ConocoPhillips (NYSE: COP) will hold an Analyst and Investor
Meeting today to outline the company’s 2018-2020 operating plan and
strategy for long-term value creation. The three-year plan averages
annual capital expenditures of $5.5 billion, based on a flat real
West Texas Intermediate (WTI) price of $50 per barrel, and targets
strong performance on several value-oriented metrics,
including:
- Greater than 20 percent cash return on
capital employed (CROCE) by 2020;
- Sustaining capital of $3.5
billion;
- Less than a $40-per-barrel average
sustaining price;
- Greater than 30 percent payout of cash
provided by operating activities to shareholders annually,
including dividends and share buybacks;
- Extending the $1.5 billion per year of
share buybacks for an additional year through 2020, resulting in
total 2017-2020 share buybacks of $7.5 billion;
- Debt reduction to $15 billion in
2019;
- Total share buybacks of $7.5 billion
and debt reduction to $15 billion will represent a 20 percent
decrease in debt-adjusted share count by year-end 2020;
- Approximately 5 percent underlying
production compound annual growth rate (CAGR) and over 5 percent
cash margin CAGR, resulting in more than a 10 percent cash flow
CAGR;
- Improvement in financial returns driven
by disciplined investments in the company’s resource base of 15
billion barrels of oil equivalent with an average cost of supply of
less than $35 per barrel.
The company also announced today that, consistent with its
ongoing commitment to sustainability, it has set a target to reduce
greenhouse gas emissions intensity by 5-to-15 percent by 2030. For
further information, see GHGTarget.cop.com.
“During 2017, we significantly transformed ConocoPhillips to
succeed across a range of commodity prices,” said Ryan Lance,
chairman and chief executive officer. “Through accretive asset
sales and an ongoing focus on capital and cost efficiency, we’ve
lowered the capital intensity and sustaining price of the company,
reduced the cost of supply of our investment portfolio,
substantially strengthened our balance sheet and returned a
significant portion of cash flow to our owners. We believe we’re
uniquely positioned to generate free cash flow, deliver top-tier
distributions to shareholders and improve financial returns, while
executing the business in a safe, socially and environmentally
responsible manner. We want to be the company that can attract and
retain capital to this sector by offering superior returns to
shareholders through cycles. Today we will provide a clear,
measurable plan to achieve this goal.”
ConocoPhillips’ Analyst and Investor Meeting will begin at 9
a.m. EST in New York City. A live webcast of the meeting will be
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 17
countries, $75 billion of total assets, and approximately 11,600
employees as of Sept. 30, 2017. Production excluding Libya averaged
1,403 MBOED for the nine months ended Sept. 30, 2017, and proved
reserves were 6.4 billion BOE as of Dec. 31, 2016. 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. Our actual
results of operations, including our targets for our capital
program and share buybacks, 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 and Other Terms –
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
sustaining capital. Sustaining capital is defined as capital
expenditures and investments that sustains production over the plan
period and beyond. The company believes that the non-GAAP measure
sustaining capital is useful to investors as it specifies minimum
capital required to maintain current production and can be useful
in comparison to peer companies. The Company’s Board of Directors
and management also use this non-GAAP measure 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.
The release also contains the terms underlying production,
debt-adjusted share, free cash flow, sustaining price, cash margin,
and cash returned on capital employed. Underlying production
excludes Libya and announced and expected dispositions.
Debt-adjusted share is calculated using ending period debt divided
by ending share price plus ending shares outstanding. Free cash
flow is cash provided by operating activities in excess of capital
expenditures and investments. 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 term. Sustaining price is the WTI price at
which cash provided by operating activities covers sustaining
capital and growing dividend. Cash margin is cash provided by
operating activities per barrel. Cash returned on capital employed
is defined as net income plus after-tax interest expense plus
depreciation, depletion and amortization less the impacts of
non-operational results and special items for unusual transactions
outside the normal course of business which are over a certain
threshold. The Company believes that underlying production is
useful to investors to compare production excluding Libya and the
full impact of announced and expected dispositions on a consistent
go-forward basis with peer companies. The Company believes that the
debt-adjusted share term is useful to investors as it provides a
consistent view of total equity by converting debt to equity and
allows for comparisons across peer companies. The Company believes
that the free cash flow term is useful to investors as it provides
insight into cash provided by operating activities after capital
expenditures and investments across periods on a consistent basis.
The Company believes that the sustaining price term is useful to
investors as it specifies the minimum price required to cover
sustaining capital and dividends and can be useful in comparison to
peer companies. The Company believes the cash margin term is useful
to investors as it provides the metric of cash provided by
operating activities on a per barrel basis and allows for
comparisons across peer companies. The Company believes that the
non-GAAP term cash returned on capital employed is useful to
investors as it provides a ratio of profitability of the Company’s
capital employed compared with that of its peers.
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 Capital
Expenditures and Investments to Sustaining Capital $
Billions, Except as Indicated
2018
Guidance Capital Expenditures and Investments 5.5
Short-Cycle Unconventionals 1.2 Future Major Project Capital
Spend 0.5 Exploration Capital Spend 0.3
Sustaining
Capital 3.5
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171108005318/en/
ConocoPhillipsDaren Beaudo, 281-293-2073
(media)daren.beaudo@conocophillips.comorAndy O’Brien, 281-293-5000
(investors)andy.m.obrien@conocophillips.com
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