uploads///COP Q Adjusted Earnings

How Did ConocoPhillips’s Profitability Metrics Look in 3Q16?

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Jan. 25 2017, Updated 7:38 a.m. ET

Operating income

In 3Q16, ConocoPhillips reported higher operating income on a year-over-year basis. For 3Q16, COP reported operating income of approximately -$1.3 billion, ~$719 million higher than the -$2.0 billion in 3Q15.

However, ConocoPhillips’s operating income is lower on a sequential basis. ConocoPhillips’s 3Q16 operating income is lower by ~$118 million from ~$1.1 billion in 2Q16. ConocoPhillips reported a downtick in operating income due to higher production expenses, increased G&A (general and administrative) costs, and higher costs of purchased commodities. COP reported production expenses of ~$1.53 billion in 3Q16 compared to ~$1.45 billion in 2Q16.

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Net income

In 3Q16, ConocoPhillips reported higher net income on a year-over-year and sequential basis. ConocoPhillips reported net income of approximately -$1.04 billion, or -$0.84 per share, in 3Q16 compared to -$1.07 billion, or -$0.87 per share, during 3Q15. Sequentially, COP’s 3Q16 net income is higher by ~$31 million compared to ~$1.07 billion in 2Q16.

However, after deducting the special non-recurring items, COP’s 3Q16 net income came in at ~$826 million, or -$0.66 a share. ConocoPhillips reported non-recurring losses of ~$214 million related to the termination of rig contracts in the Gulf of Mexico, pension settlement expenses, and non-cash impairments charges, resulting in the deviation between GAAP (generally accepted accounting principles) and adjusted net income.

Which region generated the highest adjusted income for COP?

In 3Q16, ConocoPhillips’s Asia Pacific and Middle East operations were most profitable with adjusted net income of ~$87 million. Higher sales volumes and reduced feedstock costs at Darwin LNG helped COP to post positive performance for APME region.

COP’s peers Marathon Oil (MRO), Diamondback Energy (FANG), and EOG Resources (EOG) reported net incomes of approximately -$97 million (-$0.23 per share), -$2.2 million (-$0.03 per share), and -$190 million (-$0.35 per share), respectively, in 3Q16. The Energy Select Sector SPDR ETF (XLE) generally invests at least 95% of its total assets in oil and gas related equities from the S&P 500.

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