Source: ConocoPhillips.

America's largest independent oil company, ConocoPhillips (COP 0.39%), is on deck to report its second-quarter results this Thursday before the market opens. Those results aren't expected to be all that fantastic given the continued weakness of oil and gas prices in the quarter. That said, here are a few things to keep an eye on when the company reports.

First, let's review
Last quarter the company's oil and gas production averaged 1,610 MBOED, which was 5% higher than the year-ago quarter. However, because of much weaker commodity prices, and increased dry hole expenses, the company lost $222 million, or $0.18 per share. While that was a penny less than analysts feared, the results were well off the $2.3 billion, or $1.81 per share, the company earned in the first quarter of last year. Still, the company didn't lose money during the quarter, as it produced $2.3 billion in cash flow from operations.

ConocoPhillips vs. the expectations
For the second quarter, the company is expected to produce 1,555 to 1,595 MBOED, which is down sequentially but still on target with the company's goal to grow production by 2%-3% year over year. Driving the production decline are planned turnaround activities in Alaska, Europe, and Asia Pacific/Middle East that began in the second quarter and will spill over into the third quarter, with the result that some production will come offline. However, investors should keep an eye on any deviation from these expectations, as stronger well results from shale plays in the U.S. could provide an unexpected boost, while unplanned maintenance or poor well performance could result in lower-than-expected production.

Given the production range and commodity prices in the quarter, analysts are expecting ConocoPhillips to earn a mere $0.04 per share. That's well off from the year-ago quarter, when the company earned $1.61 per share. Some analysts are nevertheless cautiously optimistic that ConocoPhillips will deliver a stronger-than-expected quarter as a result of the efforts the company is making at cutting costs. In fact, an analyst from Barclays recently boosted the company's full-year earnings outlook by $0.05 per share, with a view that the company will be one of nearly a dozen oil and gas producers that will beat forecasts on the back of stronger-than-expected production and lower operating costs.

Changes to the outlook
The other thing investors should keep an eye on is for any changes to the company's full-year outlook:

Source: ConocoPhillips investor presentation.  

One area to watch is for changes to the company's production growth target. As that slide notes, ConocoPhillips has five major project start-ups planned for the second half of this year, including its Surmont 2 project oil-sands project that's expected to deliver first oil in the third quarter. We don't want to see the company run into any last-minute issues bringing these projects online, as that will affect not just production growth, but also cash flow.

The other thing to keep an eye on is for more dry hole expenses or large impairment charges. ConocoPhillips has had a string of dry holes lately, with wells drilled offshore Angola and the Gulf of Mexico not resulting in the discovery of commercial hydrocarbons. As a result, the company took a $142 million impairment charge in the first quarter. Meanwhile, the company recently announced that it was pulling back the reins on its offshore drilling program by axing its operating drilling plans in the Gulf of Mexico. That cut will result in another charge to be taken in the third quarter. What we don't want to see is the announcement of an unexpected impairment charge during the second quarter, given all the other recent announcements.

Investor takeaway
There's absolutely no expectation that ConocoPhillips will deliver robust second-quarter results this week. That's because not only were oil and gas prices weak during the quarter, but the company is also in the middle of several major planned turnarounds that took some production offline. Still, if the company kept its costs in check it and didn't unveil any surprises, it could deliver a solid quarter given the circumstances.