ConocoPhillips Reports Better-Than-Expected Profit in Oil Crash
(Bloomberg) -- ConocoPhillips, the third-largest U.S. energy producer, reported better-than-expected profit and output while cutting spending plans amid lower oil prices.
Excluding certain items, Houston-based ConocoPhillips had a profit of 7 cents a share, which was 3 cents higher than the average of 21 analyst estimates compiled by Bloomberg. Production that was the equivalent of 1.595 million barrels of oil a day in the second quarter was the same as a year earlier.
ConocoPhillips, the first major oil producer to announce spending cuts after prices fell by more than half in a year, reduced its 2015 spending to $11 billion from $11.5 billion.
The company can maintain its current rate of production “for a long period of time” if spending is cut to as low as $8 billion, Chief Executive Officer Ryan Lance told analysts and investors Thursday on a conference call.
“They are, like everybody else in the industry, achieving more efficiencies,” Pavel Molchanov, an analyst at Raymond James in Houston, who rates the shares the equivalent of a hold and owns none, said by phone. “They’re getting cost savings from their oilfield service suppliers. That’s why they’re able to keep production the same.”
Molchanov said he was expecting production of 1.569 million barrels a day. Shares fell 1.3 percent to $52.24 at 1:14 p.m. in New York.
Second-quarter net income swung to a loss of $179 million, or 15 cents a share, from a profit of $2.08 billion, or $1.67, a year earlier, ConocoPhillips said.
Earlier this month the company said it would further reduce spending on deepwater drilling, particularly in the Gulf of Mexico.
“To further increase our capital flexibility, we are continuing to shift the portfolio to investments with shorter cycle times, including reductions to deepwater spending,” Lance said.
Lance has reshaped the one-time energy conglomerate, selling more than $14 billion in assets to tap prospects in North America. He is staking the company’s future on U.S. and Canadian oil and gas plays, betting they will generate cash at low prices and allow the company to ramp up or halt output quickly.
ConocoPhillips has said it’s continuing layoffs while it strives to reduce spending by $1 billion over two years. The company has cut close to 1,500 jobs since the downturn began in June 2014, according to Graves & Co., a Houston-based adviser that has closely tracked the cutbacks.
The company said Thursday on the call that it is ahead of schedule on its $1 billion cost-cutting program and may exceed that level.
The global oil benchmark price in the three-month period that ended in June fell 42 percent from a year earlier to average $63.50 a barrel. Brent crude was trading Thursday at $54.06, down by more than half from a mid-2014 high.
ConocoPhillips, which has 14 buy, 11 hold and two sell recommendations from analysts, has fallen 32 percent in the past year.
The company was the first of the large U.S. oil companies to report second-quarter earnings. Exxon Mobil Corp. and Chevron Corp. will report financial results on Friday.
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