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Why ConocoPhillips Stock Tumbled 36% in March

By Matthew DiLallo - Apr 2, 2020 at 1:38PM

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Weakening market conditions forced the oil giant to make some changes.

What happened

Shares of ConocoPhillips (COP 3.30%) slumped 36.4% in March, according to data provided by S&P Global Market Intelligence. The main issue weighing on the energy company was a massive sell-off in oil prices, which forced it to make some adjustments to its 2020 spending plan.

So what

The price of oil plunged more than 50% last month, ending at around $20 a barrel. That's well below the roughly $50 a barrel baseline level used by most oil producers when they set their 2020 budgets. So oil companies, including ConocoPhillips, have had to quickly adjust their spending plans to align them with lower oil prices.

An oil pump silhouette with a red sunset in the background.

Image source: Getty Images.

In the company's case, it reduced its capital budget by $700 million, which is about 10% below its initial level. ConocoPhillips also planned to slow the rate of its share repurchase program from $750 million per quarter to $250 million per quarter starting in the second quarter. These moves will save the company about $2.2 billion, reducing the amount of cash it would burn through this year at lower oil prices. 

ConocoPhillips, however, did enter the year with one of the strongest financial profiles in the sector, including $8.4 billion of cash on hand and more money coming in the door from asset sales. Because of that, the company didn't need to cut its spending as deeply as some of its peers did, with several slashing their budgets by more than 40%. Meanwhile, others have also reduced their dividends and suspended share buybacks.  

Now what

ConocoPhillips built its business with the downside in mind. This financial strength positions the company to take advantage of opportunities that could emerge during this downturn, such as making an acquisition, which it's more open to doing if it can find the right deal. Thanks to that, ConocoPhillips could emerge from this challenging period in an even better position to create long-term value for its investors.

Matthew DiLallo owns shares of ConocoPhillips. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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