ConocoPhillips Analyst and Investor Meeting to Outline Strategy and Actions for Accelerating Value Proposition
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Announcing $3 billion share repurchase program;
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Initiating $5 to $8 billion asset divestiture program; and
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Providing 2017 operating plan guidance, including expected capital
expenditures of $5 billion.
ConocoPhillips (NYSE: COP) will hold an Analyst and Investor Meeting
today to outline the company’s strategy and discuss several planned
actions for accelerating the company’s value proposition of a strong
balance sheet, growing dividend and disciplined growth. These actions
include an initial $3 billion share repurchase program and the
initiation of a $5 to $8 billion divestiture program, which will focus
primarily on North American natural gas. The company will also provide
details on its 2017 operating plan, which further reduces capital
expenditures and adjusted operating costs compared with 2016, while
delivering modest production growth.
“During the past two years, we have significantly transformed
ConocoPhillips to succeed in a lower, more volatile price environment.
We’ve lowered the capital intensity and breakeven price of the company,
lowered the cost of supply of our investment portfolio, and created
strategic flexibility for future price cycles,” said Ryan Lance,
chairman and chief executive officer. “We believe our plan offers a
differentiated strategy within the E&P sector that is focused on free
cash flow generation and improving returns to shareholders. We have
positioned ConocoPhillips to deliver double-digit shareholder returns
across a range of commodity prices through a combination of peer-leading
shareholder distributions and high-return investments.
“The acceleration actions we’ve announced today will allow us to achieve
our value proposition priorities at Brent prices of about $50 per
barrel,” added Lance. “These priorities include a debt target of $20
billion, a 20 to 30 percent payout of operating cash flows to
shareholders, and modest production growth to drive margin and cash flow
expansion. In setting out these priorities, our goal is to have strong
resilience to low commodity prices with the ability to capture upside
during periods of higher prices.”
The company’s 2017 operating plan includes capital expenditures guidance
of $5 billion, a decrease of 4 percent compared with 2016 guidance of
$5.2 billion and more than 50 percent lower than 2015 capital
expenditures and investments of $10.1 billion. Spending in 2017 will
focus primarily on flexible unconventional development programs in the
Lower 48, conventional projects in Europe, Asia Pacific and Alaska, and
base asset maintenance. Approximately $0.6 billion is included for
exploration, which is primarily focused on unconventionals, appraisal of
the Barossa discovery, and the closeout of deepwater Gulf of Mexico and
Nova Scotia drilling obligations.
Full-year 2017 production is expected to be 1,540 to 1,570 thousand
barrels of oil equivalent per day (MBOED), which results in flat to 2
percent growth compared with expected full-year 2016 production of
approximately 1,540 MBOED when adjusted for 2016 expected dispositions.
Growth is expected to come primarily from ramp up at APLNG in Australia,
Surmont 2 in Canada and Kebabangan in Malaysia, as well as increased
activity in the Lower 48 unconventionals, partly offset by normal field
decline. The company’s production outlook excludes Libya.
The company continues to achieve cost reductions across the business.
Guidance for 2017 production and operating expenses is approximately
$5.2 billion, which results in adjusted operating cost guidance of $6
billion, a 9 percent improvement compared with 2016 adjusted operating
cost guidance.
“We believe our company offers one of the most unique value propositions
in the E&P sector,” said Lance. “We’ve reset virtually every aspect of
the business – our capital program, our cost structure and our portfolio
– during the recent industry downturn. Now, we’re in a differential
position to generate free cash flow as prices recover and we implement
our clear priorities for allocating available cash. In a future of
volatile prices, we can demonstrate that our disciplined,
returns-focused approach will deliver strong performance for all our
stakeholders.”
ConocoPhillips’ Analyst and Investor Meeting will begin at 9 a.m. EST in
New York City. A live webcast of the meeting will be made available on
the ConocoPhillips Investor Relations site, 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 20 countries, $94
billion of total assets, and approximately 14,900 employees as of Sept.
