ConocoPhillips (NYSE: COP) is scheduled to report its second-quarter financial results Thursday before the markets open. There are consensus estimates from Thomson Reuters that call for of $0.04 in earnings per share (EPS) on $9.55 billion in revenue. The same quarter from the previous year had $1.61 in EPS on $14.70 billion in revenue.

UPDATE: ConocoPhilllips has released its earnings report, and despite lower expected earnings per share than the dividend here is how that dividend will remain so high.

Within the past two weeks, the company said that it would raise its dividend by a penny and cut its deep-water exploration budget. However this was met with mixed reactions from investors. In most cases, a dividend raise, even a little one, is welcome, and the cut to the capital spending budget while crude oil prices remain low is typically greeted with approval, if not always with cheers.

There was a problem, Conoco’s stock fell more than 2% after the announcement. Perhaps it was the terms of the three-year contract the company cancelled with Ensco PLC (NYSE: ESV) for a drillship. According to Ensco, Conoco is obligated to pay Ensco the operating day rate of the drillship monthly for two years. The day rate of Ensco’s DS-9 drillship is approximately $550,000 a day. That works out to $16.5 million a month, $198 million per year, or $396 million for the two-year period.

Conoco said that details of the termination are under discussion but that the company expects to take a charge in the third quarter as a result. In the first quarter of this year, ConocoPhillips posted net income of $272 million, so a charge of $200 million to $400 million is not trivial. As a special, one-time item it will not affect net earnings or earnings per share, but it has already had an impact on Conoco’s dividend increase, and the impact on cash flow will be non-trivial as well.

For the 2015 full year consensus estimates expect Conoco to have $0.22 in EPS, and $2.17 in EPS for the 2016 full year. With its dividend at $2.96 (annualized), Conoco’s yield clocks in at about 5.7%. However, looking at the expected earnings the dividend far exceeds the earnings, meaning that in order to pay this dividend the company will have to dig into its cash balance or take out loans. At the end of the first quarter the company had $2.66 billion in cash and cash equivalents.

Argus reiterated a Buy rating for Conoco and raised the price target to $82 from $75. The reasoning behind this was that Argus believes that Conoco’s combination of major long-cycle and unconventional short-cycle projects will enable it to generate shareholder value in a range of commodity price environments.

Currently, the company takes the third spot in terms of the largest U.S. oil company by market cap. Separate from that, it is the largest independent pure-play exploration and production (E&P) company in the world. Argus believes that the high-quality, low-cost asset base will aid in Conoco’s performance relative to its peers when commodity prices are low.

Recently a few analysts weighed in on Conoco ahead of its earnings release:

• Citigroup has a Buy rating but lowered its price target to $72 from $80.
• Barclays reiterated a Buy rating.
• JPMorgan lowered its price target to $65 from $67.

Shares of Conoco were up 0.9% at $52.72 on Wednesday afternoon. The stock has a consensus analyst price target of $73.35 and a 52-week trading range of $50.54 to $85.89.

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