ConocoPhillips (NYSE: COP) today reported second-quarter 2022
earnings of $5.1 billion, or $3.96 per share, compared with
second-quarter 2021 earnings of $2.1 billion, or $1.55 per share.
Excluding special items, second-quarter 2022 adjusted earnings were
$5.1 billion, or $3.91 per share, compared with second-quarter 2021
adjusted earnings of $1.7 billion, or $1.27 per share. Special
items for the current quarter were comprised of gains on asset
sales including contingent payments related to prior dispositions,
partially offset by a loss on debt extinguishment and a Norway tax
reform-related adjustment.
In addition, ConocoPhillips today announced a $5 billion
increase in planned 2022 return of capital to $15 billion. The
company declared both a third-quarter ordinary dividend of 46 cents
per share and a fourth-quarter variable return of cash (VROC)
payment of $1.40 per share.
“The second quarter delivered strong financial results and
presented outstanding opportunities to accelerate progress on our
Triple Mandate to reliably and responsibly deliver oil and gas
production to meet energy transition pathway demand, deliver
competitive returns on and of capital for our shareholders, and
achieve our net-zero operational emissions ambition,” said Ryan
Lance, chairman and chief executive officer. “We’re increasing our
targeted 2022 return to shareholders by an additional $5 billion
while taking steps to meet transition demand with recent
announcements to expand our global LNG portfolio. We also
progressed our ESG priorities by committing to an important
initiative to verifiably measure and report methane emissions and
published both our 2021 Sustainability and Human Capital Management
reports to share how we’re meeting those priorities.”
Second-Quarter Highlights and Recent
Announcements
- Announced a $5 billion increase in expected 2022 return of
capital to shareholders to a total of $15 billion.
- Distributed $3.3 billion to shareholders through a three-tier
framework, including $1.0 billion in cash through the ordinary
dividend and VROC and $2.3 billion through share repurchases.
- Expanded global LNG portfolio through participation in
QatarEnergy’s North Field East LNG project and announced a
non-binding Heads of Agreement with Sempra Infrastructure with
opportunities to participate in large-scale LNG projects, an LNG
offtake of approximately 5 million tonnes per annum and related
carbon capture activities.
- As part of an ongoing commitment to ESG excellence and
leadership, ConocoPhillips joined the Oil and Gas Methane
Partnership (OGMP) 2.0 initiative.
- Generated cash provided by operating activities of $7.9 billion
and cash from operations (CFO) of $7.8 billion.
- Delivered second-quarter production of 1,692 MBOED while
successfully completing planned maintenance turnarounds.
- Continued progress toward the company’s $5 billion debt
reduction target through $1.8 billion of debt retirements during
the quarter, now totaling $3 billion since announcing the
target.
- Completed $0.4 billion of noncore asset sales during the
quarter.
- Ended the quarter with cash and short-term investments of $8.5
billion.
Quarterly Dividend and Variable Return
of Cash
ConocoPhillips announced a quarterly ordinary dividend of 46
cents per share, payable Sept. 1, 2022, to stockholders of record
at the close of business on Aug. 16, 2022. In addition, the company
announced a fourth-quarter VROC of $1.40 per share, payable Oct.
14, 2022, to stockholders of record at the close of business on
Sept. 29, 2022.
Second-Quarter Review
Production for the second quarter of 2022 was 1,692 thousand
barrels of oil equivalent per day (MBOED), an increase of 104 MBOED
from the same period a year ago. After adjusting for closed
acquisitions and dispositions and the conversion of previously
acquired Concho contracted volumes from a two-stream to a
three-stream basis, second-quarter 2022 production decreased by 69
MBOED or 4% from the same period a year ago. Organic growth from
Lower 48 and other development programs more than offset decline;
however, production was lower overall primarily due to planned and
unplanned downtime.
In the Lower 48, production averaged 977 MBOED, including 634
MBOED from the Permian, 233 MBOED from the Eagle Ford and 91 MBOED
from the Bakken. In Canada, drilling and completion activities
continued at Montney while construction progressed on the second
phase of the company’s processing facility. Turnarounds were
successfully completed in Europe and Canada. In Qatar, the company
signed an agreement with QatarEnergy to form a new joint venture
that will participate with a 12.5% interest in the North Field East
LNG project. Subject to regulatory approvals, ConocoPhillips will
hold a 25% interest in this joint venture.
Earnings and adjusted earnings increased from second-quarter
2021 primarily due to higher realized prices. The company’s total
average realized price was $88.57 per barrel of oil equivalent
(BOE), 77% higher than the $50.03 per BOE realized in the second
quarter of 2021, as production remains unhedged and thus realizes
the full impact of changes in marker prices.
For the quarter, cash provided by operating activities was $7.9
billion. Excluding a $0.1 billion change in operating working
capital, ConocoPhillips generated CFO of $7.8 billion. Dispositions
generated $0.6 billion from the sale of Lower 48 noncore assets and
contingent payments received. The company funded $2.0 billion of
capital expenditures and investments, paid $1.9 billion to reduce
total debt, distributed $1.0 billion in ordinary dividends and VROC
and repurchased $2.3 billion of shares.
