ConocoPhillips (NYSE: COP) today reported third-quarter 2021
earnings of $2.4 billion, or $1.78 per share, compared with a
third-quarter 2020 loss of $0.5 billion, or ($0.42) per share.
Excluding special items, third-quarter 2021 adjusted earnings were
$2.4 billion, or $1.77 per share, compared with a third-quarter
2020 adjusted loss of $0.3 billion, or ($0.31) per share. Special
items for the current quarter included a contingent payment from
Cenovus associated with the 2017 Canadian disposition and a
non-cash impairment credit, partially offset by a loss on asset
sales and transaction and restructuring expenses.
“This third quarter was very significant for ConocoPhillips,”
said Ryan Lance, chairman and chief executive officer. “While we
benefited from the constructive price environment, the quarter’s
important feature was that our underlying performance achieved our
‘new’ baseline for ConocoPhillips post-Concho. The previously
announced operating cost synergies have now been delivered, we
continue successfully executing our core programs across every part
of the business and our returns on and of capital remain
peer-leading. This positive performance momentum established an
exceptional platform for the pending acquisition of Shell’s Permian
properties that we announced in the quarter and expect to close in
the fourth quarter. This transaction will spur another phase of
positive performance as we head into 2022 and further strengthen
our ability to deliver our distinctive triple mandate: meet future
energy demand with the lowest cost of supply production through the
energy transition, deliver competitive returns and meet our net
zero ambition on operational emissions. These objectives, in
addition to our well-established capital allocation priorities,
ideally position us to remain a sector leader in any
environment.”
Third-Quarter Highlights & Recent
Announcements
- Delivered strong operational performance across the company’s
asset base, including successful planned maintenance turnarounds,
resulting in third-quarter production of 1,507 MBOED, excluding
Libya.
- Cash provided by operating activities was $4.8 billion.
Excluding working capital, cash from operations (CFO) of $4.1
billion exceeded capital expenditures and investments of $1.3
billion, generating free cash flow (FCF) of $2.8 billion. CFO was
reduced by approximately $0.2 billion due to non-recurring impacts
further explained in the Third-Quarter Review section below.
- Distributed a total of $4.0 billion to shareholders year to
date, comprised of $2.2 billion in share repurchases and $1.8
billion in dividends as part of the company’s plan to return
approximately $6 billion to shareholders during 2021.
- Increased the quarterly dividend by 7% to 46 cents per
share.
- Ended the quarter with combined cash, cash equivalents and
restricted cash of $10.2 billion and short-term investments of $0.7
billion, totaling $10.9 billion in ending cash and short-term
investments.
- As part of a commitment to ESG excellence, announced an
improvement to the company’s Scope 1 and 2 greenhouse gas
emissions-intensity reduction targets from a 2016 baseline to
40-50% on a net equity and gross operated basis by 2030, from the
previous target of 35-45% on only a gross operated basis.
- Announced highly accretive pending acquisition of Shell
Enterprises LLC’s (Shell) complementary Delaware Basin position in
the Permian for $9.5 billion in cash, before customary closing
adjustments.
- Generated approximately $0.2 billion in disposition proceeds
from Lower 48 non-core asset sales as part of the company’s
targeted dispositions. Production from the disposed assets averaged
approximately 15 MBOED in the first nine months of 2021.
Third-Quarter Review
Production excluding Libya for the third quarter of 2021 was
1,507 thousand barrels of oil equivalent per day (MBOED), an
increase of 441 MBOED from the same period a year ago. After
adjusting for closed acquisitions and dispositions as well as
impacts from the 2020 curtailment program, third-quarter 2021
production increased 26 MBOED or 2% 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 37 MBOED.
In the Lower 48, production averaged 790 MBOED, including 445
MBOED from the Permian, 217 MBOED from the Eagle Ford and 95 MBOED
from the Bakken. Lower 48 development progressed as planned and the
quarter ended with 15 drilling rigs and seven frac crews at work.
In Alaska, drilling continued at GMT2 with first oil on track for
the fourth quarter of 2021. Turnarounds were successfully completed
during the quarter in Alaska and the Asia Pacific region.
Earnings and adjusted earnings increased from third-quarter 2020
due to higher realized prices and volumes, partially offset by
higher operating costs associated with the higher volumes. The
company’s total average realized price was $56.92 per BOE, 84%
higher than the $30.94 per BOE realized in the third quarter of
2020, as our production remains unhedged and thus realizes the
benefit of higher marker prices.
For the quarter, cash provided by operating activities was $4.8
billion. Excluding working capital, ConocoPhillips generated CFO of
$4.1 billion. CFO was reduced by approximately $0.2 billion due to
expected payment timing of a previously announced dispute
settlement, which was offset in operating working capital, and a
discretionary pension plan contribution during the period. The
company also funded $1.3 billion of capital expenditures and
investments, repurchased $1.2 billion of shares, paid $0.6 billion
in dividends and made a $0.5 billion deposit under terms of the
Shell Permian acquisition agreement. In addition, the company
reported $1.5 billion in net sales of investments in financial
instruments and generated $0.6 billion in disposition proceeds.
Nine-Month Review
ConocoPhillips’ nine-month 2021 earnings were $5.5 billion, or
$4.09 per share, compared with a nine-month 2020 loss of $1.9
billion, or ($1.79) per share. Nine-month 2021 adjusted earnings
were $5.0 billion, or $3.75 per share, compared with a nine-month
2020 adjusted earnings loss of $0.8 billion, or ($0.78) per
share.
