As one of the largest independent exploration and production companies in the U.S., ConocoPhillips (COP -1.27%) is like an ocean liner, which makes it tough for the company to quickly alter course. That has been evident in its financial results, which have continued to bleed red during the oil market downturn while the company works on its turnaround strategy. However, that plan started bearing fruit last quarter, which gives investors some optimism that the oil giant might finally report a profit when it releases first-quarter results on Tuesday morning.

Showing improvement

Last quarter ConocoPhillips reported an adjusted loss of $318 million, or $0.26 per share. While that continued the company's string of recent losses, it was a substantial improvement from the third quarter when it reported an adjusted loss of $826 million and it was much better than the year-ago loss of $1.1 billion. Further, last quarter's results were well ahead of analysts' expectations since the consensus estimate was that the company would lose $0.42 per share.

Prairie Pumpjack in Alberta Canada.

Image source: Getty Images.

Two factors drove COP's stronger results. First, the company benefited from an 11% increase in price realizations as it captured $32.93 per barrel of oil equivalent during the quarter. That's up from $29.78 per BOE in the third quarter and $28.54 per BOE in the year-ago quarter thanks to higher oil prices as a result of OPEC's deal to cut its output.

Second, the company recorded a lower depreciation expense due to the result of performance-related reserve revisions as well as the addition of new reserves. Meanwhile, the company also reported that cash flow from operating activities exceeded capital expenses and dividends, which showed a "snapshot" of the company's strategy at work.

Another step forward?

The hope is that the company built upon that progress and jumped back into profitability during the first quarter. In fact, that's exactly what analysts expect to see. While some project another quarterly loss, the consensus is that the company will eke out a profit this quarter of around $0.03 per share.

To hit that mark, the company will need to deliver on the guidance it laid out last quarter. Topping that list is production, which the company expects will be in a range of 1.54 to 1.58 million BOE/d. The closer production comes to the upper end of that range; the more likely the company will turn a profit. Likewise, another key factor to watch is how well the company does keeping a lid on costs. It expects that full-year production and operating expenses will be $6.1 billion. However, it has had a knack of beating guidance, which was the case last year when costs declined 19% year-over-year. If it can do that again, then ConocoPhillips should get out of the red this quarter.

One more thing to watch this quarter

Aside from keeping an eye out for continued improvement in the company's financial results, another thing investors should look for this quarter is an update on the company's strategic plan. Topping the list what the company has to say about when it will close the recently announced transaction to unload the bulk of its Canadian oil and gas assets to Cenovus Energy (CVE -0.57%). The two companies initially anticipated that the $13.3 billion deal would close during the second quarter. However, according to a report, certain of Cenovus Energy's shareholders have asked Canadian regulators to block the transaction pending a shareholder vote due to the number of shares Cenovus would issue to close the sale. A delay could have a significant impact on ConocoPhillips plans for the $10.6 billion cash infusion it would receive from the deal, which includes tripling its planned stock buyback this year and reducing debt to $20 billion by year-end.

Investor takeaway

ConocoPhillips appears to be on the cusp of finally returning to profitability this quarter. At least, that's what analysts expect as long as the company didn't run into any production issues and kept a lid on costs. Meanwhile, the other important thing to keep an eye on this quarter is an update to its strategy, including when it expects to close its deal with Cenovus. If the company has good news for investors on both fronts, it might be just the ticket to ignite the company's stagnate stock price and finally get it moving higher.