What To Expect From ConocoPhillips’ Q1 2018 Results

ConocoPhillips (NYSE: COP) will release its first quarter results and conduct a conference call with analysts on April 26. The company is expected to post a strong financial result backed by a recovery in commodity prices. Further, the company’s sustained reduction in debt would provide additional support to its bottom line. Consensus market estimates have a mean adj-EPS estimate of $0.67 and revenue estimate of $8.88 billion, reflecting ~50% sequential EPS growth and ~2% sequential revenue growth.

Continued Strength In Oil Prices To Boost Revenue & Increase Cash Flows

Oil prices have continued to display strength since the beginning of year owing to several macroeconomic factors. Crude oil spot price (average spot price of Brent, Dubai and West Texas Intermediate, equally weighed) averaged $64.62 per barrel for March ’18 quarter, representing ~10% sequential growth. Apart from the extension of the Organization of Petroleum Exporting Countries’ (OPEC) production cuts in the fourth quarter of 2017, oil prices have received additional support from the weakness in the U.S. dollar, geopolitical tensions in the Middle East, and the recent U.S. sanctions against Russia. Higher oil prices would continue to support the company’s top line and add to a significant portion of the company’s cash flows.

Increased Cash Flows & Stronger Balance Sheet To Result In Higher Shareholder Return

ConocoPhillips has strategically been reducing its debt to be better equipped to face an environment of fluctuating commodity prices. The company in 2017 reduced its debt by almost 30% to less than $20 billion and aims to achieve a debt level of $15 billion by 2019. This reduced debt will consequently result in significant interest expense savings and thus boost the company’s bottom line in the upcoming quarters. Additionally, lower interest expense would result in higher cash availability for the company.

Thus, a higher availability of cash flows as a resultant impact of higher commodity prices and lower interest expenses and with no plans of superseding the company’s current CapEx plan, ConocoPhillips is expected to deliver strong shareholder returns in the form of buybacks and dividends throughout 2018.

The company expects its full-year 2018 production (excluding Libya) to average between 1,195 to 1,235 MBOED, translating into a growth of 5% on a year-on-year basis.  The first quarter production is estimated to be around 1,180-1,220 MBOED. Thus, with notably higher production volume and higher commodity prices and a strong balance sheet, ConocoPhillips is expected to have a strong year ahead and we look forward to the company’s performance in the upcoming quarters. Our key expectations from the company’s 2018 results are highlighted in our interactive dashboard, you can make changes to our assumptions to arrive at your own fair price estimate for the company. 

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