- Announcing $3 billion share repurchase
program;
- Initiating $5 to $8 billion asset
divestiture program; and
- 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.
ConocoPhillips Reconciliation
of Production and Operating Expenses to Adjusted Operating
Costs $ Millions, Except as Indicated
FY 2016Guidance
FY 2017Guidance
Production and operating expenses 5,700
5,200 Production and operating expenses - percent
reduction 9 % Adjustments: Selling, general and
administrative (G&A) expenses 700 550 Exploration G&A,
G&G, lease rentals and other expenses 700
350 Operating costs 7,100 6,100
Adjustments to exclude special items Less restructuring (145 ) Less
pension settlement expense (151 ) Less impairments (36 ) Less rig
termination (134 ) Less pending claims and settlements (43 ) Less
other costs - (150 )
Adjusted
operating costs ~6,600
~6,000 Adjusted operating costs - percent
reduction 9 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161110005309/en/
ConocoPhillipsDaren Beaudo, 281-293-2073
(media)daren.beaudo@conocophillips.comorAndy O’Brien, 281-293-5000
(investors)andy.m.obrien@conocophillips.comorVladimir R. dela Cruz,
281-293-5000 (investors)v.r.delacruz@conocophillips.com
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