Deep Production Cuts, Oil Industry Turmoil To Shave Off 45% From ConocoPhillips’ 2020 Revenues

ConocoPhillips (NYSE: COP) reported $4.8 billion in total revenues for the first quarter, representing a 52% drop over the prior-year period. Revenue declines were primarily driven by the low average realized price of oil, which fell by 23% from $50 BOE in Q1’19 to $38 in Q1’20. The company has announced a 265 MBD cut in gross oil and bitumen production for May and planned a staggering 460 MBD curtailment for June. Trefis expects ConocoPhillips’ revenues to decline by almost 45% to $20 billion for the full-year 2020, as the production cuts are likely to remain until the industrial and transportation demand picks up – as we detail in our interactive dashboard for the company.

A Quick Look At ConocoPhillips’ Revenues

ConocoPhillips’ two revenue components generated $36.7 billion in total revenues for the full-year 2019.

• Sales & Other Operations: $32.5 billion in FY2019 (89% of Total Revenue). It majorly includes revenues from the sale of crude oil & other products by ConocoPhillips and its consolidated companies. It also includes revenues from transportation services provided to third-party crude oil producers.
• Equity Earnings & Other Income: $2.1 billion in FY2019 (6% of Total Revenue). It includes income from investments in affiliates.

Production from lower 48 to decline by 50% in June

• In 2019, ConocoPhillips’ total production from Lower 48, Alaska, Europe, and other international regions was 450 MBD, 218 MBD, 181 MBD, and 499 MBD, respectively.
• The average production cost per barrel of oil equivalent at Lower 48, Alaska, Europe, and Canada was $9.59, $15.52, $11.22, and $16.53, respectively.
• With the WTI benchmark price for June contract trading at $20 per barrel, the high production cost in Canada and Alaska would result in considerable losses.
• Thus, the company has planned to curtail production in June at the Lower 48, Alaska, and Canada fields by 260 MBD, 100 MBD, 100 MBD, respectively.
• Voluntary production cuts are likely to continue until the benchmark crude oil prices support favorable unit economics.

Low industrial and transportation demand likely to keep benchmark prices subdued

• Industrial and transportation sector account for 25% and 70% of the total oil consumption in the U.S. – something we highlighted in our dashboard U.S. Oil Consumption By Sector
• Moreover, transportation demand is likely to remain subdued as the coronavirus pandemic has led to restricted population movement until the containment efforts find success or a vaccine get developed.
• Our dashboard forecasting US COVID-19 cases with cross-country comparisons analyzes expected recovery time-frames and possible spread of the virus.
• Further, our dashboard -28% Coronavirus crash vs. 4 Historic crashes builds a complete macro picture.

The upheaval in the global crude oil industry will hurt every aspect of the oil & gas industry. Oilfield services and equipment companies Schlumberger and Halliburton will also face the heat over the next few quarters. We compare the performance of these two companies over the last few years as we answer the question: Is Halliburton Expensive Or Cheap Compared To Schlumberger After Declining Over -75%?

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