COP Posted Top Production, so Why the Year-over-Year Decline?

Top five upstream oil and gas producers

With earnings season behind us, let’s look at the top five upstream oil and gas producers based on Q1 2018 numbers. In our analysis, we have used components of three key energy sector ETFs: the Energy Select Sector SPDR ETF (XLE), the SPDR S&P Oil & Gas Explore & Production ETF (XOP), and the iShares U.S. Oil & Gas Exploration & Production ETF (IEO).

COP Posted Top Production, so Why the Year-over-Year Decline?

ConocoPhillips’ Q1 2018 production

ConocoPhillips (COP) reported production of 1,269 thousand barrels of oil equivalent per day (or Mboed) in the first quarter, down 20% compared to Q1 2017 production of 1,593 Mboed. The decrease in production resulted primarily due to asset dispositions including its Canada asset sale to Cenovus (CVE), the San Juan Basin transaction, as well as normal field decline, and higher unplanned downtime mainly in Malaysia. The decrease in volumes was partly offset by higher production from the Eagle Ford, Bakken, and the Permian Basin. Additionally, the ramp-up of production in Libya, lower unplanned downtime in the United Kingdom, and improved drilling and well performance in Alaska, China, the lower 48 states, and Norway also helped offset production

COP’s second quarter and 2018 production expectations

For Q2 2018, COP has provided a production guidance range of 1,170 Mboed to 1,210 Mboed “reflecting seasonal turnarounds.” For context, the company reported production of 1,437 Mboed in Q2 2017.

For fiscal 2018, COP increased its production guidance range from 1,195–1,235 Mboed (excluding Libya), or 1,215 Mboed at the midpoint, to 1,200 Mboed–1,240 Mboed, or 1,220 at the midpoint. In the Q1 2018 earnings release, the company noted, “The higher production forecast reflects first-quarter outperformance and a change in disposition assumptions. These and other improvements more than offset the impact from a third-party gas pipeline in Malaysia that is now assumed to be out of service for the entire year.”

In the next part, we’ll discuss how COP stock has performed recently.