ConocoPhillips (NYSE:COP) is scheduled to report its Q1 2010 results after the market closes on April 27, 2010. The company expects to return to a more normalized production, which was achieved in 2008 in large part to having a full year impact of reduced North America drilling as well as lower production growth from new projects. While the company does have a good portfolio of major projects such as QG3, Canadian Oil, Jasmine, Gumusut and others, which are expected to contribute to growth, capital spending plans on more mature assets is likely to come down in order to achieve a better return on capital employed and increase its per barrel cash flow and earnings in their Australia business. The company also plans on holding on to the operational savings it achieved this year from procurement initiatives, controllable cost reductions, and portfolio changes.
ConocoPhillips adjusted earnings for Q4 2009 stood at $1.7 billion or $1.16 per share generating cash from operations amounting to $5.1 billion. The company ended the quarter with a debt of $28.7 billion resulting in debt to capital ratio of 31%, down 2% against the previous quarter. The company produced a total of 2.26 million barrels of oil equivalent per day, including LUKOIL, in Q4 2009. R&M, however, reported an overall loss n net income driven by depressed refining margins which were particularly low in the US, with global utilization reaching only 76%. Adjusted earnings for Q4 2009 increased sequentially, but were down by nearly 10% when compared to the same period last year. The E&P business reported earnings increases of more than 20%, primarily due to improvement in crude prices and LUKOIL, as a separate category, reported higher Q4 2009 adjusted net earnings when compared to the same period the year before.
Analysts' estimates for Q1 2010 range from a low of $1.21 to a high of $1.44, compared to a consensus estimate of $1.36, with number of estimates being 12and the co-efficient variance 5.61. ConocoPhillips has decided to sell its 9% stake in Syncrude, the Canadian heavy oil project, to China's SINOPEC for $4.65B, which puts the company's $10B divestiture program on track. COP plans to use the proceeds to reduce debt to 20% of capitalization, increase dividends by 10% and repurchase shares. COP also plans to reduce its LUKOIL stake from 20% to 10% in the next two years and use the proceeds of more than $5B to repurchase shares, which should improve per share reserves, production, earnings and cash flow.
The stock closed at $57, up 0.19% on April 14, 2010 and most analysts' believe the stock should outperform and it has been allocated a price target of $70. This stage marks an attractive entry point for long-term investors.
