ConocoPhillips (COP) reported first quarter 2014 adjusted earnings of $1.81 per share, surpassing the Zacks Consensus Estimate of $1.57 per share and increasing 27.5% from the year-earlier profit of $1.42. The year-over-year growth was mainly attributable to production from new development programs as well as upstream ventures in key projects.
Revenues in the reported quarter increased to $16,048.0 million from the year-ago level of $14,651.0 million and comfortably surpassed our projection of $15,506.0 million.
Exploration and Production
Daily production averaged 1.568 million barrels of oil equivalent (MMBOE) in the quarter, down 1.8% from 1.596 MMBOE in the year-ago quarter. The decline was mainly due to the natural decline in fields and downtime.
Price Realization
Overall price realization increased 3.9% to $71.21 per BOE from $68.57 per BOE in the first quarter of 2013.
Average realized price for oil was $101.59 per barrel compared with $105.97 in the year-earlier quarter. Natural gas liquids (NGL) were sold at $46.52 per barrel, reflecting an increase of 8.3% from the year-ago level of $42.95 per barrel.
The price for natural gas was $7.55 per thousand cubic feet (Mcf) versus $6.19 in first quarter 2013, reflecting an increase of 22%. The company’s bitumen prices jumped 44% year over year to $56.47 per barrel.
Financials
At the end of the first quarter, ConocoPhillips generated $6.3 billion in cash from continuing operating activities (excluding working capital). As of Mar 31, 2014, the company had total cash and cash equivalents of $7.5 billion and $21.2 billion in debt, with a debt-to-capitalization ratio of 28%.
ConocoPhillips also paid $0.9 billion in dividends and incurred $3.9 billion in capital expenditures during the quarter.
Guidance
For the second quarter of 2014, daily production is expected in the band of 1,490–1,540 thousand barrels of oil equivalent (MBOE), excluding Libya. ConocoPhillips expects to deliver 3–5% production growth in 2014. Excluding Libya, the company’s 2014 full-year production remained unchanged at 1,510–1,550 MBOED.
Outlook
With leading positions in both natural gas and heavy crude oil in North America, as well as a legacy position in the North Sea and growing exposure to lucrative international regions, ConocoPhillips expects to replace reserves and sustain production growth over the long term. ConocoPhillips' exploration initiatives toward liquids-rich plays are gaining momentum through the Eagle Ford, Bakken and North Barnett shale plays.
Again, ConocoPhillips completed the spin-off of its refining/sales business into a separate, independent and publicly traded company, Phillips 66 (PSX) in 2012. With this, ConocoPhillips shifted its total focus to upstream operations and thus oil and gas prices play a major role in determining its performance.
We believe that any downtrend in the global economy will affect the supply-demand fundamentals of oil and gas, hurting the sales prices of crude oil and natural gas.
We have a Zacks Rank #3 Rank (Hold) for ConocoPhillips. However, Zacks Ranked #1 Unit Corp (UNT) and Boardwalk Pipeline Partners, LP (BWP) are expected to outperform the market over the next few months.
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