Six-Month Review
ConocoPhillips’ six-month 2022 earnings were $10.9 billion, or
$8.36 per share, compared with six-month 2021 earnings of $3.1
billion, or $2.31 per share. Six-month 2022 adjusted earnings were
$9.4 billion, or $7.18 per share, compared with six-month 2021
adjusted earnings of $2.6 billion, or $1.97 per share.
Production for the first six months of 2022 was 1,720 MBOED, an
increase of 162 MBOED from the same period a year ago. After
adjusting for closed acquisitions and dispositions, the conversion
of previously acquired Concho contracted volumes from a two-stream
to a three-stream basis, and 2021 Winter Storm Uri impacts,
production decreased 53 MBOED or 3% from the same period a year
ago. Organic growth from Lower 48 and other development programs
more than offset decline; however, production was lower overall
primarily due to planned and unplanned downtime.
The company’s total realized price during this period was $82.70
per BOE, 73% higher than the $47.79 per BOE realized in the first
six months of 2021, reflecting higher marker prices.
In the first half of 2022, cash provided by operating activities
was $13.0 billion. Excluding a $1.9 billion change in working
capital, ConocoPhillips generated CFO of $14.9 billion.
Dispositions generated $3.0 billion, including $1.4 billion from
sale of Cenovus Energy (CVE) shares, with the proceeds from CVE
sales applied to share repurchases. The company funded $5.1 billion
of capital expenditures and investments, comprised of $3.7 billion
in operating capital and $1.4 billion to acquire an additional 10%
interest in Australia Pacific LNG. In addition, the company paid
$1.9 billion in ordinary dividends and VROC, repurchased $3.7
billion of shares and paid $2.9 billion to reduce total debt.
Outlook
Third-quarter 2022 production is expected to be 1.70 to 1.76
million barrels of oil equivalent per day (MMBOED), reflecting the
impacts of planned seasonal turnarounds primarily in Alaska and the
Asia-Pacific region. The company’s full-year production is expected
to be approximately 1.74 MMBOED reflecting uncertainty in Libya and
modest updates across the portfolio.
The company updated its 2022 adjusted operating cost guidance to
$7.5 billion versus the prior guidance of $7.3 billion, reflecting
commodity price-related impacts. Full-year guidance for adjusted
corporate segment net loss has been lowered to $0.9 billion from
$1.0 billion primarily due to lower net interest expense. Full-year
guidance for depreciation, depletion and amortization has decreased
to $7.6 billion. Capital guidance remains 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.
--- # # # ---
About ConocoPhillips
ConocoPhillips is one of the world’s leading exploration and
production companies based on both production and reserves, with a
globally diversified asset portfolio. Headquartered in Houston,
Texas, ConocoPhillips had operations and activities in 13
countries, $94 billion of total assets and approximately 9,400
employees at June 30, 2022. Production averaged 1,720 MBOED for the
six months ended June 30, 2022, and proved reserves were 6.1 BBOE
as of Dec. 31, 2021. 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 any ongoing military
conflict, including the conflict between Russia and Ukraine and the
global response to it, or 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; insufficient liquidity or other factors, such as those
listed herein, that could impact our ability to repurchase shares
and declare and pay dividends such that we suspend our share
repurchase program and reduce, suspend, or totally eliminate
dividend payments in the future, whether variable or fixed; 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, inflationary
pressures 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,
including any sanctions imposed as a result of any ongoing military
conflict, including the conflict between Russia and Ukraine; 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 complete any
announced or any future dispositions or acquisitions on time, if at
all; the possibility that regulatory approvals for 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 following the acquisition of assets
from Shell (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 directly or indirectly to
our transaction with Concho Resources Inc.; 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 or developments, including as a result of any
ongoing military conflict, including the conflict between Russia
and Ukraine; the ability to successfully integrate the assets from
the Shell Acquisition or achieve the anticipated benefits from the
transaction; unanticipated difficulties or expenditures relating to
the Shell Acquisition; changes in fiscal regime or tax,
environmental and other laws applicable to our business; and
disruptions resulting from accidents, extraordinary weather events,
civil unrest, political events, war, terrorism, cyber attacks or
information technology failures, constraints or disruptions; 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, cash from operations (CFO), adjusted
operating costs and adjusted corporate segment net loss.
The company believes that the non-GAAP measure adjusted earnings
(both on an aggregate and a per-share basis), adjusted operating
costs and adjusted corporate segment net loss 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. Adjusted
operating costs is defined 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 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.
Adjusted corporate segment net loss is defined as corporate and
other segment earnings adjusted for special items. 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 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 pro forma
underlying production. Pro forma underlying production reflects the
impact of closed acquisitions and closed dispositions as of June
30, 2022. The impact of closed dispositions assume they closed
January 1, 2021, while the 2021 impact of the closed Shell Permian
acquisition and the additional 10% APLNG interest acquisition
assume they closed January 1, 2021 and February 1, 2021,
respectively. The company believes that underlying production is
useful to investors to compare production reflecting the impact of
closed acquisitions and dispositions on a consistent go-forward
basis across periods and with peer companies. Return of capital is
defined as the total of the ordinary dividend, share repurchases
and variable return of cash (VROC).
