ConocoPhillips’ 2Q’16 Earnings Remain Depressed; Revises 2016 Production And Capex Guidance
As expected, ConocoPhillips (NYSE:COP), one of the world’s largest independent exploration and production companies by proved reserves and annual production, released a weak set of June quarter results, primarily due to depressed commodity prices.
Even though the sharp recovery in commodity prices over the last three months resulted in better price realizations on a sequential basis, the US-based company’s second quarter revenue dropped to $5.6 billion, over 35% lower compared to the same quarter last year. As a result, the oil and gas producer missed its market estimate for revenue by a large margin.
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The drop in revenue had a trickle down effect on the company’s operating margins. Besides, the company recorded higher-than-expected depreciation, depletion and amortization, and interest expense. Thus, its second quarter pre-tax income fell to a loss of $1.1 billion, as opposed to a loss of just $164 million in the same quarter of 2015. This translates to a contraction of 17.1% in the company’s pre-tax margins.
Going forward, ConocoPhillips has raised 2016 production guidance upwards by almost 2% due to better-than-expected results from its key regions. In addition, the company has downwardly revised its operating cost guidance from $7 billion to $6.8 billion for the full year. This is primarily driven by the operational efficiencies that the company estimates it to realize during the year. Finally, the Houston-based company has further cut its capital spending budget to $5.5 billion from $5.7 billion for 2016. Thus, we figure that the company’s high quality assets, along with its consistent efforts to control its costs, will enable it to manage its cash flows more efficiently, and sustain its operations in this downturn.
Have more questions about ConocoPhillips (NYSE:COP)? See the links below:
- ConocoPhillips’ 2Q’16 Earnings To Remain Depressed Due To Persistently Low Commodity Prices
- Why Are We Bullish On ConocoPhillips?
- Why Is OPEC An Important Determinant Of Crude Oil Prices?
- Why Is China A Key Factor In Determining Crude Oil Prices?
- How Are Crude Oil Prices And Global Oil Rig Count Correlated?
- How Are Natural Gas Prices And Global Gas Rig Count Correlated?
- How Have Plummeting Crude Oil Prices Impacted Merger And Acquisitions In The US Oil And Gas Industry?
- How Will ConocoPhillips’ Revenue And EBITDA Grow Over The Next Five Years?
- Weak Commodity Prices Drive Down ConocoPhillips’ 1Q’16 Earnings; Company Cut Capex Guidance To $5.7 Billion
- ConocoPhillips’ 1Q’16 Results To Remain Weak As The Commodity Downturn Deepens
- How Has ConocoPhillips’ Production Mix And Price Realizations Changed Over The Last 6 Years?
- How Will ConocoPhillips’ Revenue Move If Crude Oil Prices Rebound To $100 Per Barrel By 2018?
- How Will ConocoPhillips’ Revenue Move If Crude Oil Price Average At $50 Per Barrel In 2018?
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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