How Will ConocoPhillips’ Revenue Change If Crude Oil Prices Average $50 Per Barrel In 2018?

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ConocoPhillips

The revenues and profitability of an oil and gas company highly depend on commodity markets. Hence, the sharp fall in commodity prices over the last 20 months has resulted in a notable decline in the price realizations for the various commodities. As a result, E&P companies had to pull back their exploration and drilling plans during 2015, leading to a notable decline in their top line as well as profitability.

For this reason, ConocoPhillips, a US-based E&P company, has witnessed a notable decline in its revenues and earnings over the last few quarters. Its revenue dropped more than 45% in 2015 compared to the previous year, while its EBITDA plunged more than 60% during the same period.

Based on a weak outlook for commodity prices in the near future, we expect crude oil prices to remain weak in the short term and gradually recover to $70 per barrel by 2018. In this case, ConocoPhillips’ production and price realization will remain low in 2016 and grow gradually over the following two years. These numbers are presented in the table below under the base case calculations. If, however, the commodity markets take longer-than-expected to recover and crude oil prices average only $50 per barrel by 2018, ConocoPhillips’ revenue in 2018 is likely to be 24% lower than our base case.

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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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