Reported earnings of $2.1 billion; adjusted earnings of $1.7
billion. Generated cash provided by operating activities of $4.3
billion; cash from operations of $4.0 billion. Produced 1,547 MBOED
excluding Libya.
ConocoPhillips (NYSE: COP) today reported second-quarter 2021
earnings of $2.1 billion, or $1.55 per share, compared with
second-quarter 2020 earnings of $0.3 billion, or $0.24 per share.
Excluding special items, second-quarter 2021 adjusted earnings were
$1.7 billion, or $1.27 per share, compared with a second-quarter
2020 adjusted loss of $1.0 billion, or ($0.92) per share. Special
items for the current quarter included a gain on Cenovus Energy
shares and a contingent payment from Cenovus associated with the
2017 Canadian disposition, partially offset by corporate
expenses.
This quarter’s performance follows a market update held on June
30, during which the company laid out a compelling 10-year plan.
The plan, based on a reference oil price of $50 per barrel West
Texas Intermediate at 2020 real prices, provided a comprehensive
outlook for the business post-Concho acquisition and reaffirmed the
company’s commitment to playing a valued role in the energy
transition, delivering sector-leading returns on and of capital and
reducing greenhouse gas emissions. In conjunction with the market
update, the company lowered its capital and adjusted operating cost
guidance for 2021 and announced plans to increase 2021 share
repurchases by $1 billion, bringing total planned return of capital
to shareholders to roughly $6 billion for the year. A replay of the
market update is available on the ConocoPhillips Investor Relations
website, http://www.conocophillips.com/investor.
“The market update provided a durable plan for the business that
is unmatched,” said Ryan Lance, ConocoPhillips chairman and chief
executive officer. “We have a stronger, more flexible asset base
and greater underlying efficiency resulting from the Concho
acquisition and the restructuring work we’ve performed throughout
our company. Our updated outlook comes at a time that we believe is
a defining moment for the sector. ConocoPhillips uniquely meets
this moment with a credible multi-year plan, continued strong
execution, resilience with unhedged upside, a track record of
peer-leading returns on and of capital, and a clear commitment to
ESG excellence. These are the attributes that will reenlist
investor interest in our sector, and we are ideally positioned to
deliver them through the industry price cycles.”
Second-Quarter Highlights & Recent
Announcements
- Delivered strong operational performance across the company’s
asset base, including successful planned maintenance turnarounds,
resulting in second-quarter production of 1,547 MBOED, excluding
Libya.
- Cash provided by operating activities was $4.3 billion.
Excluding working capital, cash from operations (CFO) of $4.0
billion exceeded capital expenditures and investments of $1.3
billion, generating free cash flow (FCF) of approximately $2.8
billion.
- Distributed a total of $1.2 billion to shareholders, comprised
of $0.6 billion in dividends and $0.6 billion in share repurchases,
entirely funded from FCF.
- Ended the quarter with combined cash, cash equivalents and
restricted cash of $7.0 billion and short-term investments of $2.3
billion, totaling over $9 billion in ending cash and short-term
investments.
- Entered into divestiture agreements during July for certain
Lower 48 non-core assets totaling nearly $0.2 billion, subject to
customary closing adjustments, as part of the company’s plan to
generate $2 to $3 billion in disposition proceeds over the next 18
months.
Second-Quarter Review
Production excluding Libya for the second quarter of 2021 was
1,547 thousand barrels of oil equivalent per day (MBOED), an
increase of 566 MBOED from the same period a year ago. After
adjusting for closed acquisitions and dispositions as well as
impacts from the 2020 curtailment program, second-quarter 2021
production increased 46 MBOED or 3% from the same period a year
ago. This increase was primarily due to new production from the
Lower 48 and other development programs across the portfolio,
partially offset by normal field decline. Production from Libya
averaged 41 MBOED.
In the Lower 48, production averaged 794 MBOED, including 435
MBOED from the Permian, 227 MBOED from the Eagle Ford and 95 MBOED
from the Bakken. In Alaska, drilling commenced at GMT2 and the
first Fiord West well spud from the CD2 pad. In Norway, the Tor II
project was completed with the remaining three wells of the
eight-well program brought on line.
