ConocoPhillips Reports Second-Quarter 2016 Results; Continued Strong Operational Performance
ConocoPhillips (NYSE: COP) today reported a second-quarter 2016 net loss
of $1.1 billion, or ($0.86) per share, compared with a second-quarter
2015 net loss of $179 million, or ($0.15) per share. Excluding special
items, second-quarter 2016 adjusted earnings were a net loss of $985
million, or ($0.79) per share, compared with second-quarter 2015
adjusted earnings of $81 million, or $0.07 per share. Special items for
the current quarter were related to non-cash impairments in the Lower
48, primarily in the Gulf of Mexico; pension settlement expense;
deferred tax adjustments; and a gain on an asset sale.
Summary
-
Exceeded second-quarter guidance with production of 1,546 MBOED;
increasing full-year guidance.
-
Lowering 2016 capital expenditures guidance from $5.7 billion to $5.5
billion.
-
Improved production and operating expenses by 20 percent year over
year; improved adjusted operating costs by 18 percent year over year;
lowering full-year adjusted operating cost guidance.
-
Safely executed second-quarter major turnaround activity in Europe and
Alaska; activity ongoing in the third quarter.
-
Achieved first production at Foster Creek Phase G in Canada; Surmont
production restored to prior quarter levels after wildfires.
-
On track for first cargo from APLNG Train 2 in Australia and first
production from Alder in Europe in the fourth quarter of 2016.
-
Lowered debt by $0.8 billion.
-
Completed non-core asset sales of $0.2 billion, bringing the six-month
2016 total to $0.4 billion; signed a sale and purchase agreement for
exploration blocks offshore Senegal in July.
“The price environment remains challenging, but our business is running
well and we continue to beat our production, capital expenditures and
operating cost targets,” said Ryan Lance, chairman and chief executive
officer. “During the quarter, we successfully completed significant
turnaround activity and saw strong performance across the portfolio,
which enabled us to improve our full-year guidance for production,
capital expenditures and adjusted operating costs. We are continuing to
ramp up production from our APLNG and Surmont projects, and achieved
first production at Foster Creek Phase G in Canada. Our financial
position improved as we reduced our debt by $0.8 billion and generated
asset sale proceeds of $0.2 billion, remaining on track for about $1
billion of asset sale proceeds this year. We remain focused on
successfully executing our operating plan, lowering the breakeven price
of the business and positioning for strong momentum as prices recover.”
Second-Quarter Review
Production for the second quarter of 2016 was 1,546 thousand barrels of
oil equivalent per day (MBOED), a decrease of 49 MBOED compared with the
same period a year ago. The decrease was the result of normal field
decline, dispositions, planned downtime and the impact of wildfires in
Canada, partly offset by growth from major projects and development
programs and improved well performance. When adjusted for 95 MBOED from
dispositions and downtime, production increased 46 MBOED, or 3 percent.
For the quarter, operational performance was strong across the
portfolio. The company safely progressed several major turnarounds in
Europe and Alaska, which will continue in the third quarter. The Lower
48 delivered strong production, primarily from the unconventionals, and
there were positive results from the Shenandoah 5 appraisal well in the
Gulf of Mexico. CD5 and Drill Site 2S in Alaska continue to perform
well, with an additional phase approved at CD5. By the end of June,
Surmont production was restored to first-quarter levels after the
wildfires and first production was achieved with the commissioning of
Foster Creek Phase G. Production began to ramp up from Kebabangan in
Malaysia and the APLNG project in Australia continued to operate above
expectations, with Train 2 expected to start up in the fourth quarter of
2016.
The company progressed its phased exit from deepwater exploration with
the signing of a sale and purchase agreement for three exploration
blocks offshore Senegal in July. The company also recorded a dry hole
and leasehold impairment at the Gibson and Tiber prospects in the Gulf
of Mexico.
Adjusted earnings were lower compared with second-quarter 2015 primarily
due to lower realized prices. The company’s total realized price was
$27.79 per barrel of oil equivalent (BOE), compared with $39.06 per BOE
in the second quarter of 2015, reflecting lower average realized prices
across all commodities.
For the quarter, cash provided by operating activities was $1.26
billion. Excluding a change in operating working capital, ConocoPhillips
generated $1.23 billion in cash from operations and received proceeds
from asset dispositions of $0.2 billion. The company funded $1.1 billion
in capital expenditures and investments, and paid dividends of $0.3
billion. Additionally, the company repaid debt of $0.8 billion and
purchased $1.0 billion in short-term investments.
Six-Month Review
ConocoPhillips’ six-month 2016 earnings were a net loss of $2.5 billion,
or ($2.04) per share, compared with six-month 2015 earnings of $93
million, or $0.07 per share. Six-month 2016 adjusted earnings were a net
loss of $2.2 billion, or ($1.74) per share, compared with a six-month
2015 adjusted net loss of $141 million, or ($0.11) per share.
