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Energy

ConocoPhillips (COP): What Upside Potential Can Be Expected In 2Q Results

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ConocoPhillips 2Q results, how much upside should investors expect?

ConocoPhillips (NYSE: COP) announced that it would be reporting its financial results for 2Q on July 28. The lower oil and gas prices in 1Q hampered the company’s performance, and all eyes would be on Conoco’s 2Q results to see how it performed after commodity prices recovered to an extent as compared to 1Q.

Earlier in Q1, Conoco reported operational cash flows of around $421 million, as compared to 4Q last year when it generated around $1.6 billion. Out of that, it spent around $313 million to fund its dividend payments. In addition, the company also burned $1.8 billion of cash for funding Capital Expenditure (CAPEX). It is to be noted that the CAPEX in upcoming quarters is expected to be at the lower end, as Conoco’s yearly guidance for CAPEX is of $5.7 billion.

In 1Q, the average price for US benchmark of crude oil, West Texas Intermediate (WTI) stood around $33.27 per barrel and Brent crude stood at $33.89 a barrel. As of now, both WTI and Brent prices have gained a little, and touched $50 a barrel mark before hovering at $45 a barrel in recent weeks. With substantial recovery in oil prices, investors would hope that Conoco’s earnings reflect the same.

Henry Hub, which is US natural gas’ benchmark, averaged at $2.09 per Million cubic feet (Mcf) in 1Q. Now, it trades in range of $2.70-$2.80 per Mcf, which presents another positive aspect for investors to await the company’s results. With recovery in commodity prices, it is widely anticipated that its operating cash flows have improved.

Conoco’s stock has lost 10.32% of its value in its Year-to-Date (YTD). The future movement in stock entirely depends on how well it has managed to take advantage of the recovery in commodity prices when it reports its 2Q results.

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