Texas-based ConocoPhillips (COP), a major global integrated oil company, provided its second-quarter 2009 interim update yesterday. The company will release its quarterly results on July 29, 2009.
ConocoPhillips cautioned about lower production in the quarter, compared to the year-earlier as well as the previous quarter. The company anticipates production from the E&P segment, including Canadian Syncrude and excluding LUKOIL, to be 1.86 million barrels of oil equivalent per day (MMBOE/d), while its first quarter 2009 and fourth quarter 2008 production were 1.93 MMBOE/d and 1.87 MMBOE/d, respectively. Before-tax exploration expenses are expected to be $225 million, essentially flat with the first quarter 2009 figure.
The Refining and Marketing segment is also expected to be impacted by low distillate margins and considerably squeezed light-heavy crude differentials. Anticipated worldwide average crude oil refining capacity utilization rate in the upper 80% range compared to 81% in the first quarter. International utilization rate is expected to be in the low 70% range, compared to 85% in the first quarter. This lower utilization rate reflects turnaround activity in Europe and production run cuts at the Wilhelmshaven, Germany refinery.
Despite the turnaround in oil prices, ConocoPhillips experienced sluggishness in market conditions for refined products as the increase in summer demand was hampered by the weak macro backdrop.
While this turnaround is beneficial to the entire sector, we are maintaining our Hold recommendation on ConocoPhillips shares, given the company’s competitive disadvantages relative to its super major peers such as ExxonMobil (XOM) and Chevron (CVX). These disadvantages include a high-cost OECD-centric asset base and heavy exposure to the relative tentative outlook for U.S. natural gas (about a third of total volumes) and refining markets.
Read the full analyst report on “COP”
Read the full analyst report on “XOM”
Read the full analyst report on “CVX”
Zacks Investment Research
