 min read

ConocoPhillips COP reported third-quarter 2020 adjusted loss per share of 31 cents, wider than the Zacks Consensus Estimate of a loss of 30 cents. The company recorded adjusted earnings of 82 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 $4,380 million declined from third-quarter 2019 sales of $10,093 million. Moreover, the figure missed the Zacks Consensus Estimate of $4,797 million.

The weak third-quarter results stemmed from lower realized commodity prices and production volumes. During the September quarter, the company executed production curtailment of 90 thousand barrels of oil equivalent per day (MBoe/d).

ConocoPhillips Price, Consensus and EPS Surprise

ConocoPhillips Price, Consensus and EPS Surprise
ConocoPhillips Price, Consensus and EPS Surprise

ConocoPhillips price-consensus-eps-surprise-chart | ConocoPhillips Quote

Operational Update

Production Falls

Total production averaged 1,067 MBoe/d, down from the year-ago quarter’s 1,366 MBoe/d. Of the total output, 51.4% was crude oil. 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 production decline. Libya production remained under force majeure during the third quarter.

ConocoPhillips’ production of crude oil came in at 548 thousand barrels per day (MBD), lower than the year-ago quarter’s 710 MBD. Moreover, the company’s production of natural gas liquids totaled 97 MBD, lower than the year-ago period’s 114 MBD. Bitumen production for the quarter was recorded at 49 MBD, lower than the third-quarter 2019 figure of 63 MBD. Also, natural gas output came in at 2,235 million cubic feet per day (MMcf/d), lower than the year-ago level of 2,871 MMcf/d.

Realized Prices Decline

The average realized crude oil price for the third quarter was $39.45 per barrel, reflecting a decline from the year-ago realization of $59.57. Realized natural gas liquids price was recorded at $15.29 per barrel, lower than the year-ago quarter’s $15.59. Average realized natural gas price for third-quarter 2020 was $2.70 per thousand cubic feet, down from the year-ago period’s $4.74. As such, average realized oil equivalent prices fell to $30.94 per barrel from the year-ago level of $47.07.

Total Expenses Fall

ConocoPhillips’ third-quarter total expenses contracted to $4,892 million from $6,600 million in the corresponding period of 2019. Production and operating expenses fell to $963 million for the reported quarter from $1,331 million a year ago. Also, exploration costs decreased to $125 million for third-quarter 2020 from $360 million in the comparable period of 2019.

Balance Sheet & Capital Spending

As of Sep 30, 2020, the oil giant had $2,490 million in total cash and cash equivalents, down from the second-quarter level of $2,907 million. The company had a total long-term debt of $14,905 million, up sequentially from $14,852 million. It had a debt-to-capitalization ratio of 0.33. At third quarter-end, the company had a short-term debt of $482 million.

Capital expenditures and investments totaled $1,132 million, and dividend payments grossed $454 million. Net cash provided by operating activities was recorded at $868 million, down from the year-ago figure of $2,337 million.

Outlook

Owing to weak commodity prices due to coronavirus pandemic, the upstream energy player voluntarily curtailed production volumes for a while. With improving crude prices, it has brought back production online. Notably, its Montney third pad is expected to commence in first-quarter 2021. Moreover, the Tor II project in Norway is expected to produce first oil in the fourth quarter.

The company expects fourth-quarter production in the range of 1,125-1,165 MBoe/d. As such, full-year 2020 production will likely be within 1,115-1,125 MBoe/d. The figures exclude production from Libya. It expects operating plan capital for this year to be $4.3 billion.

Zacks Rank & Stocks to Consider

The company currently has a Zacks Rank #4 (Sell). Some better-ranked players in the energy space include Cabot Oil & Gas Corporation COG, Equitrans Midstream Corporation ETRN and Antero Resources Corporation AR, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cabot Oil & Gas’ bottom line for 2021 is expected to rise 201.6% year over year.

Equitrans’ full-year 2020 earnings estimates have risen 18.9% in the past 60 days.

Antero Resources’ bottom line for 2021 is expected to jump 31% year over year.

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