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Why Is ConocoPhillips (COP) Down 4% 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% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

ConocoPhillips' Q1 Earnings Beat on Higher Oil Output

ConocoPhillips   reported first-quarter 2019 adjusted earnings per share of $1.00, beating the Zacks Consensus Estimate of 92 cents and improving from the year-ago figure of 96 cents.

Based in Houston, TX, the world’s largest independent oil and gas producer’s quarterly revenues of $10,057 million increased from first-quarter 2018 sales of $8,961 million and beat the Zacks Consensus Estimate of $9,157 million.

The strong first-quarter 2019 results are primarily attributable to increased volumes from the company’s unconventional assets and higher natural gas price realization.

Production Growth

Total production, excluding Libya, averaged 1,361 thousand barrels of oil equivalent per day (MBoe/d), up 7.2% from the year-ago quarter’s 1,269 Mboe/d. ConocoPhillips’ production of crude oil came in at 715 thousand barrels per day (MBD), higher than the year-ago quarter’s 636 MBD.

The company’s production of natural gas liquids came in at 110 MBD, higher than the year-ago quarter’s 96 MBD. Bitumen production in the quarter was recorded at 63 MBD, lower than the first-quarter 2018 figure of 66 MBD.

Natural gas output came in at 2,840 million cubic feet per day (MMcf/d), higher than the year-ago level of 2,828 MMcf/d. The results were aided by growth in the company’s Big 3 unconventional assets (Eagle Ford, Bakken and Delaware), alongside Alaska, Europe and Asia Pacific operations.

Selling Prices

The average realized crude oil price during the first quarter was $59.45 per barrel, representing a decrease from the year-ago realization of $65.49. Realized natural gas liquids price was recorded at $23.85 per barrel, lower than the year-ago quarter’s $28.37. Nevertheless, average realized natural gas price during first-quarter 2019 was $6.00 per thousand cubic feet, up from the year-ago period’s $5.13.

Expenses

ConocoPhillips’ first-quarter total expenses increased to $7,370 million from $7,185 million in the corresponding period of 2018. Production and operating expenses rose to $1,271 million in the reported quarter from $1,171 million in the year-ago period. Also, exploration costs rose to $110 million in first-quarter 2019 from $95 million in the comparable period of 2018.

Balance Sheet & Capital Spending

As of Mar 31, 2019, the oil giant, with a market capitalization of around $70.9 billion, had $6,218 million in total cash and cash equivalents. The company had a total debt of nearly $14,832 million, representing a debt-to-capitalization ratio of 31.1%.

In the reported quarter, ConocoPhillips generated $2.9 billion in cash from operating activities. Capital expenditures and investments totaled $1.6 billion, and dividend payments grossed $350 million. The company repurchased shares worth $752 million in the quarter.

Guidance

For second-quarter 2019, the company projects production in the range of 1,240-1,280 MBoe/d. Quarterly production is expected to be affected by planned turnarounds in Alaska, Canada and Europe. For full-year 2019, the company expects DD&A to be around $6.1 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, ConocoPhillips has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, ConocoPhillips has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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