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Why Is ConocoPhillips (COP) Down 4.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for ConocoPhillips (COP - Free Report) . Shares have lost about 4.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is ConocoPhillips due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

ConocoPhillips Q3 Earnings Beat on Higher Oil Prices

ConocoPhillips reported third-quarter 2021 adjusted earnings per share of $1.77, comfortably beating the Zacks Consensus Estimate of $1.53. Further, the figure significantly improved from an adjusted loss of 31 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 $11,616 million increased from third-quarter 2020 sales of $4,380 million. Also, the figure beat the Zacks Consensus Estimate of $11,338 million.

The strong third-quarter results were aided by increased production volumes due to the Concho acquisition and rising realized commodity prices. Production from the Lower 48, Canada, Europe and other regions marked an increase.

Production

Total production averaged 1,544 thousand barrels of oil equivalent per day (MBoe/d), up from the year-ago quarter’s 1,067 MBoe/d. Of the total output, 52.8% was crude oil. Overall production was higher than the year-ago period, primarily due to significantly increased output in the Lower 48, Canada and other regions. This was partially offset by decreased production in Alaska and Asia Pacific. The Concho acquisition supported higher production volumes.

ConocoPhillips’ production of crude oil came in at 815 thousand barrels per day (MBbls/d), significantly higher than the year-ago quarter’s 548 MBbls/d. Natural gas output came in at 3,177 million cubic feet per day (MMcf/d), higher than the year-ago level of 2,235 MMcf/d. Also, bitumen production for the quarter was recorded at 69 MBbls/d, higher than the third-quarter 2020 figure of 49 MBbls/d. The company’s production of natural gas liquids totaled 130 MBbls/d, higher than the year-ago period’s 97 MBbls/d.

Realized Prices

Average realized oil equivalent prices rose to $56.92 per barrel from the year-ago level of $30.94.

The average realized crude oil price for the third quarter was $70.43 per barrel, reflecting an increase from the year-ago realization of $39.45. Realized natural gas liquids price was recorded at $34.79 per barrel, higher than the year-ago quarter’s $15.29. Average realized natural gas price for third-quarter 2021 was $5.94 per thousand cubic feet, up from the year-ago period’s $2.70. Average realized bitumen price was recorded at $41.19 per barrel, which also reflects an increase from the year-ago level of $15.87.

Total Expenses

ConocoPhillips’ third-quarter total expenses rose to $8,034 million from $4,892 million in the corresponding period of 2020.

Production and operating expenses rose to $1,389 million for the reported quarter from $963 million a year ago. Similarly, the cost of purchased commodities rose to $4,179 million for the quarter from $1,839 million a year ago. Nonetheless, exploration costs decreased to $65 million for the September quarter of 2021 from $125 million in the comparable period of 2020.

Balance Sheet & Capital Spending

As of Sep 30, 2021, the oil and gas giant had $9,833 million in total cash and cash equivalents, reflecting a jump from the second-quarter level of $6,608 million. The company had a total long-term debt of $18,748 million, down sequentially from $18,805 million. It had a debt-to-capitalization ratio of 0.31. At third quarter-end, the company had short-term debt of $920 million.

Capital expenditures and investments totaled $1,302 million, and dividend payments grossed $579 million. Net cash provided by operating activities was recorded at $4,797 million, up from the year-ago figure of $868 million. It generated free cash flow of $2.8 billion in the third quarter.

Guidance

The company reiterated its full-year production guidance at 1.5 million barrels of oil equivalent per day (MMBoe/d). The figure indicates an improvement from the 2020 level of 1.1 MMBoe/d. Fourth-quarter production will likely be within 1.53-1.57 MMBoe/d.

For the full year, adjusted operating costs will likely be $6.1 billion. The company expects 2021 capital budget of $5.3 billion, indicating an increase from the 2020 level of around $4.7 billion. It has lowered its full-year depreciation, depletion and amortization expense guidance to $7.1 billion from the previous estimate of $7.4 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 15.75% due to these changes.

VGM Scores

Currently, ConocoPhillips has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise ConocoPhillips has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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