ConocoPhillips Stock Drops After Adjusted Q1 2017 Loss

By John

It was a rough Tuesday for oil and gas industry bigwig ConocoPhillips(NYSE: COP), whose stock was off more than 1.6% after it reported an adjusted loss for the first quarter of 2017.

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In addition to -- of course -- turning a profit, the company is looking to reduce its debt load and improve its cash flows by shifting away from less-profitable operations and reducing its production costs. The first-quarter results, though, cast some doubt on how quickly the company will be able to do so.

ConocoPhillips beat on revenue but posted negative earnings for the quarter. Image source: Getty Images.

The raw numbers

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Data source: ConocoPhillips. Chart by author.

The good, the bad, and the ugly

The numbers weren't all that bad, all things considered. Compared to a year ago, the company brought in more revenue and lost a lot less money ($1.3 billion less, to be precise). Expenses were down, as were overall operating costs.

That said, the fact that the company still isn't cash flow positive -- it ended the quarter with $501 million less cash than it started with -- is of concern. Even if you factor in short-term investments, which increased during the quarter, the company still finished the quarter about $300 million behind.

ConocoPhillips has claimed to be cash flow neutral with oil prices between $45 and $50 per barrel. In fact, management projected $6.5 billion in operating cash flow for 2017 with oil at $50 per barrel. But oil prices in the first quarter were above $50 per barrel: Marker prices for the quarterwere $53.78 per barrel for Brent crude and $51.83 per barrel for WTI. Yet the company still lost money.

Since $800 million of Conoco's outgoing cash went toward debt payments,hopefully the company will be able to run even more efficiently once it is able to close the $13.3 billion in asset sale agreements it inked during the quarter.But whether that pans out remains to be seen.

What management had to say

ConocoPhillips CEO Ryan Lance tried to put a positive spin on the earnings miss:

Investor takeaway

ConocoPhillips is heading in the right direction, but it's far from being the lean, mean, cash-generating machine it hopes to be. Investors hoping for positive earnings and cash flow no-doubt disappointed this quarter. Management says, though, that the company is "on track" to meet its goals this year. Let's hope they're right.

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John Bromels has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.