COP: 3Q Look Ahead Revisited

Back on 18 September 2008, we looked ahead to ConocoPhillips's third-quarter results.   A press release reporting these results is due on 22 October.

ConocoPhillips (NYSE: COP) is the seventh-largest Major Integrated Oil & Gas company by market capitalization.

We made projections for the quarterly Income Statement.  We will use this model to identify and evaluate unexpected deviations, positive or negative, in the actual data.  GCFR estimates are derived from trends in the company's historical financial results and guidance provided by company management.

Since our estimates for the third quarter were made, ConocoPhillips described the market and operating conditions experienced by the company during the quarter.

For our purposes, the following were the key points in this announcement.

• Crude oil and natural gas prices were lower (no surprise)
• Production just met, or was slightly below, the level of the second quarter. (Previous guidace was to expect production "similar to the second quarter.")
  
• Refining margins were higher across the industry, but the company experienced lower margins because capacity utilization was down (partially attributed to hurricane impacts)
• Lukoil results will include a $101 after-tax charge because second-quarter estimates proved optimistic.
• Approximately $2.5 billion of shares were repurchased.  The number of weighted-average diluted shares outstanding during the third quarter is expected to be approximately 1,528 million (our estimate was 1,525 million).

We forecast third quarter Revenue of $63 billion, $8.4 billion less than that of the previous quarter.  The new information tempts us to lower the target even more, but we have decided to stand pat for now.  The Lukoil info is probably more worrisome.