ConocoPhillips Reports Fourth-Quarter and Full-Year 2015 Results; Lowers Quarterly Dividend and Revises 2016 Operating Plan Guidance
ConocoPhillips (NYSE: COP) today announced it is taking actions to
maintain its strong balance sheet in response to both the weak outlook
for commodity prices and expected credit tightening across the industry.
The actions will position the company to accelerate shareholder value
creation as prices recover.
Dividend and Operating Plan Actions
The company announced that its board of directors approved a reduction
in the company’s quarterly dividend to 25 cents per share, compared with
the previous quarterly dividend of 74 cents per share. The dividend is
payable on March 1, 2016 to stockholders of record at the close of
business on Feb. 16, 2016.
The company also announced revisions to its previously disclosed 2016
operating plan. The company lowered capital expenditures guidance from
$7.7 billion to $6.4 billion and operating cost guidance from $7.7
billion to $7.0 billion. Production in 2016 is expected to be
approximately flat with 2015 volumes, adjusted for the full-year impact
of 2015 asset divestitures.
“While we don’t know how far commodity prices will fall, or the duration
of the downturn, we believe it’s prudent to plan for lower prices for a
longer period of time,” said Ryan Lance, chairman and chief executive
officer. “The actions we have announced will improve net cash flow by
$4.4 billion in 2016. The decision to reduce the dividend was a
difficult one. The dividend has been, and will continue to be, a top
priority. We still intend to provide a competitive dividend, while
significantly lowering the breakeven price for the company and
substantially reducing the level of borrowing in 2016. Our actions also
position us to deliver strong absolute and relative performance as
prices recover.”
Fourth-Quarter and Full-Year 2015 Results
ConocoPhillips reported a fourth-quarter 2015 net loss of $3.5 billion,
or ($2.78) per share, compared with a fourth-quarter 2014 net loss of
$39 million, or ($0.03) per share. Excluding special items,
fourth-quarter 2015 adjusted earnings were a net loss of $1.1 billion,
or ($0.90) per share, compared with fourth-quarter 2014 adjusted
earnings of $0.7 billion, or $0.60 per share. Special items for the
current quarter related primarily to non-cash impairments due to price
impacts and changes to future exploration plans, partially offset by net
gains on asset sales.
Full-year 2015 earnings were a net loss of $4.4 billion, or ($3.58) per
share, compared with full-year 2014 earnings of $6.9 billion, or $5.51
per share. Excluding special items, full-year 2015 adjusted earnings
were a net loss of $1.7 billion, or ($1.40) per share, compared with
full-year 2014 adjusted earnings of $6.6 billion, or $5.30 per share.
2015 Summary
-
Achieved full-year production of 1,589 MBOED; 5 percent production
growth from continuing operations, adjusted for Libya, downtime and
dispositions.
-
Lowered operating costs by 14 percent year over year.
-
Reduced 2015 capital by 41 percent compared with 2014.
-
Achieved major project startups at APLNG and Surmont 2.
-
Completed additional startups at Eldfisk II, CD5, Drill Site 2S,
Enochdhu and the Brodgar H3 subsea tie-back.
-
Announced phased exit from deepwater exploration.
-
Completed approximately $2 billion of non-core asset dispositions
across the portfolio.
-
Ended the year with $2.4 billion of cash and cash equivalents.
Fourth-Quarter Review
Production from continuing operations for the fourth quarter of 2015 was
1,599 thousand barrels of oil equivalent per day (MBOED), an increase of
32 MBOED compared with the same period a year ago, excluding Libya.
Growth was primarily due to new production from major projects and
development programs, as well as improved well performance, partially
offset by normal field decline. The net increase in production reflects
42 MBOED, or 3 percent growth, after adjusting for 10 MBOED from
dispositions and downtime.
First production was achieved at CD5 and Drill Site 2S in Alaska. In
Canada, production continued to ramp at Surmont 2 and the Cheshire
exploration well spud offshore Nova Scotia. First LNG was achieved at
APLNG in December and the first cargo departed Australia in January
2016. The company also completed several non-core asset dispositions in
the Lower 48, Canada, Europe and North Africa, and Other International.
The first Senegal appraisal well and flow test confirmed the discovery
and the second appraisal well is currently drilling. In the Gulf of
Mexico, drilling is currently underway at the Melmar, Gibson and Tiber
wells.
Adjusted earnings were lower compared with fourth-quarter 2014 primarily
due to lower realized prices. The company’s total realized price was
$28.54 per barrel of oil equivalent (BOE), compared with $52.88 per BOE
in the fourth quarter of 2014, reflecting lower average realized prices
across all commodities. During the quarter, dry hole expense of $565
million, or $506 million excluding special items, was incurred primarily
in Canada and the Gulf of Mexico. Fourth-quarter earnings were also
negatively impacted by $57 million of foreign exchange rate impacts,
primarily from tax on foreign exchange rate movements in the Asia
Pacific and Middle East segment.
