It has been about a month since the last earnings report for ConocoPhillips (
COP Quick Quote COP - Free Report) . Shares have added about 24.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is ConocoPhillips due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
ConocoPhillips Beats Q4 Earnings Estimates, Ups 2021 Budget
ConocoPhillips reported fourth-quarter 2020 adjusted loss per share of 19 cents, narrower than the Zacks Consensus Estimate by a penny. The company recorded adjusted earnings of 76 cents per share a year ago.
Based in Houston, TX, one of the world’s largest independent oil and gas producers, ConocoPhillips’ quarterly revenues of $6,049 million declined from fourth-quarter 2019 sales of $8,140 million. However, the figure beat the Zacks Consensus Estimate of $5,245 million.
The better-than-expected fourth-quarter results stemmed from increased output in Canada. Moreover, overall bitumen production rose from the year-ago period. Additionally, production and operating expenses declined for the quarter. The positives were partially offset by lower realized commodity prices and total production volumes.
The company ended 2020 with proved reserves of around 4.5 billion barrels of oil equivalent (BOE) and a reserve replacement ratio of 86%. Through 2020, the upstream energy player produced 1,127 thousand BOE per day, comprising more than 50.4% oil.
Overall Production Falls
Total production averaged 1,169 thousand barrels of oil equivalent per day (MBoe/d), down from the year-ago quarter’s 1,334 MBoe/d. Of the total output, 50.9% was crude oil. Overall production was lower than the year-ago period, primarily due to decreased output in Lower 48, Alaska and other regions. This was partially offset by increased production in Canada.
ConocoPhillips’ production of crude oil came in at 595 thousand barrels per day (MBD), lower than the year-ago quarter’s 695 MBD. Moreover, the company’s production of natural gas liquids totaled 106 MBD, lower than the year-ago period’s 118 MBD. Also, natural gas output came in at 2,394 million cubic feet per day (MMcf/d), lower than the year-ago level of 2,741 MMcf/d. However, bitumen production for the quarter was recorded at 69 MBD, higher than the fourth-quarter 2019 figure of 64 MBD.
Realized Prices Decline
Markedly, average realized oil equivalent prices fell to $33.21 per barrel from the year-ago level of $47.01.
The average realized crude oil price for the fourth quarter was $40.89 per barrel, reflecting a decline from the year-ago realization of $60.17. Realized natural gas liquids price was recorded at $17.98 per barrel, lower than the year-ago quarter’s $19.67. Average realized natural gas price for fourth-quarter 2020 was $3.23 per thousand cubic feet, down from the year-ago period’s $4.62. Moreover, average realized bitumen price was recorded at $19.41 per barrel, lower than year-ago figure of $24.58.
Total Expenses Rise
ConocoPhillips’ fourth-quarter total expenses rose to $7,135 million from $6,854 million in the corresponding period of 2019. Exploration costs jumped to $1,047 million for fourth-quarter 2020 from $151 million in the comparable period of 2019. However, production and operating expenses fell to $1,161 million for the reported quarter from $1,302 million a year ago.
Balance Sheet & Capital Spending
As of Dec 31, 2020, the oil giant had $2,991 million in total cash and cash equivalents, up from the third-quarter level of $2,490 million. The company had a total long-term debt of $14,750 million, down sequentially from $14,905 million. It had a debt-to-capitalization ratio of 0.34. At fourth quarter-end, the company had a short-term debt of $619 million.
Capital expenditures and investments totaled $1,058 million, and dividend payments grossed $464 million. Net cash provided by operating activities was recorded at $1,672 million, down from the year-ago figure of $2,982 million.
The Concho acquisition is expected to bring about an interesting era for ConocoPhillips. A detailed outlook for 2021 of the combined entity will likely be announced in March. A glimpse has already been provided by the company, with its 2021 capital budget being set at $5.5 billion, higher than the 2020 level of around $4.7 billion. The total amount incorporates $5.1 billion that will be used to sustain the current production level and $400 million for growth project investments. The projects are primarily located in Alaska. Notably, 2021 production will likely be 1.5 million Boe/d.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
Currently, ConocoPhillips has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise ConocoPhillips has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.