References in the release to earnings refer to net income.
ConocoPhillips Table 1: Reconciliation of earnings
to adjusted earnings $ Millions, Except as Indicated
2Q22
2Q21
2022 YTD 2021 YTD Pre-tax Incometax
After-tax Pershareofcommonstock(dollars)
Pre-tax Incometax After-tax
Pershareofcommonstock(dollars) Pre-tax
Incometax After-tax
Pershareofcommonstock(dollars) Pre-tax
Incometax After-tax
Pershareofcommonstock(dollars) Earnings
$
5,145
3.96
2,091
1.55
10,904
8.36
3,073
2.31
Adjustments: Net gain on asset sales
(254
)
57
(197
)
(0.15
)
(68
)
16
(52
)
(0.04
)
(1,017
)
110
(907
)
(0.70
)
(268
)
22
(246
)
(0.19
)
(Gain) loss on debt extinguishment and exchange fees
83
(13
)
70
0.05
-
-
-
-
(44
)
52
8
0.01
-
-
-
-
Tax adjustments
-
58
58
0.04
-
-
-
-
-
(407
)
(407
)
(0.32
)
-
75
75
0.06
Transaction and restructuring expenses
14
(4
)
10
0.01
23
(5
)
18
0.01
28
(8
)
20
0.02
314
(53
)
261
0.20
(Gain) loss on CVE shares
-
-
-
-
(418
)
-
(418
)
(0.30
)
(251
)
-
(251
)
(0.20
)
(726
)
-
(726
)
(0.55
)
Pension settlement expense
-
-
-
-
42
(9
)
33
0.02
-
-
-
-
42
(9
)
33
0.02
Pending claims and settlements
-
-
-
-
48
(10
)
38
0.03
-
-
-
-
48
(10
)
38
0.03
(Gain) loss on FX derivative
-
-
-
-
8
(2
)
6
-
10
(2
)
8
0.01
12
(3
)
9
0.01
Net loss on accelerated settlement of Concho hedging program
-
-
-
-
-
-
-
-
-
-
-
-
132
(31
)
101
0.08
Adjusted earnings / (loss)
$
5,086
3.91
1,716
1.27
9,375
7.18
2,618
1.97
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
2Q22
2Q21
2022 YTD 2021 YTD Total Reported ConocoPhillips
Production
1,692
1,588
1,720
1,558
Closed Dispositions1
-
(77
)
(22
)
(77
)
Closed Acquisitions 2
-
210
-
205
Total Pro Forma Underlying Production
1,692
1,721
1,698
1,686
Estimated Downtime from Winter Storm Uri3
-
-
-
25
Estimated Uplift from 2 to 3 stream conversion4
(40
)
-
(40
)
-
1Includes production related to the completed Indonesia
disposition and various Lower 48 dispositions. 2Includes production
related to the acquisition of Shell's Permian assets as well as the
additional 10% shareholding interest in APLNG. 2021 has been pro
forma adjusted for these acquisitions and assumes 180 MBOED for the
Shell Permian assets. 3Estimated production impacts from Winter
Storm Uri, which are excluded from Total Reported Production and
Total Pro Forma Underlying Production. 4Estimated production
impacts from the conversion of Concho two-stream contracted volumes
to a three-stream (crude oil, natural gas and natural gas liquids)
reporting basis, which are included in Total Reported Production
and Total Pro Forma Underlying Production.
ConocoPhillips Table 3: Reconciliation of net cash
provided by operating activities to cash from operations $
Millions, Except as Indicated
2Q22
2022 YTD Net Cash Provided by Operating Activities
7,914
12,982
Adjustments: Net operating working capital changes
80
(1,877
)
Cash from operations
7,834
14,859
ConocoPhillips Table 4: Reconciliation of
production and operating expenses to adjusted operating costs $
Millions, Except as Indicated
2022 FYGuidance
Production and operating expenses ~6,800 Adjustments: Selling,
general and administrative (G&A) expenses ~500 Exploration
G&A, G&G and lease rentals ~250 Operating Costs
~7,550 Adjustments to exclude special items:
Transaction and restructuring expenses ~(50)
Adjusted Operating
Costs ~7,500 ConocoPhillips
Table 5: Reconciliation of adjusted corporate segment net
loss $ Millions, Except as Indicated
2022
FYGuidance Corporate and Other earnings
~(250) Adjustments to exclude special items: (Gain)
loss on CVE shares ~(250) (Gain) loss on FX derivative ~10 Debt
extinguishment and exchange fees ~(45) Income tax on special items
~(365)
Adjusted corporate segment net loss ~(900)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220804005037/en/
Dennis Nuss (media) 281-293-1149
dennis.nuss@conocophillips.com
Investor Relations 281-293-5000
investor.relations@conocophillips.com
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