Special items for the quarter resulted in after-tax impacts of $2.3
billion. Special items included $2.7 billion of non-cash impairments
primarily from price-related impacts at APLNG in Australia and various
assets in the United Kingdom, as well as changes to future exploration
plans in the Chukchi Sea in Alaska, Angola and the Gulf of Mexico,
partially offset by $366 million from net gains on asset sales.
Operating costs for the quarter were $2.14 billion compared with $3.35
billion in the fourth quarter of 2014. Adjusted for $0.23 billion
pre-tax of 2015 special items from Angola Block 36 obligations,
restructuring charges and pension settlement expense, and $0.80 billion
pre-tax from the Freeport LNG termination in 2014, operating costs were
reduced 25 percent, or $0.63 billion, compared with fourth-quarter 2014.
For the quarter, cash provided by continuing operating activities was
$1.6 billion. Excluding a $0.2 billion change in operating working
capital, ConocoPhillips generated $1.8 billion in cash from operations.
In addition, the company funded $2.1 billion in capital expenditures and
investments, received proceeds from asset dispositions of $1.6 billion,
and paid dividends of $0.9 billion.
Full-Year Review
Production from continuing operations was 1,589 MBOED in 2015, an
increase of 57 MBOED compared with 1,532 MBOED in 2014, excluding Libya.
The net increase in production reflects 70 MBOED, or 5 percent growth,
after adjusting for 13 MBOED from dispositions and downtime. Production
increased due to growth from major projects and development programs, as
well as improved well performance, partially offset by normal field
decline.
The company’s total realized price during this period was $34.34 per
BOE, compared with $64.59 per BOE in 2014. This reflected lower average
realized prices across all commodities.
Operating costs for the full year of 2015 were $9.10 billion compared
with $10.52 billion in 2014. Adjusted for $1.06 billion pre-tax of 2015
special items from restructuring charges, rig termination costs, pension
settlement expense and Angola Block 36 obligations, and $0.80 billion
pre-tax from the Freeport LNG termination in 2014, operating costs were
reduced 17 percent year over year, or $1.68 billion.
In 2015, cash provided by continuing operating activities was $7.6
billion. Operating working capital had no impact during the year.
Additionally, the company funded $10.1 billion in capital expenditures
and investments, paid dividends of $3.7 billion, received proceeds from
asset dispositions of $2.0 billion, and increased debt by $2.4 billion.
As of Dec. 31, 2015, ConocoPhillips had $2.4 billion of cash and cash
equivalents. The company ended the year with debt of $24.9 billion and a
debt-to-capital ratio of 38 percent.
Reserves Update
Preliminary year-end 2015 proved reserves are 8.2 billion BOE. Additions
excluding market factors and dispositions are expected to be 523 million
BOE, or an 86 percent adjusted replacement ratio. Dispositions were 175
million BOE. Market factors, primarily related to lower prices, were a
reduction of 464 million BOE. The company expects to rebook reserves as
prices improve. The total reserve replacement ratio, including
dispositions and market factors, is expected to be negative 19 percent
of 2015 production.
Final information related to the company’s 2015 oil and gas reserves, as
well as costs incurred, will be provided in ConocoPhillips’ Annual
Report on Form 10-K, to be filed with the Securities and Exchange
Commission in late February.
Outlook
As previously noted, guidance for 2016 capital expenditures has been
lowered from $7.7 billion to $6.4 billion, primarily driven by reduced
activity in the Lower 48. Guidance for 2016 operating costs has been
reduced from $7.7 billion to $7.0 billion.
Consistent with the capital reductions, the company has revised its
full-year 2016 production guidance to be essentially flat with 2015
production of 1,525 MBOED, which excludes 64 MBOED for the full-year
impact of completed dispositions. First-quarter 2016 production guidance
is 1,540 to 1,580 MBOED.
The company’s 2016 guidance for corporate segment net expense is $1.0
billion; depreciation, depletion and amortization is $8.5 billion; and
exploration dry hole and leasehold impairment expense is $0.8 billion.
Guidance excludes any special items.
ConocoPhillips will host a conference call today at 12:00 p.m. EST to
discuss this announcement. To listen to the call, as well as view
related presentation materials and supplemental information, go to www.conocophillips.com/investor.
--- # # # ---
About ConocoPhillips
ConocoPhillips is the world’s largest independent E&P company based on
production and proved reserves. Headquartered in Houston, Texas,
ConocoPhillips had operations and activities in 21 countries, $30
billion in annual revenue, $97.5 billion of total assets, and
approximately 15,900 employees as of Dec. 31, 2015. Production averaged
1,589 MBOED in 2015, and preliminary proved reserves were 8.2 billion
BOE as of Dec. 31, 2015. For more information, go to www.conocophillips.com.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE
"SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995
This news release contains forward-looking statements.
