uploads///COP Q EBITDA Growth and Crude Oil Prices

How Crude Oil Prices Affected ConocoPhillips’s Earnings Growth




ConocoPhillips (COP) reported lower adjusted revenues of ~$6.5 billion in 3Q16 compared to ~$7.5 billion in 3Q15. However, COP’s 3Q16 revenues were ~16% higher on a sequential basis when compared with COP’s 2Q16 revenues of ~$5.6 billion.

Sequentially, higher production and better realized prices for crude oil (USO) and natural gas (UNG) in 3Q16 positively affected ConocoPhillips’s 3Q16 revenues. ConocoPhillips’s production mix contains ~60% liquids.

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EBITDA growth

For 3Q16, ConocoPhillips reported adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of ~$1.51 billion, lower than the Wall Street analyst consensus for adjusted EBITDA of ~$1.68 billion.

For 3Q16, ConocoPhillips’s adjusted EBITDA growth was negative on a year-over-year basis and a sequential basis. In 3Q15, ConocoPhillips reported adjusted EBITDA of ~$1.63 billion. In 2Q16, ConocoPhillips’s adjusted EBITDA was ~$1.64 billion.

Why COP reported sequentially lower EBITDA

Despite higher revenues, lower margins as a result of higher costs affected ConocoPhillips’s sequential EBITDA growth in 3Q16. ConocoPhillips’s EBITDA margin has fallen from ~29% in 2Q16 to ~23% in 3Q16. We’ll look at ConocoPhillips’s margins in part three of this series.

For 4Q16, Wall Street analysts estimate ConocoPhillips’s adjusted EBITDA of ~$2.0 billion, which is ~34% higher when compared with 4Q15.

ConocoPhillips’s peers Devon Energy (DVN) and Occidental Petroleum (OXY) have also reported sequentially higher revenues of $2.9 billion and $2.7 billion, respectively, whereas Marathon Oil (MRO) reported sequentially lower revenues of $1.2 billion in 3Q16.

Next, we’ll take a look at two interesting charts related to ConocoPhillips’s 3Q16 adjusted EBITDA per unit of production and how COP’s adjusted EBITDA margin moved due to crude oil prices.


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