Earnings increased from second-quarter 2020 due to higher
realized prices and volumes, partially offset by the absence of the
second-quarter 2020 gain following completion of the Australia-West
divestiture, as well as higher depreciation expense associated with
the higher volumes. Excluding special items, adjusted earnings were
higher compared with second-quarter 2020 due to higher realized
prices and higher volumes, partially offset by increased
depreciation expense associated with the higher volumes. The
company’s total average realized price was $50.03 per BOE, 117%
higher than the $23.09 per BOE realized in the second quarter of
2020, reflecting higher marker prices and improved
realizations.
For the quarter, cash provided by operating activities was $4.3
billion. Excluding working capital, ConocoPhillips generated CFO of
$4.0 billion. CFO was reduced by approximately $0.2 billion due to
a discretionary pension plan contribution during the period. The
company also funded $1.3 billion of capital expenditures and
investments, paid $0.6 billion in dividends, repurchased $0.6
billion of shares and reported $1.8 billion in net sales of
investments in financial instruments.
Six-Month Review
ConocoPhillips’ six-month 2021 earnings were $3.1 billion, or
$2.31 per share, compared with a six-month 2020 loss of $1.5
billion, or ($1.37) per share. Six-month 2021 adjusted earnings
were $2.6 billion, or $1.97 per share, compared with a six-month
2020 adjusted earnings loss of $0.5 billion, or ($0.47) per
share.
Production excluding Libya for the first six months of 2021 was
1,518 MBOED, an increase of 388 MBOED from the same period a year
ago. After adjusting for closed acquisitions and dispositions, as
well as impacts from the 2020 curtailment program and Winter Storm
Uri impacts from 2021, production increased 18 MBOED. This increase
was primarily due to new production from the Lower 48 and other
development programs across the portfolio, partially offset by
normal field decline. Production from Libya averaged 40 MBOED.
The company’s total realized price during this period was $47.79
per BOE, 49% higher than the $32.15 per BOE realized in the first
six months of 2020, reflecting higher marker prices and improved
realizations.
In the first half of 2021, cash provided by operating activities
was $6.3 billion. Excluding a $0.2 billion change in working
capital, ConocoPhillips generated CFO of $6.1 billion. CFO was
reduced by approximately $1.0 billion due to transaction and
restructuring expenses and realized losses on the commodity hedging
portfolio acquired from Concho. The company funded $2.5 billion of
capital expenditures and investments, paid $1.2 billion in
dividends, repurchased $1.0 billion of shares and reported $1.3
billion in net sales of investments in financial instruments.
Outlook
Third-quarter 2021 production is expected to be 1.48 to 1.52
MMBOED, reflecting seasonal turnarounds planned in Alaska and the
Asia Pacific region. This guidance excludes Libya and assumes that
previously announced divestitures close during the third quarter of
2021. All other guidance items are unchanged.
ConocoPhillips will host a conference call today at 12:00 p.m.
Eastern time to discuss this announcement. To listen to the call
and view related presentation materials and supplemental
information, go to www.conocophillips.com/investor. A recording and
transcript of the call will be posted afterward.
--- # # # ---
About ConocoPhillips
Headquartered in Houston, Texas, ConocoPhillips had operations
and activities in 15 countries, $85 billion of total assets, and
approximately 10,100 employees at June 30, 2021. Production
excluding Libya averaged 1,518 MBOED for the six months ended June
30, 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 and anticipated results of operations,
business strategies, and other aspects of our operations or
operating results. 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 expressed in good faith and believed
to be reasonable at the time such forward-looking statement is
made. However, these statements are not guarantees of future
performance and involve certain risks, uncertainties and other
factors beyond our control. Therefore, actual outcomes and results
may differ materially from what is expressed or forecast in the
forward-looking statements. 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. Unless
legally required, ConocoPhillips expressly disclaims any obligation
to update any forward-looking statements, whether as a result of
new information, future events or otherwise.
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 – 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, operating costs, adjusted operating
costs, cash from operations (CFO) and free cash flow (FCF).
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 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. The
company further believes that the non-GAAP measure CFO 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 FCF 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. FCF 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. Adjusted earnings is defined as net
income (loss) attributable to ConocoPhillips adjusted for the
impact of special items that do not directly relate to the
company’s core business operations, or are of an unusual and
non-recurring nature. 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. CFO is defined
as cash provided by operating activities, excluding the impact of
changes in operating working capital. FCF is defined as CFO net of
capital expenditures and investments. 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 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 in the release.
Other Terms – This news release also contains the term
underlying production. Underlying production excludes Libya and
reflects the impact of closed acquisitions and closed dispositions
with an assumed close date of January 1, 2020. The company believes
that underlying production is useful to investors to compare
production excluding Libya and reflecting the impact of closed
acquisitions and dispositions on a consistent go-forward basis
across periods and with peer companies.
