ConocoPhillips’ 4Q’17 Earnings To Surge Backed By The Recovery In Commodity Prices
ConocoPhillips (NYSE:COP), one of the largest independent oil and gas companies, is expected to report its December quarter and full year 2017 financial results on 1st February 2018((ConocoPhillips To Announce Its December Quarter Results, 11th January 2018, www.conocophillips.com)). The market expects the company to post a strong improvement in its top-line, backed by the recovery in commodity prices and improved production through the year. Further, the company’s efforts to bring down its break-even price are expected to convert into the higher earnings for the year. The investor optimism for the company is evident from the 20% rise in its stock price over the last one year. We have a price estimate of $53 per share for the company, which is slightly lower than its current market price.
See Our Complete Analysis For ConocoPhillips Here
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Key Trends Witnessed In 4Q’17
- As a result of the extension of the Organization of Petroleum Exporting Countries’ (OPEC) production cuts in the fourth quarter, commodity prices witnessed a sharp rise. The WTI crude oil prices averaged at $55.26 per barrel for the December quarter, notably higher than the $48.18 per barrel of the previous quarter. Thus, we expect this higher price realization to boost ConocoPhillips’ revenue for the quarter as well as the full year 2017.
- Despite the asset sales completed through the year, we expect the company to meet its production targets for the year, which will allow it to capitalize on the recovery in commodity prices.
- Based on the latest investor update, ConocoPhillips expects to spend only $4.5 billion in capital expenditure for 2017, which is lower than its initial guidance of $5 billion at the beginning of the year. Further, the company will continue to restrict its sustainable capital investment to about $3.5 billion, which could go up to $5.5 billion, based on the pace of production growth that the company aims for.
- Since ConocoPhillips has raised a notable amount of cash from its recent asset sales, the company has further extended its existing share repurchase program by $1.5 billion, taking its total buyback amount to $7.5 billion for the period of 2017-2020. This will not only enable the company to return value to its shareholders but will also improve its earnings per share going forward.
- In addition, ConocoPhillips aims to increase its dividend payments in the coming quarters, subject to its improving cash flows from operations. This, along with a higher share repurchase program, will help the company to achieve its objective of returning 20%-30% of its cash flows from operations to its shareholders.
- Lastly, ConocoPhillips reiterated its plans to bring down its long term debt to less than $20 billion by the end of 2017 and to $15 billion by 2019. As per the company’s latest financial numbers, its long term debt stood at $19.7 billion, down from $26.2 billion at the beginning of the year. This indicates that the company is progressing well toward achieving its objective in the next two years.
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