ConocoPhillips’ 2Q’16 Earnings To Remain Depressed Due To Persistently Low Commodity Prices

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ConocoPhillips

  • ConocoPhillips (NYSE:COP), the US-based independent oil and gas company, is slated to release its June quarter 2016 results on 28th July 2016. [1]

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  • Although the E&P company’s revenue are likely to see a notable decline due to depressed commodity prices compared to last year, the fall is expected to be lower-than-anticipated due to the sudden recovery in crude oil prices (more than 35% higher) over the last three months.
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  • In order to preserve its operating margins, ConocoPhillips has been proactively trying on control its operating costs while keeping its production flat for the year. The company targets to reduce its operating costs to $7 billion by the end of 2016, translating into a reduction of ~28% since 2014. For this, the Houston-based company plans to cut another 1,000 jobs in the remaining half of 2016. [2] However, despite these efforts, we anticipate the company’s bottom line to drop sharply in 2Q’16, both sequentially as well as annually.

ConocoPhillips’ Operating Costs 

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  • While the commodity markets have shown signs of recovery in the last quarter, it is difficult to say if the markets have bottomed out. Thus, we believe that the global upstream capital expenditure will remain low, even for the remaining half of 2016. Consequently, ConocoPhillips had cut its capital spending budget to $5.7 billion, almost 45% lower compared to last year.

ConocoPhillips’ Capital Expenditure

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  • Further, the company has reduced its quarterly dividend to 25 cents from almost 75 cents to conserve its cash flows in the current weak price environment. [3]

See Our Complete Analysis For ConocoPhillips Here

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for ConocoPhillips

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Notes:
  1. ConocoPhillips To Announce Its Second Quarter 2016 Results, 7th July 2016, www.conocophillips.com []
  2. ConocoPhillips To Lay Off Another 1,000 Energy Workers, 21st July 2016, Wall Street Journal []
  3. ConocoPhillips Announces Quarterly Dividend, 13th July 2016, www.conocophillips.com []