Company Provides Concho Transaction Update; Increases 2021 Share
Repurchases by $1 Billion; Reduces 2021 Capital and Adjusted
Operating Cost Guidance
ConocoPhillips (NYSE: COP) will host a market update today to
reaffirm its commitment to the disciplined, returns-focused
strategy it launched in 2016. The company will outline details of a
compelling 2022-2031 operating and financial plan that reflects
numerous transformational activities undertaken over the past 18
months, most notably the acquisition of Concho.
“We’re looking forward to providing today’s market update, which
comes at a defining moment for our sector,” said Ryan Lance,
chairman and chief executive officer. “We believe we’re entering a
constructive environment for the business, but we also recognize
that we’re in a period of evolving energy transition.
ConocoPhillips is meeting this moment with a very compelling plan
that is resilient and durable, but also flexible. We can and will
adapt as the future plays out, all while remaining focused on
delivering superior returns to shareholders through cycles. We
don’t believe any other company in our E&P sector offers a more
investable plan for this vital business.”
Today’s market update includes the following highlights:
- Increasing anticipated Concho transaction-related synergies and
savings to $1 billion annually;
- Reducing 2021 capital expenditures and adjusted operating cost
guidance by $200 million and $100 million, respectively, due to
stronger-than-projected business execution;
- Increasing 2021 planned share repurchases by $1 billion,
bringing total planned distributions for the year to approximately
$6 billion, or 7% of current market capitalization;
- Expected cash from operations of ~$145 billion and free cash
flow of ~$70 billion over the 10-year plan period at $50 per barrel
WTI based on 2020 real prices, escalating at 2% annually;
- Capital expenditures expected to average approximately $7
billion annually, resulting in approximately 3% compounded annual
production growth at an average reinvestment rate of ~50%;
- Over $65 billion in estimated shareholder returns of capital
across the plan period, fully funded from cash from
operations;
- Return on capital employed projected to grow 1 to 2 percentage
points annually, with balance sheet strength further improving
throughout the plan period; and
- Progress on the company’s ambition to become net-zero for
operational (Scope 1 and 2) emissions by 2050.
Lance continued, “We have embraced a new imperative for the
business that we call the Triple Mandate. We want to play a valued
role in whatever pathway the energy transition takes by investing
in the lowest cost of supply barrels, delivering competitive
returns of and on capital, and achieving our net-zero emissions
ambition. Since 2016, we’ve been on a continuous path to be the
most relevant, sustainable E&P company in the business. Today’s
strong 10-year plan takes another step forward in that
direction.”
The ConocoPhillips market update will begin at 9:00 a.m. Central
time and is expected to be roughly two hours in duration, including
a question-and-answer session. A link to the live webcast and slide
deck will be available on the ConocoPhillips Investor Relations
website, www.conocophillips.com/investor, roughly 15
minutes prior to the start of the webcast. The event will also be
archived and available for replay later in the day, with a
transcript posted shortly afterward.
--- # # # ---
About ConocoPhillips
Headquartered in Houston, Texas, ConocoPhillips had operations
and activities in 15 countries, $84 billion of total assets, and
approximately 10,300 employees at March 31, 2021. Production
excluding Libya averaged 1,488 MBOED for the three months ended
March 31, 2021, and proved reserves were 4.5 BBOE as of Dec. 31,
2020. 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 as defined
under the federal securities laws. Forward-looking statements
relate to future events, plans and anticipated results of
operations, business strategies, and other aspects of our
operations or operating results. Graphics that project into a
future date constitute forward-looking statements. Also, words and
phrases such as “anticipate,” “estimate,” “believe,” “budget,”
“continue,” “could,” “intend,” “may,” “plan,” “potential,”
“predict,” “seek,” “should,” “will,” “would,” “expect,”
“objective,” “projection,” “forecast,” “goal,” “guidance,”
“outlook,” “effort,” “target” and other similar words can be used
to identify forward-looking statements. 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 believed to be reasonable at the time
such forward-looking statement is made based on management’s good
faith plans and objectives under the following assumptions: the
phased conversion of acquired volumes from 2-stream to 3-stream
accounting beginning in 2022; exclusion of Libya and the Willow
project in Alaska in production and capital forecasts, as well as
associated metrics; inclusion of resources associated with Libya
and the Willow project in total resources; an oil price of $50/BBL
West Texas Intermediate in 2020 dollars, escalating at two percent
annually; an oil price of $55/BBL Brent in 2020 dollars, escalating
at two percent annually; a gas price of approximately $3/MMBTU
Henry Hub in 2020 dollars increasing in real terms towards a price
of approximately $3.25 by 2031, escalating at two percent annually;
cost and capital escalation in line with price escalation; and
inclusion of carbon tax in the cash flow forecasts for assets where
a tax is currently assessed. If no carbon tax exists for the asset,
it is not included in the cash flow forecasts. These statements are
not guarantees of future performance and involve certain risks and
uncertainties and are subject to change as management is
continually assessing factors beyond our control that may or may
not be currently known. Given the foregoing and the extended time
horizon of this presentation, actual outcomes and results will
likely differ from what is expressed or forecast in the
forward-looking statements, and such differences may be material.
