Source: ConocoPhillips

America's largest independent oil and gas company, ConocoPhillips (NYSE:COP) is expected to report fourth-quarter earnings on Thursday morning. Given the dramatic drop in oil prices last quarter investors should brace themselves for a rough quarter while steeling themselves for what could be a dour outlook for 2015. Here are three things in particular that investors should focus on when the company reports.

Look at production
Investors should avoid getting too caught up in the earnings numbers until they have a look at production. We want to first see if the company hit its own production guidance as it will be a key driver of earnings in the quarter. The company already said last quarter that its production for the fourth-quarter would be lower than previously expected. It noted that it expected that ramp gas sales from APLNG wouldn't happen as previously anticipated while infrastructure constraints would impact production in Malaysia. Because of this it estimated that production would be 1,545 to 1,575 thousand barrels of oil equivalent per day.

If production comes in below this guidance it will have an impact on earnings, which will already be affected by lower oil prices. That's why investors need to take a look at production before focusing too much attention on earnings.

Look at the impact of oil prices on results
Speaking of earnings, these will certainly be affected by oil prices, which plunged a stunning 41% during the fourth-quarter as we see on this chart.

Brent Crude Oil Spot Price Chart

Brent Crude Oil Spot Price data by YCharts

That represented a $40 per barrel drop in just three months and will have a very direct impact on income as every $1 change in the price of Brent crude oil impacts ConocoPhillips' annual income by about $85 million.

In addition to the direct impact from falling oil prices, investors will want to look to see if the drop in oil prices takes another bite out of profits by forcing the company to record an impairment charge due to any asset writedowns or even layoffs. Write downs have the potential to cause the headline earnings number to be much worse than it actually is, which is why investors need to look closely at what's in the reported numbers.

We know that earnings will be down on the quarter, but we want to see if anything other than falling oil prices is the culprit. 

Look for changes to the outlook
The final thing investors will want to look for is changes to the company's outlook for the year ahead. ConocoPhillips already slashed its capital spending plan for 2015 by 20% over its 2014 spending level. This should still yield production growth of about 3% on the year, which is at the bottom end of the company's long-term plan of 3%-5% annually. However, oil prices have continued to fall since the 2015 budget was announced, so it's quite possible that the company could make more cuts.

What investors want to see is how committed the company is to its current spending plan. It's quite possible that the company might shave it down further as it follows the trend of revisions we are seeing to 2015 capital spending plans by energy companies as oil prices have continued to slide. The other thing investors will want to make note of is the company's overall view for the year ahead. Another cut to capital spending will suggest the company is growing more bearish on oil prices and growth. Meanwhile, a hint that it's open to acquisitions could suggest that the company sees opportunities ahead of it amid the turmoil. 

Investor takeaway
The dramatic drop in oil prices over the past quarter will certainly have an impact on ConocoPhillips' earnings. However, investors need to look past that drop to see if there is anything else that had an impact on results such as a production shortfall or big writedown. Finally, investors should take a closer look at the company's outlook as that could provide clues as to what direction the company plans to head as oil prices continue to fall.