Production for the first six months of 2016 was 1,562 MBOED, compared
with 1,603 MBOED for the same period in 2015. Production decreased due
to normal field decline and dispositions, partly offset by new
production from major projects and development programs.
The company’s total realized price during this period was $25.31 per
BOE, compared with $37.99 per BOE in the first six months of 2015. This
reflected lower average realized prices across all commodities.
In the first half of 2016, cash provided by operating activities was
$1.7 billion. Excluding a $0.2 billion change in operating working
capital, ConocoPhillips generated $1.9 billion in cash from operations
and received proceeds from asset dispositions of $0.4 billion. The
company funded $3.0 billion in capital expenditures and investments, and
paid dividends of $0.6 billion. Additionally, the company increased debt
by $3.8 billion and purchased $1.3 billion in short-term investments.
Outlook
The company is increasing its full-year 2016 production guidance to
1,540 to 1,570 MBOED, reflecting strong year-to-date performance across
most of the portfolio. Third-quarter 2016 production guidance is 1,510
to 1,550 MBOED, which reflects significant planned turnaround activity
during the quarter.
Guidance for production and operating expenses is expected to be $5.8
billion, which results in improved adjusted operating costs of $6.8
billion versus prior guidance of $7.0 billion. The company entered into
an agreement to terminate its final Gulf of Mexico drillship contract
for approximately $140 million before tax, which is expected to be
recorded in the third quarter as a special item.
Guidance for capital expenditures has been lowered to $5.5 billion
versus prior guidance of $5.7 billion. Depreciation, depletion and
amortization guidance has been increased to $9.2 billion for the full
year as a result of increased volumes and increased expense associated
with price-related reserve revisions. The company’s other guidance items
remain unchanged, with corporate segment net expense of $1.0 billion and
exploration dry hole and leasehold impairment expense of $0.8 billion.
ConocoPhillips will host a conference call today at 12:00 p.m. EDT 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 20 countries, $21
billion in annualized revenue, $96 billion of total assets, and
approximately 15,400 employees as of June 30, 2016. Production averaged
1,562 MBOED for the six months ended June 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 and the accompanying supplemental financial information contain
certain financial measures that are not prepared in accordance with
GAAP, including adjusted earnings (calculated on a consolidated and on a
segment-level basis), adjusted earnings per share, adjusted dry hole and
leasehold impairment, adjusted corporate and other earnings, operating
costs and adjusted operating costs. 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 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 other expenses.
The Company believes that the non-GAAP measures adjusted earnings
(both on an aggregate and a per share basis), operating costs and
adjusted operating costs, adjusted dry hole and leasehold impairment,
and adjusted corporate and other earnings 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 and the
accompanying supplemental financial information 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 and the accompanying supplemental financial
information 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.
References in the release to earnings refer to net income/(loss)
attributable to ConocoPhillips.
|
|
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|
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|
|
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips
|
|
Reconciliation of Earnings to Adjusted Earnings
|
|
$ Millions, Except as Indicated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2Q16
|
|
|
2Q15
|
|
|
2016 YTD
|
|
|
2015 YTD
|
|
|
|
Pre-tax
|
|
Income
tax
|
|
After-tax
|
|
|
Pre-tax
|
Income
tax
|
After-tax
|
|
|
Pre-tax
|
|
Income
tax
|
|
After-tax
|
|
|
Pre-tax
|
|
Income
tax
|
|
After-tax
|
|
Earnings
|
|
|
|
|
|
$
|
(1,071
|
)
|
|
|
|
|
(179
|
)
|
|
|
|
|
|
|
(2,540
|
)
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|
|
|
|
|
|
93
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairments
|
|
246
|
|
|
(87
|
)
|
|
|
159
|
|
|
|
275
|
|
(135
|
)
|
140
|
|
|
|
631
|
|
|
(240
|
)
|
|
391
|
|
|
|
275
|
|
|
(135
|
)
|
|
140
|
|
|
Pension settlement expense
|
|
45
|
|
|
(14
|
)
|
|
|
31
|
|
|
|
52
|
|
(14
|
)
|
38
|
|
|
|
128
|
|
|
(39
|
)
|
|
89
|
|
|
|
52
|
|
|
(14
|
)
|
|
38
|
