ConocoPhillips Reports Third-Quarter 2015 Results; Accelerating Capital and Operating Cost Reductions
ConocoPhillips (NYSE:COP) today reported a third-quarter 2015 net loss
of $1.1 billion, or ($0.87) per share, compared with third-quarter 2014
earnings of $2.7 billion, or $2.17 per share. Excluding special items,
third-quarter 2015 adjusted earnings were a net loss of $466 million, or
($0.38) per share, compared with third-quarter 2014 adjusted earnings of
$1.6 billion, or $1.29 per share. Special items for the current quarter
related primarily to the termination of a rig contract for a Gulf of
Mexico deepwater drillship, non-cash impairments, restructuring costs
and pension settlement expense.
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Ryan Lance, ConocoPhillips Chairman and Chief Executive Officer (Photo: Business Wire)
Highlights
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Increased quarterly dividend to $0.74 per share in July.
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Accelerating capital and operating cost reductions; further reduced
2015 capital expenditures guidance from $11.0 billion to $10.2 billion
and operating cost guidance from $8.9 billion to $8.2 billion.
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Achieved third-quarter production of 1,554 MBOED; on track to exceed
full-year 2015 production guidance.
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Four percent year-over-year production growth from continuing
operations, adjusted for Libya, downtime and dispositions.
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Special items of $654 million pre-tax drove a 9 percent year-over-year
increase in operating costs; however, adjusted for special items,
underlying operating costs improved 18 percent.
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Achieved first oil at Surmont 2 in Canada during the quarter, as well
as CD5 and Drill Site 2S in Alaska in October; on track for first
cargo at APLNG by year end.
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Successfully completed major turnarounds in the Alaska, Europe, and
Asia Pacific and Middle East segments.
“We are accelerating actions to position our company for low and
volatile prices, while improving the underlying performance of the
business,” said Ryan Lance, chairman and chief executive officer. “We
are on track to deliver seven major project startups and exceed our
volume targets for the year. We are exercising flexibility in our
capital program, dramatically lowering our cost structure and divesting
assets that do not compete for funding in our portfolio. These steps
will make us more flexible and resilient for the future. We remain
committed to a compelling dividend, affordable growth and strong
financial performance.”
Operations Update
Lower 48 – Quarterly production was 551 thousand barrels of oil
equivalent per day (MBOED), an increase of 8 MBOED compared with the
same period in 2014. The increase was primarily from growth in
liquids-rich unconventional plays as well as improved drilling
performance, partially offset by normal field decline. The Eagle Ford
and Bakken collectively delivered 234 MBOED for the quarter, a 10
percent increase compared with the third quarter of 2014. Lower 48 crude
production grew 12 percent year over year. In the Gulf of Mexico,
results from the Shenandoah appraisal well are encouraging. The
Vernaccia and Gibson exploration wells are currently drilling and the
Melmar exploration well is expected to spud in the fourth quarter.
Canada – Third-quarter production was 315 MBOED, an increase of
39 MBOED compared with the third quarter of 2014. The increase was
primarily driven by strong well performance in western Canada and the
oil sands, ramp up at Foster Creek Phase F, and lower downtime. First
production was achieved at Surmont 2 and production is expected to ramp
up through 2017. In October, the Cheshire exploration well spud offshore
Nova Scotia.
Alaska – Production for the quarter was 160 MBOED, an increase of
5 MBOED compared with the same period in 2014. This increase was due to
lower planned downtime, partially offset by normal field decline.
Turnaround activities were successfully completed at Kuparuk and
Prudhoe. In October, first oil was achieved at CD5 and Drill Site 2S.
Europe – Quarterly production was 192 MBOED, a decrease of 2
MBOED compared with the same period in 2014. The decrease was primarily
the result of normal field decline and downtime, partially offset by new
production from major projects and well performance. Turnaround activity
was successfully completed across the U.K.
Asia Pacific and Middle East – Third-quarter production was 332
MBOED, an increase of 31 MBOED compared with the third quarter of 2014.
The increase was primarily the result of growth from major projects,
partially offset by normal field decline. In Malaysia, the major
turnaround activity at Gumusut was completed ahead of schedule. In
Australia, APLNG is progressing toward first cargo, which is expected by
year end.
Other International – Production was 4 MBOED in the third
quarter, flat compared with the same period in 2014 when excluding
Libya. The Es Sider Terminal in Libya remains shut-in as a result of
ongoing unrest.
Third-Quarter Review
Production from continuing operations, excluding Libya, for the third
quarter of 2015 was 1,554 MBOED, an increase of 81 MBOED compared with
the same period a year ago. Growth was primarily due to new production
from major projects and development programs, partially offset by normal
field decline. The net increase in production reflects 56 MBOED, or 4
percent growth, after adjusting for 25 MBOED from dispositions and
downtime.
Adjusted earnings were lower compared with third-quarter 2014 primarily
due to lower realized prices. The company’s total realized price was
$32.91 per barrel of oil equivalent (BOE), compared with $64.78 per BOE
in the third quarter of 2014, reflecting lower average realized prices
across all commodities.
Special items for the quarter resulted in after-tax impacts of $246
million from the termination of a rig contract for a Gulf of Mexico
deepwater drillship, $195 million from non-cash impairments in the Lower
48 and Asia Pacific and Middle East segments, $156 million from
restructuring costs, $56 million of pension settlement expenses and a
$48 million decrease in depreciation from a third-quarter revision in
the Lower 48.