References in the release to earnings refer to net income/(loss)
attributable to ConocoPhillips.
ConocoPhillips
Table 1: Reconciliation of
earnings to adjusted earnings
$ Millions, Except as Indicated
2Q21
2Q20
2021 YTD
2020 YTD
Pre-tax
Income tax
After-tax
Per share of common stock
(dollars)
Pre-tax
Income tax
After-tax
Per share of common stock
(dollars)
Pre-tax
Income tax
After-tax
Per share of common stock
(dollars)
Pre-tax
Income tax
After-tax
Per share of common stock
(dollars)
Earnings
$
2,091
1.55
260
0.24
3,073
2.31
(1,479
)
(1.37
)
Adjustments: (Gain) loss
on CVE shares
(418
)
-
(418
)
(0.30
)
(551
)
-
(551
)
(0.51
)
(726
)
-
(726
)
(0.55
)
1,140
-
1,140
1.05
Net gain on asset sales
(68
)
16
(52
)
(0.04
)
(589
)
(5
)
(594
)
(0.56
)
(268
)
22
(246
)
(0.19
)
(551
)
(14
)
(565
)
(0.52
)
Pending claims and settlements
48
(10
)
38
0.03
(3
)
-
(3
)
-
48
(10
)
38
0.03
(32
)
-
(32
)
(0.03
)
Pension settlement expense
42
(9
)
33
0.02
-
-
-
-
42
(9
)
33
0.02
-
-
-
-
Transaction and restructuring expenses
23
(5
)
18
0.01
-
-
-
-
314
(53
)
261
0.20
-
-
-
-
Unrealized (gain) loss on FX derivative
8
(2
)
6
-
12
(3
)
9
0.01
12
(3
)
9
0.01
(63
)
13
(50
)
(0.05
)
Net loss on accelerated settlement of Concho hedging program
-
-
-
-
-
-
-
-
132
(31
)
101
0.08
-
-
-
-
Deferred tax adjustments
-
-
-
-
-
92
92
0.09
-
75
75
0.06
-
92
92
0.09
Impairments
-
-
-
-
(214
)
55
(159
)
(0.15
)
-
-
-
-
556
(122
)
434
0.40
Alberta tax credit
-
-
-
-
-
(48
)
(48
)
(0.04
)
-
-
-
-
-
(48
)
(48
)
(0.04
)
Adjusted earnings / (loss)
$
1,716
1.27
(994
)
(0.92
)
2,618
1.97
(508
)
(0.47
)
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.
ConocoPhillips Table 2: Reconciliation of reported
production to pro forma underlying production In MBOED, Except
as Indicated
2Q21
2Q20
2021 YTD
2020 YTD
Total Reported ConocoPhillips Production
1,588
981
1,558
1,135
Adjustments: Libya
(41
)
-
(40
)
(5
)
Total Production excluding Libya
1,547
981
1,518
1,130
Closed Dispositions1
-
(24
)
-
(41
)
Closed Acquisitions 2
-
319
-
323
Total Pro Forma Underlying Production
1,547
1,276
1,518
1,412
Estimated Production Curtailments3
-
225
-
113
Estimated Downtime from Winter Storm Uri4
-
-
25
-
1Includes production related to the completed Australia-West
disposition and various Lower 48 dispositions. 2Includes production
related to the acquisition of Concho which closed on January 15,
2021. 2020 has been pro forma adjusted for the acquisition based on
volumes publicly reported by Concho. 3Estimated production impacts
from price related curtailments, which are excluded from Total
Production excluding Libya and Total Underlying Production.
4Estimated production impacts from Winter Storm Uri, which are
excluded from Total Production excluding Libya and Total Underlying
Production.
ConocoPhillips
Table 3: Reconciliation of net cash provided by operating
activities to free cash flow $ Millions, Except as
Indicated
2Q21
2021 YTD
Net Cash Provided by Operating Activities
4,251
6,331
Adjustments: Net operating working capital
changes
211
196
Cash from operations
4,040
6,135
Capital expenditures and investments
1,265
2,465
Free Cash Flow
2,775
3,670
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210803005269/en/
Dennis Nuss (media) 281-293-1149 dennis.nuss@conocophillips.com
Investor Relations 281-293-5000
investor.relations@conocophillips.com
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