Production excluding Libya for the nine months of 2021 was 1,514
MBOED, an increase of 406 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 2021 Winter Storm
Uri, production increased 17 MBOED or 1% 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 39 MBOED.
The company’s total realized price during this period was $50.92
per BOE, 60% higher than the $31.76 per BOE realized in the first
nine months of 2020, as our production remains unhedged and thus
realizes the benefit of higher marker prices.
In the first nine months of 2021, cash provided by operating
activities was $11.1 billion. Excluding a $0.9 billion change in
working capital, ConocoPhillips generated CFO of $10.2 billion. CFO
was reduced by approximately $1.1 billion due to transaction and
restructuring expenses and realized losses on the commodity hedging
portfolio acquired from Concho. The company funded $3.8 billion of
capital expenditures and investments, repurchased $2.2 billion of
shares, paid $1.8 billion in dividends and reported $2.8 billion in
net sales of investments in financial instruments. In addition, the
company generated $0.8 billion in disposition proceeds.
Outlook
Fourth-quarter 2021 production is expected to be 1.53 to 1.57
MMBOED, excluding Libya as well as impacts from the pending Shell
Permian acquisition.
This guidance includes the impact of planned conversion of the
significant majority of previously acquired Concho two-stream
contracted volumes to a three-stream (crude oil, natural gas and
natural gas liquids) reporting basis as Concho volumes are
integrated into the company’s commercial activities. The conversion
to three-stream reporting is neutral to earnings. Effective in the
fourth quarter, this conversion is expected to add production of
approximately 40 MBOED and increase both revenue and operating
costs by roughly $70 million.
The company updated its 2021 depreciation, depletion and
amortization expense guidance to $7.1 billion versus the prior
guidance of $7.4 billion, reflecting positive revisions to proved
reserves as a result of higher commodity prices. The company’s
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 14 countries, $87 billion of total assets, and
approximately 9,900 employees at Sept. 30, 2021. Production
excluding Libya averaged 1,514 MBOED for the nine months ended
Sept. 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, plans 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 the acquisition of assets from Shell Enterprises LLC (the
“Shell Acquisition”) or any announced or any future dispositions or
acquisitions on time, if at all; the possibility that regulatory
approvals for the Shell Acquisition or any 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 the Shell Acquisition or
any other 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
assets from the Shell Acquisition or achieve the anticipated
benefits from the transaction; 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 Shell Acquisition or
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
3Q21
3Q20
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
$
2,379
1.78
(450
)
(0.42
)
5,452
4.09
(1,929
)
(1.79
)
Adjustments: Impairments
(89
)
21
(68
)
(0.06
)
-
-
-
-
(89
)
21
(68
)
(0.05
)
556
(122
)
434
0.40
(Gain) loss on CVE shares
(17
)
-
(17
)
(0.01
)
162
-
162
0.14
(743
)
-
(743
)
(0.57
)
1,302
-
1,302
1.20
Transaction and restructuring expenses
52
(25
)
27
0.02
-
-
-
-
366
(78
)
288
0.22
-
-
-
-
(Gain) loss on asset sales
47
(19
)
28
0.02
-
-
-
-
(221
)
3
(218
)
(0.16
)
(551
)
(14
)
(565
)
(0.53
)
Pension settlement expense
28
(5
)
23
0.02
27
(6
)
21
0.02
70
(14
)
56
0.04
27
(6
)
21
0.02
Net loss on accelerated settlement of Concho hedging program
-
-
-
-
-
-
-
-
132
(31
)
101
0.08
-
-
-
-
Unrealized (gain) loss on FX derivative
-
-
-
-
8
(2
)
6
0.01
12
(3
)
9
0.01
(55
)
11
(44
)
(0.04
)
Pending claims and settlements
-
-
-
-
(89
)
19
(70
)
(0.06
)
48
(10
)
38
0.03
(121
)
19
(102
)
(0.09
)
Alberta tax credit
-
-
-
-
-
-
-
-
-
-
-
-
-
(48
)
(48
)
(0.04
)
Deferred tax adjustments
-
-
-
-
-
-
-
-
-
75
75
0.06
-
92
92
0.09
Adjusted earnings / (loss)
$
2,372
1.77
(331
)
(0.31
)
4,990
3.75
(839
)
(0.78
)
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
3Q21
3Q20
2021 YTD 2020 YTD Total Reported ConocoPhillips
Production
1,544
1,067
1,553
1,112
Adjustments: Libya
(37
)
(1
)
(39
)
(4
)
Total Production excluding Libya
1,507
1,066
1,514
1,108
Closed Dispositions1
(12
)
(7
)
(13
)
(34
)
Closed Acquisitions 2
-
320
-
322
Total Pro Forma Underlying Production
1,495
1,379
1,501
1,396
Estimated Production Curtailments3
-
90
-
105
Estimated Downtime from Winter Storm Uri4
-
-
17
-
1
Includes production related to
the completed Australia-West disposition and various Lower 48
dispositions.
2
Includes 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.
3
Estimated production impacts from
price related curtailments, which are excluded from Total
Production excluding Libya and Total Underlying Production.
4
Estimated 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
3Q21
2021 YTD
Net Cash Provided by Operating Activities
4,797
11,128
Adjustments: Net operating working capital changes
702
898
Cash from operations
4,095
10,230
Capital expenditures and investments
1,302
3,767
Free Cash Flow
2,793
6,463
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211102005212/en/
Dennis Nuss (media) 281-293-1149
dennis.nuss@conocophillips.com
Investor Relations 281-293-5000
investor.relations@conocophillips.com
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