30, 2016. Production averaged 1,560 MBOED for the nine months ended
Sept. 30, 2016, and 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 – To supplement the
presentation of the Company’s financial results prepared in accordance
with U.S. generally accepted accounting principles (GAAP), this news
release contains certain financial measures that are not prepared in
accordance with GAAP, including operating costs, adjusted operating
costs, breakeven price and free cash flow. Operating costs is defined by
the Company as the sum of production and operation expenses, selling,
general and administrative expenses, and exploration general and
administrative expenses, geological and geophysical and lease rental and
other expenses. Adjusted operating costs is defined as the Company’s
operating costs further adjusted to exclude expenses that are included
as adjustments to adjusted earnings to the extent those adjustments
impact production and operating expenses, selling, general and
administrative expenses, and exploration general and administrative
expenses, geological and geophysical and lease rental and other
expenses. Breakeven price is the Brent price at which cash from
operations equals the capital expenditures and investments required to
maintain flat production, working capital changes associated with
investing activities and dividends paid. Free cash flow is cash from
operations in excess of capital expenditures and investments required to
maintain flat production, working capital changes associated with
investing activities, and dividends paid. Free cash flow is not a
measure of cash available for discretionary expenditures since the
Company has certain non-discretionary obligations such as debt service
that are not deducted from the measure. The company believes that the
non-GAAP measures breakeven price and free cash flow are useful to
investors as they provide measures to compare cash from operations after
deduction of capital expenditures and investments, working capital
changes associated with investing activities, and dividends paid across
periods on a consistent basis.
The Company believes that the non-GAAP measures operating costs and
adjusted operating costs are useful to investors to help facilitate
comparisons of the Company’s operating performance and controllable
costs associated with the Company’s core business operations across
periods on a consistent basis and with the performance and cost
structures of peer companies in a manner that, when viewed in
combination with the Company’s results prepared in accordance with GAAP,
provides a more complete understanding of the factors and trends
affecting the Company’s business and performance. The Company further
believes that the non-GAAP measure adjusted operating costs provides a
more indicative measure of the Company’s underlying, controllable costs
of operations by excluding other items that do not directly relate to
the Company’s core business operations. The Company’s Board of Directors
and management also use these non-GAAP measures to analyze the Company’s
operating performance across periods when overseeing and managing the
Company’s business.
Each of the non-GAAP measures included in this news release has
limitations as an analytical tool and should not be considered in
isolation or as a substitute for an analysis of the Company’s results
calculated in accordance with GAAP. In addition, because not all
companies use identical calculations, the Company’s presentation of
non-GAAP measures in this news release and the accompanying supplemental
financial information may not be comparable to similarly titled measures
disclosed by other companies, including companies in our industry. The
Company may also change the calculation of any of the non-GAAP measures
included in this news release from time to time in light of its then
existing operations to include other adjustments that may impact its
operations.
Reconciliations of each non-GAAP measure presented in this news
release to the most directly comparable financial measure calculated in
accordance with GAAP are included below.
Cautionary Note to U.S. Investors – The SEC permits oil and gas
companies, in their filings with the SEC, to disclose only proved,
probable and possible reserves. We use the term "resource" in this
presentation that the SEC’s guidelines prohibit us from including in
filings with the SEC. U.S. investors are urged to consider closely the
oil and gas disclosures in our Form 10-K and other reports and filings
with the SEC. Copies are available from the SEC and from the
ConocoPhillips website.
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ConocoPhillips
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Reconciliation of Production and Operating Expenses to Adjusted
Operating Costs
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$ Millions, Except as Indicated
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FY 2016 Guidance
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FY 2017 Guidance
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Production and operating expenses
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5,700
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5,200
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Production and operating expenses - percent reduction
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9
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%
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Adjustments:
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Selling, general and administrative (G&A) expenses
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700
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550
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Exploration G&A, G&G, lease rentals and other expenses
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700
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350
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Operating costs
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7,100
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6,100
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Adjustments to exclude special items
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Less restructuring
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(145
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Less pension settlement expense
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(151
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Less impairments
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(36
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Less rig termination
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(134
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)
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Less pending claims and settlements
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(43
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Less other costs
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-
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(150
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Adjusted operating costs
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~6,600
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~6,000
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Adjusted operating costs - percent reduction
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9
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%
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