ConocoPhillips’ 3Q’17 Earnings Surge Backed By Its Lower Costs; Capex Budget Revised To $4.5 Billion

by Trefis Team
+6.97%
Upside
50.01
Market
53.50
Trefis
COP
ConocoPhillips
Rate   |   votes   |   Share

Contrary to the market expectations, ConocoPhillips (NYSE:COP), one of the largest independent oil and gas companies in the US, reported a strong set of financial numbers for its September quarter 2017 on 26th October 2017((ConocoPhillips Announces Its September Quarter Results, 5th October 2017, www.conocophillips.com)). The company’s top-line grew by more than 10% compared to the last year, despite a drop in its production volumes due to the disruption caused by the hurricanes Harvey and Nate in the third quarter. Further, the company posted adjusted earnings of 16 cents, more than twice what the analysts had expected, backed by its cost reduction efforts. However, the major highlight of the earnings release was the revision of the company’s capital spending budget to $4.5 billion for the full-year 2017. The move seemed to have pleased the market, causing the company’s stock to rise sharply post the announcement. We have a $50 price estimate for ConocoPhillips’ stock, which is near the current market price.

See Our Complete Analysis For ConocoPhillips Here

Key Highlights of 3Q’17 Earnings

  • Despite the weather challenges in the third quarter, ConocoPhillips recorded an output (excluding Libya) of 1.2 million barrels of oil equivalent per day (boed), backed by the strong performance from the company’s global portfolio. This represents a rise of 1.4% on the underlying production compared to the last year, and is 12,000 boed higher than the midpoint of the company’s guidance for the quarter.
  • On the profitability front, the US-based company made a solid comeback by growing its adjusted earnings by more than $1 billion on a year-on-year basis. This improvement in earnings was driven by higher commodity prices, lower depreciation and exploration expenses, and the impact of dispositions during the quarter. Alaska and Asia Pacific & Middle East regions continued to contribute a majority of the company’s profits.

ConocoPhillips’ Cash Flow Position (YTD)

  • Year-to-date, ConocoPhillips has generated cash flows of $4.5 billion from its operations, exceeding the capital expenditure and dividend payments by over $400 million. This is addition to the $600 million that the company has provisioned towards its pension plan for the year.
  • In terms of shareholder returns, the oil and gas company has repurchased $1 billion of its shares during the September quarter, taking the total repurchased amount for the year to $2 billion. Thus, the company is on track to achieve its target of $3 billion in share buybacks by the end of this year.
  • Furthermore, ConocoPhillips repaid $2.4 billion of its long term debt, bringing down its total debt to $21 billion at the end of the quarter. The company also received a credit rating upgrade during the quarter and is on track to reduce its long term debt to under $20 billion by the end of 2017.

Guidance

  • With an aim to do more with less, ConocoPhillips has revised its capital spending budget to $4.5 billion for the current year. This is the second revision in capital investment by the company, representing a drop of 10% on the guidance provided at the beginning of the year.
  • Despite the capital reduction, the company aims to deliver an underlying production growth of 3%, exceeding its original production guidance of 0%-2%. The full year production guidance stands at 1.35-1.36 million boed, while the fourth quarter production is expected to come in at 1.195-1.235 million boed.
  • With the sale of San Juan basin and Panhandle completed, ConocoPhillips expects to deliver more than $16 billion in asset sales by the end of 2017.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!