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Analyzing ConocoPhillips’s Retained Earnings Effectiveness

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ConocoPhillips’s retained earnings effectiveness

According to ConocoPhillips’s (COP) 3Q16 balance sheet, the company’s retained earnings fell by ~$1.4 billion. When divided by COP’s 2Q16 stockholder equity of ~$37.5 billion, the retained earnings effectiveness was -4%.

In other words, due to net loss in 3Q16, negative changes in ConocoPhillips’s retained earnings affected 2Q16 stockholder equity by -4%.

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Other upstream players

In 3Q16, almost all S&P 500 (SPY) upstream companies like Southwestern Energy (SWN), Stone Energy (SGY), and California Resources (CRC) have reported negative changes in their retained earnings. This trend is mainly due to the lower realized crude oil and natural gas prices and impairment of their proved reserves.

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