Operating costs for the quarter were $2.66 billion compared with $2.44
billion in the third quarter of 2014. Adjusted for rig termination,
restructuring charges and pension settlement expense, totaling $0.65
billion pre-tax, operating costs were improved 18 percent year over year
or $0.43 billion.
For the quarter, cash provided by continuing operating activities was
$1.9 billion. Excluding a $0.6 billion change in operating working
capital, ConocoPhillips generated $1.3 billion in cash from operations.
Adjusted for the $0.3 billion working capital impact from special items,
cash from operations excluding working capital would have been $1.6
billion during the quarter. In addition, the company funded $2.2 billion
in capital expenditures and investments and paid dividends of $0.9
billion.
Nine-Month Review
ConocoPhillips’ nine-month 2015 earnings were a net loss of $978
million, or ($0.80) per share, compared with nine-month 2014 earnings of
$6.9 billion, or $5.54 per share. Nine-month 2015 adjusted earnings were
a net loss of $607 million, or ($0.50) per share, compared with
nine-month 2014 adjusted earnings of $5.9 billion, or $4.71 per share.
Production from continuing operations, excluding Libya, for the first
nine months of 2015 was 1,586 MBOED, compared with 1,520 MBOED for the
same period in 2014. Production increased due to new production 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 $36.31 per
BOE, compared with $68.71 per BOE in the first nine months of 2014. This
reflected lower average realized prices across all commodities.
Operating costs for the first nine months of 2015 were $6.96 billion
compared with $7.17 billion in 2014. Adjusted for rig termination,
restructuring charges and pension settlement expense, totaling $0.83
billion pre-tax, operating costs were improved 15 percent year over year
or $1.04 billion.
For the nine months ended Sept. 30, 2015, cash provided by continuing
operating activities was $6.0 billion. Excluding a $0.2 billion change
in operating working capital, ConocoPhillips generated $5.8 billion in
cash from operations. Additionally, the company funded $7.9 billion in
capital expenditures and investments, paid dividends of $2.7 billion and
increased debt by $2.4 billion.
As of Sept. 30, 2015, ConocoPhillips had $2.4 billion of cash and cash
equivalents. The company ended the third quarter with debt of $24.9
billion and a debt-to-capital ratio of 36 percent.
Outlook
Fourth-quarter production guidance is 1,585 to 1,625 MBOED. Full-year
2015 production guidance is 1,585 to 1,595 MBOED, resulting in expected
year-over-year growth of 3 to 4 percent from continuing operations,
excluding Libya.
The company has further reduced its 2015 capital expenditures guidance
to $10.2 billion compared with initial 2015 guidance of $11.5 billion.
The company has also reduced 2015 operating cost guidance to $8.2
billion compared with initial guidance of $9.2 billion. For both capital
and operating costs, approximately half of these reductions are due to
market factors, while the remainder are the result of discretionary
actions to lower costs.
Corporate segment net expense has been reduced to $0.8 billion. Guidance
for depreciation, depletion and amortization of $9.0 billion, and
exploration dry hole and leasehold impairment expense of $0.8 billion
are unchanged. Guidance excludes any special items.
ConocoPhillips expects to release its 2016 capital and operating plan on
Dec. 10, 2015. Management also plans to host a call in conjunction with
the release. Additional details will be provided at a later date.
ConocoPhillips will host a conference call today at 12:00 p.m. EDT to
discuss its third-quarter results and provide an operational update. To
listen to the call, and 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 25 countries, $31
billion in annualized revenue, $106 billion of total assets, and
approximately 17,800 employees as of Sept. 30, 2015. Production,
excluding Libya, averaged 1,586 MBOED for the nine months ended Sept.
30, 2015, and proved reserves were 8.9 billion BOE as of Dec. 31, 2014.
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.
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ConocoPhillips
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Reconciliation of Earnings to Adjusted Earnings
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$ Millions, Except as Indicated
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3Q
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YTD
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2015
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2014
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2015
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2014
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Earnings
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$
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(1,071
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)
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2,704
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(978
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)
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6,908
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Adjustments:
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Net gain on asset sales
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-
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-
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(29
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)
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-
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Impairments
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195
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151
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335
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260
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Loss on capacity agreements
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-
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-
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-
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83
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Qatar depreciation adjustment
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-
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-
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-
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28
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International tax law changes
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-
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-
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(426
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)
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-
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Restructuring
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156
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-
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227
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-
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Pending claims and settlements
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-
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(105
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)
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-
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(220
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)
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Tax impact from country exit
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-
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-
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(28
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)
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-
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Pension settlement expense
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56
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-
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94
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-
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Rig termination
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246
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-
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246
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-
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Depreciation volume adjustment
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(48
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)
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-
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(48
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)
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-
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Tax benefit on interest expense
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-
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(61
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-
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(61
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Discontinued operations - other ¹
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-
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(1,078
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-
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(1,131
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Adjusted earnings
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$
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(466
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1,611
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(607
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5,867
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(1) Includes Kashagan, Algeria and Nigeria
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Earnings per share of common stock (dollars)
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$
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(0.87
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)
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2.17
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(0.80
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)
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5.54
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Adjusted earnings per share of common stock (dollars)
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$
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(0.38
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)
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1.29
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(0.50
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4.71
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