COP: Financial Analysis through March 2009 (Update)

GCFR previously analyzed the initial results of ConocoPhillips (NYSE: COP), a major oil and gas company, for the three months that ended on 31 March 2009. 

The earnings announcement included Income and Cash Flow statements, and a plethora of data for each business segment.  But, it did not include a Balance Sheet for the last day of the quarter.  To compute gauge scores, we assumed that the company's Assets and Liabilities didn't change in value during the first three months of the year.


ConocoPhillips has now filed a complete 10-Q report for the quarter with the SEC, and we extracted the data that had not previously been disclosed to update our analysis.  Since the 10-Q did not change our Income Statement evaluation, those results are not repeated here.


http://sheet.zoho.com/public/ncarvin/cop-income-statement-2009q1?mode=html


The data in the 10-Q led to changes no greater than one point in any of the gauge scores, relative to the figures reported in the initial analysis.  On balance, the Overall gauge inched up one point to 45.


The gauges now read as follows:

• Cash Management: 12 of 25 (unchanged from December)
  
• Growth: 10 of 25 (down from 13)
  
• Profitability: 9 of 25 (down from 11)
  
• Value: 12 of 25 (unchanged)
  

• Overall: 45 of 100 (down from 46)
  

The data on the Balance Sheet in the 10-Q slightly modified the values for some Cash Management metrics.

Cash Management	March 2009	3 months prior	12 months prior
Current Ratio	1.0	1.0	0.9
LTD/Equity	52%	49%	24%
Debt/CFO	1.6 years	1.2 years	0.9 years
Inventory/CGS	N/A	N/A	N/A
Finished Goods/Inventory	N/A	N/A	N/A
Days of Sales Outstanding (DSO)	23.1 days	21.5 days	28.2 days
Working Capital/Invested Capital	-0.1%	-1.1%	-2.3%
Cash Conversion Cycle Time	-0.1 days	-1.1 days	-2.5 days
Gauge Score (0 to 25)	12	12	10

Note the doubling over the last year of the Long-Term Debt to Shareholders' Equity ratio.  In the last 12 month, LTD increased from $21.1 billion to $29.3 billion (39 percent), and Equity was slashed from $89.6 billion to $56.2 billion (-37 percent).

Most of the debt increase can be attributed to Conoco's decision to issue $4.9 billion of commercial paper in October 2008 to form a 50/50 joint venture, named Australia Pacific LNG, with Origin Energy, Ltd., (ASX:ORG ).  In early February 2009, Conoco issued $6.0 billion in notes due between 2014 and 2039.  A portion of the principal was used to refinance credit facilities established earlier.   $4.2 billion of short-term debt was reclassified as long-term debt, based on refinancing plans.

The plunge in Shareholders' Equity is a consequence of the $34.5 billion asset impairment charges Conoco recorded in the fourth quarter of 2008.

Since  Cash Flow from Operations is down 26 percent in the last year, fewer internally generated funds are available to service the Debt.