ConocoPhillips' (COP) Q2 Earnings Miss On Lower Crude Prices

ConocoPhillips (NYSE:COP) reported second-quarter 2019 adjusted earnings per share of $1.01, missing the Zacks Consensus Estimate of $1.04 and declining from the year-ago figure of $1.09.

Based in Houston, TX, the world’s largest independent oil and gas producer’s quarterly revenues of $8,380 million decreased from second-quarter 2018 sales of $9,240 million and missed the Zacks Consensus Estimate of $9,898 million.

The weak second-quarter 2019 results are primarily attributable to lower realized commodity prices, partially offset by higher volumes from the company’s unconventional assets.

Production Growth

Total production averaged 1,332 thousand barrels of oil equivalent per day (MBoe/d), up 6.6% from the year-ago quarter’s 1,249 Mboe/d. ConocoPhillips’ production of crude oil came in at 702 thousand barrels per day (MBD), higher than the year-ago quarter’s 624 MBD.

The company’s production of natural gas liquids came in at 118 MBD, higher than the year-ago quarter’s 103 MBD. Bitumen production in the quarter was recorded at 51 MBD, lower than the second-quarter 2018 figure of 63 MBD.

Natural gas output came in at 2,768 million cubic feet per day (MMcf/d), marginally higher than the year-ago level of 2,754 MMcf/d. The overall production was aided by growth in the company’s Big 3 unconventional assets (Eagle Ford, Bakken and Delaware), alongside Alaska, Europe and Asia Pacific operations.

Realized Prices Decline

The average realized crude oil price during the second quarter was $64.88 per barrel, representing a decrease from the year-ago realization of $70.55. Realized natural gas liquids price was recorded at $21.65 per barrel, lower than the year-ago quarter’s $29.94. Average realized natural gas price during second-quarter 2019 was $4.76 per thousand cubic feet, down from the year-ago period’s $5.18. As such, average realized equivalent prices fell to $50.50 per barrel from the year-ago level of $54.32.

Expenses

ConocoPhillips’ second-quarter total expenses decreased to $6,322 million from $6,621 million in the corresponding period of 2018, owing to lower purchased commodities. Production and operating expenses rose to $1,418 million in the reported quarter from $1,313 million in the year-ago period. Also, exploration costs rose to $122 million in second-quarter 2019 from $69 million in the comparable period of 2018.

Balance Sheet & Capital Spending

As of Jun 30, 2019, the oil giant — with a market capitalization of around $65.8 billion — had $5,941 million in total cash and cash equivalents. The company had a total long-term debt of nearly $14,809 million, representing a debt-to-capitalization ratio of 31%.

In the reported quarter, ConocoPhillips generated $2.9 billion in cash from operating activities. Capital expenditures and investments totaled $1.7 billion, and dividend payments grossed $346 million. The company repurchased shares worth $1,250 million in the quarter. Notably, the company generated around $600 million in proceeds from dispositions, in the quarter under review.

Guidance

For third-quarter 2019, the company’s production guidance is projected in the range of 1,290-1,330 MBoe/d, excluding Libya. Quarterly production is expected to be affected by planned turnarounds in Alaska, Asia Pacific and Europe. Full-year 2019 production is expected in the range of $1,310-$1,340 MBoe/d, excluding Libya. For full-year 2019, it expects capital for operating plan to be around $6.3 billion. The company estimates full-year planned share purchase to be $3.5 billion.

Zacks Rank and Stocks to Consider

Currently, ConocoPhillips has a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy sector are given below:

MPLX LP (NYSE:MPLX) provides midstream infrastructures to upstream companies. Its bottom line in 2019 is expected to improve 23.6% from a year ago. The company has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

World Fuel Services Corporation (NYSE:INT) engages in the distribution of fuel and related products for different industries all over the world. Its bottom line in 2019 is expected to improve 10.9% from a year ago. The company has a Zacks Rank #1.

Delek US Holdings, Inc. (NYSE:DK) engages in integrated downstream energy businesses. It beat earnings estimates in three of the trailing four quarters, with an average positive surprise of 59.2%. The company has a Zacks Rank #2 (Buy).

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