|
|
International tax law changes
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
129
|
|
129
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
(426
|
)
|
|
(426
|
)
|
|
Restructuring
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
17
|
|
(7
|
)
|
10
|
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
121
|
|
|
(50
|
)
|
|
71
|
|
|
Net gain on asset sales
|
|
(56
|
)
|
|
20
|
|
|
|
(36
|
)
|
|
|
(39
|
)
|
10
|
|
(29
|
)
|
|
|
(56
|
)
|
|
20
|
|
|
(36
|
)
|
|
|
(39
|
)
|
|
10
|
|
|
(29
|
)
|
|
Deferred tax adjustment
|
|
-
|
|
|
(68
|
)
|
|
|
(68
|
)
|
|
|
-
|
|
-
|
|
-
|
|
|
|
-
|
|
|
(68
|
)
|
|
(68
|
)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
Tax impact from country exit
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
(28
|
)
|
(28
|
)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
-
|
|
|
(28
|
)
|
|
(28
|
)
|
|
Adjusted earnings / (loss)
|
|
|
|
|
|
$
|
(985
|
)
|
|
|
|
|
81
|
|
|
|
|
|
|
|
(2,164
|
)
|
|
|
|
|
|
|
(141
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share of common stock (dollars)
|
|
|
|
|
|
$
|
(0.86
|
)
|
|
|
|
|
(0.15
|
)
|
|
|
|
|
|
|
(2.04
|
)
|
|
|
|
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings / (loss) per share of common stock
(dollars)
|
|
|
|
|
|
$
|
(0.79
|
)
|
|
|
|
|
0.07
|
|
|
|
|
|
|
|
(1.74
|
)
|
|
|
|
|
|
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
|
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|
|
|
|
|
|
The income tax effects of the special items are primarily calculated
based on the statutory rate of the jurisdiction in which the discrete
item resides.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips
|
|
Reconciliation of Production and Operating Expenses to Adjusted
Operating Costs
|
|
$ Millions, Except as Indicated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2Q16
|
|
|
2Q15
|
|
|
2016
YTD
|
|
|
FY 2016
Guidance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production and operating expenses
|
|
|
|
1,445
|
|
|
|
1,798
|
|
|
|
2,799
|
|
|
|
5,800
|
|
|
|
|
|
|
|
Production and operating expenses - percent reduction
|
|
|
|
-20
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative (G&A) expenses
|
|
|
|
167
|
|
|
|
218
|
|
|
|
353
|
|
|
|
600
|
|
|
|
|
|
|
|
Exploration G&A, G&G and lease rentals
|
|
|
|
147
|
|
|
|
147
|
|
|
|
292
|
|
|
|
700
|
|
|
|
|
|
|
|
Operating costs
|
|
|
|
1,759
|
|
|
|
2,163
|
|
|
|
3,444
|
|
|
|
7,100
|
|
|
|
|
|
|
|
Operating costs unadjusted - percent reduction
|
|
|
|
-19
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to exclude special items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less restructuring
|
|
|
|
-
|
|
|
|
(17
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
Less pension settlement expense
|
|
|
|
(45
|
)
|
|
|
(52
|
)
|
|
|
(128
|
)
|
|
|
(128
|
)
|
|
|
|
|
|
|
Less impairments
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(36
|
)
|
|
|
(36
|
)
|
|
|
|
|
|
|
Less other costs
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(140
|
)
|
|
|
|
|
|
|
Adjusted operating costs
|
|
|
|
1,714
|
|
|
|
2,094
|
|
|
|
3,280
|
|
|
|
~6,800
|
|
|
|
|
|
|
|
Adjusted operating costs - percent reduction
|
|
|
|
-18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ConocoPhillips
|
|
|
Reconciliation of dry hole and leasehold impairment
|
|
|
$ Millions, Except as Indicated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
YTD
|
|
|
FY 2016
Guidance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dry holes
|
|
|
|
429
|
|
|
|
700
|
|
|
|
|
|
|
|
Leasehold impairment
|
|
|
|
394
|
|
|
|
500
|
|
|
|
|
|
|
|
Total
|
|
|
|
823
|
|
|
|
1,200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment to exclude special items
|
|
|
|
|
|
|
|
Less impairments
|
|
|
|
(423
|
)
|
|
|
(423
|
)
|
|
|
|
|
|
|
Adjusted dry hole and leasehold impairment
|
|
|
|
400
|
|
|
|
~800
|
|
Impairment adjustments include $371 million of leasehold impairment
expense and $52 million of dry hole expense.
|
|
|
|
ConocoPhillips
|
|
Reconciliation of Corporate and Other earnings
|
|
$ Millions, Except as Indicated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
YTD
|
|
|
|
FY 2016
Guidance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and Other earnings
|
|
|
|
(608
|
)
|
|
|
|
(1,100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to exclude special items
|
|
|
|
|
|
|
|
Less pension settlement expense
|
|
|
|
(128
|
)
|
|
|
|
(128
|
)
|
|
|
|
|
|
|
Less tax on pension settlement expense
|
|
|
|
39
|
|
|
|
|
39
|
|
|
|
|
|
|
|
Adjusted Corporate and Other earnings
|
|
|
|
(519
|
)
|
|
|
|
~(1,000
|
)
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160728005211/en/
Copyright Business Wire 2016