Forward-looking statements relate to future events and anticipated
results of operations, business strategies, and other aspects of our
operations or operating results. In many cases you can identify
forward-looking statements by terminology such as "anticipate,"
"estimate," "believe," "continue," "could," "intend," "may," "plan,"
"potential," "predict," "should," "will," "expect," "objective,"
"projection," "forecast," "goal," "guidance," "outlook," "effort,"
"target" and other similar words. However, the absence of these words
does not mean that the statements are not forward-looking. Where, in any
forward-looking statement, the company expresses an expectation or
belief as to future results, such expectation or belief is expressed in
good faith and believed to have a reasonable basis. However, there can
be no assurance that such expectation or belief will result or be
achieved. The actual results of operations can and will be affected by a
variety of risks and other matters including, but not limited to,
changes in commodity prices; changes in expected levels of oil and gas
reserves or production; operating hazards, drilling risks, unsuccessful
exploratory activities; difficulties in developing new products and
manufacturing processes; unexpected cost increases; international
monetary conditions; potential liability for remedial actions under
existing or future environmental regulations; potential liability
resulting from pending or future litigation; limited access to capital
or significantly higher cost of capital related to illiquidity or
uncertainty in the domestic or international financial markets; and
general domestic and international economic and political conditions; as
well as changes in tax, environmental and other laws applicable to our
business. Other factors that could cause actual results to differ
materially from those described in the forward-looking statements
include other economic, business, competitive and/or regulatory factors
affecting our business generally as set forth in our filings with the
Securities and Exchange Commission. Unless legally required,
ConocoPhillips undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Use of Non-GAAP Financial Information – This news release
includes the terms adjusted earnings, adjusted earnings per share and
operating costs. These are non-GAAP financial measures. These terms are
included to help facilitate comparisons of company operating performance
across periods and with peer companies. Operating costs represent
controllable costs and include production and operating expenses,
selling, general and administrative expenses and exploration expenses
excluding dry holes and leasehold impairments.
References in the release to earnings refer to net income/(loss)
attributable to ConocoPhillips.
Organic reserve additions comprise net proved reserve additions
resulting from extensions and discoveries, improved recovery and
revisions, and exclude the impact of sales and acquisitions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips Reconciliation of Earnings to
Adjusted Earnings $ Millions, Except as Indicated
|
|
|
|
4Q
|
|
|
FY
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
Earnings
|
|
|
$
|
(3,450
|
)
|
|
|
(39
|
)
|
|
|
(4,428
|
)
|
|
|
6,869
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain on asset sales
|
|
|
|
(366
|
)
|
|
|
(38
|
)
|
|
|
(395
|
)
|
|
|
(38
|
)
|
Impairments
|
|
|
|
2,742
|
|
|
|
381
|
|
|
|
3,077
|
|
|
|
641
|
|
Loss on capacity agreements
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
83
|
|
Qatar depreciation adjustment
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
28
|
|
International tax law changes
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(426
|
)
|
|
|
-
|
|
Restructuring
|
|
|
|
55
|
|
|
|
-
|
|
|
|
282
|
|
|
|
-
|
|
Pending claims and settlements
|
|
|
|
62
|
|
|
|
(48
|
)
|
|
|
62
|
|
|
|
(268
|
)
|
Tax impact from country exit
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(28
|
)
|
|
|
-
|
|
Pension settlement expense
|
|
|
|
49
|
|
|
|
-
|
|
|
|
143
|
|
|
|
-
|
|
Rig termination
|
|
|
|
-
|
|
|
|
-
|
|
|
|
246
|
|
|
|
-
|
|
Depreciation volume adjustment
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(48
|
)
|
|
|
-
|
|
Tax benefit on interest expense
|
|
|
|
(209
|
)
|
|
|
-
|
|
|
|
(209
|
)
|
|
|
(61
|
)
|
Deferred tax adjustment
|
|
|
|
-
|
|
|
|
(59
|
)
|
|
|
-
|
|
|
|
(59
|
)
|
Freeport LNG termination agreement
|
|
|
|
-
|
|
|
|
545
|
|
|
|
-
|
|
|
|
545
|
|
Discontinued operations - other ¹
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,131
|
)
|
Adjusted earnings
|
|
|
$
|
(1,117
|
)
|
|
|
742
|
|
|
|
(1,724
|
)
|
|
|
6,609
|
|
1 Includes Kashagan, Algeria and Nigeria
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share of common stock (dollars)
|
|
|
$
|
(2.78
|
)
|
|
|
(0.03
|
)
|
|
|
(3.58
|
)
|
|
|
5.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per share of common stock (dollars)
|
|
|
$
|
(0.90
|
)
|
|
|
0.60
|
|
|
|
(1.40
|
)
|
|
|
5.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160204005453/en/
Copyright Business Wire 2016