Factors that could cause actual results or events to differ
materially from what is presented include the impact of public
health crises, including pandemics (such as COVID-19) and epidemics
and any related company or government policies or actions; global
and regional changes in the demand, supply, prices, differentials
or other market conditions affecting oil and gas, including changes
resulting from a public health crisis or from the imposition or
lifting of crude oil production quotas or other actions that might
be imposed by OPEC and other producing countries and the resulting
company or third-party actions in response to such changes; changes
in commodity prices, including a prolonged decline in these prices
relative to historical or future expected levels; changes in
expected levels of oil and gas reserves or production; potential
failures or delays in achieving expected reserve or production
levels from existing and future oil and gas developments, including
due to operating hazards, drilling risks or unsuccessful
exploratory activities; unexpected cost increases or technical
difficulties in constructing, maintaining or modifying company
facilities; legislative and regulatory initiatives addressing
global climate change or other environmental concerns; investment
in and development of competing or alternative energy sources;
disruptions or interruptions impacting the transportation for our
oil and gas production; international monetary conditions and
exchange rate fluctuations; changes in international trade
relationships, including the imposition of trade restrictions or
tariffs on any materials or products (such as aluminum and steel)
used in the operation of our business; our ability to collect
payments when due under our settlement agreement with PDVSA; our
ability to collect payments from the government of Venezuela as
ordered by the ICSID; our ability to liquidate the common stock
issued to us by Cenovus Energy Inc. at prices we deem acceptable,
or at all; our ability to complete our announced or any future
dispositions or acquisitions on time, if at all; the possibility
that regulatory approvals for our announced or any future
dispositions or acquisitions will not be received on a timely
basis, if at all, or that such approvals may require modification
to the terms of the transactions or our remaining business;
business disruptions during or following our announced or any
future dispositions or acquisitions, including the diversion of
management time and attention; the ability to deploy net proceeds
from our announced or any future dispositions in the manner and
timeframe we anticipate, if at all; potential liability for
remedial actions under existing or future environmental
regulations; potential liability resulting from pending or future
litigation, including litigation related to our transaction with
Concho Resources Inc. (Concho); the impact of competition and
consolidation in the oil and gas industry; limited access to
capital or significantly higher cost of capital related to
illiquidity or uncertainty in the domestic or international
financial markets; general domestic and international economic and
political conditions; the ability to successfully integrate the
operations of Concho with our operations and achieve the
anticipated benefits from the transaction; unanticipated
difficulties or expenditures relating to the Concho transaction;
changes in fiscal regime or tax, environmental and other laws
applicable to our business; and disruptions resulting from
extraordinary weather events, civil unrest, war, terrorism or a
cyber attack; and other economic, business, competitive and/or
regulatory factors affecting our business generally as set forth in
our filings with the Securities and Exchange Commission. We assume
no duty to update these statements as of any future date and
neither future distribution of this material nor the continued
availability of this material in archive form on our website should
be deemed to constitute an update or re-affirmation of these
figures as of any future date. Any future update of these figures
will be provided only through a public disclosure indicating that
fact.
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 may use the term
“resource” in this news release 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.
Use of Non-GAAP Financial Information – This news release
contains certain financial measures that are not prepared in
accordance with GAAP, including operating costs, adjusted operating
costs, cash from operations, free cash flow and return on capital
employed (ROCE).
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
associated with the company’s core business operations across
periods on a consistent basis and with the performance and cost
structures of peer companies by excluding items that do not
directly relate to the company’s core business operations.
Operating costs is defined by the company as the sum of production
and operating expenses, selling, general and administrative
expenses, exploration general and administrative expenses,
geological and geophysical, lease rentals and other exploration
expenses. Adjusted operating costs is defined as the company’s
operating costs further adjusted to exclude expenses that do not
directly relate to the company’s core business operations and are
included as adjustments to arrive at adjusted earnings to the
extent those adjustments impact operating costs. The company
further believes that the non-GAAP measure cash from operations is
useful to investors to help understand changes in cash provided by
operating activities excluding the timing effects associated with
operating working capital changes across periods on a consistent
basis and with the performance of peer companies. The company
believes free cash flow is useful to investors in understanding how
existing cash from operations is utilized as a source for
sustaining our current capital plan and future development growth.
Free Cash Flow is defined as cash from operations net 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 measure. The company believes that ROCE is a
good indicator of long-term company and management performance.
ROCE is a measure of the profitability of ConocoPhillips’ capital
employed in its business. ConocoPhillips calculates ROCE as a
ratio, the numerator of which is historically reported or
forecasted net income plus after-tax interest expense and the
denominator of which is average total equity plus total debt. The
company believes that the above-mentioned non-GAAP measures, 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’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 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.
Any non-GAAP measures related to current period included herein
will be accompanied by a reconciliation to the nearest
corresponding GAAP measure at the end of this news release. For
forward-looking non-GAAP measures, we are unable to provide a
reconciliation to the most comparable GAAP financial measures
because the information needed to reconcile these measures is
dependent on future events, many of which are outside management’s
control as described above. Additionally, estimating such GAAP
measures and providing a meaningful reconciliation consistent with
our accounting policies for future periods is extremely difficult
and requires a level of precision that is unavailable for these
future periods and cannot be accomplished without unreasonable
effort. Forward looking non-GAAP measures are estimated consistent
with the relevant definitions and assumptions.
ConocoPhillips Table 1: Reconciliation of
production and operating expenses to adjusted operating costs $
millions, except as indicated
2021 FYGuidance
Production and operating expenses ~5,575 Adjustments:
Selling, general and administrative (G&A) expenses ~625
Exploration G&A, G&G and lease rentals ~275
Operating
costs ~6,475 Adjustments to exclude special
items: Transaction and restructuring expenses ~(375)
Adjusted
operating costs ~6,100
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210630005532/en/
Dennis Nuss (media) 281-293-1149 dennis.nuss@conocophillips.com Investor Relations
281-293-5000 investor.relations@conocophillips.com
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