ConocoPhillips (NYSE: COP) today reported second-quarter 2019
earnings of $1.6 billion, or $1.40 per share, compared with
second-quarter 2018 earnings of $1.6 billion, or $1.39 per share.
Excluding special items, second-quarter 2019 adjusted earnings were
$1.1 billion, or $1.01 per share, compared with second-quarter 2018
adjusted earnings of $1.3 billion, or $1.09 per share. Special
items for the current quarter were primarily driven by a financial
tax benefit related to the previously announced U.K. disposition,
settlement of certain tax disputes, and amounts recognized from the
PDVSA International Chamber of Commerce (ICC) settlement.
Second-Quarter
Highlights
- Cash provided by operating activities was $2.9 billion.
Excluding working capital, cash from operations (CFO) of $3.4
billion exceeded capital expenditures and investments, generating
free cash flow of $1.7 billion.
- Increased 2019 planned share repurchases to $3.5 billion.
- Repurchased $1.2 billion of shares and paid $0.3 billion in
dividends in the second quarter; both funded entirely from free
cash flow, representing a return of 47 percent of CFO to
shareholders.
- Second-quarter production excluding Libya of 1,290 MBOED
exceeded the high end of guidance; year-over-year underlying
production grew 4 percent overall and 6 percent on a per
debt-adjusted share basis.
- Grew production from the Lower 48 Big 3 unconventionals by 26
percent year-over-year.
- Executed turnarounds in Europe, Canada and Alaska.
- Ended the quarter with cash, cash equivalents and restricted
cash totaling $6.2 billion and short-term investments of $0.7
billion, equating to $6.9 billion of ending cash and short-term
investments.
- Generated $0.6 billion in proceeds from dispositions.
- Acquired approximately $0.1 billion in Lower 48 Big 3 bolt-on
interests and acreage.
“This was our seventh consecutive quarter of generating free
cash flow while executing our disciplined plans and delivering on
our targets,” said Ryan Lance, chairman and chief executive
officer. “Over that time frame we fully funded our capital
expenditures, dividends and buybacks within cash from operations.
ConocoPhillips has embraced an approach to our cyclical industry
that we believe will deliver superior returns and create value
across a range of commodity prices. This quarter represents a
continuation of strong performance on our business model that
prioritizes financial returns, discipline, resilience with upside
and shareholder distributions. At our Analyst & Investor
Meeting in November we will lay out a plan that demonstrates our
ability to successfully perform on this model for the long
term.”
Second-Quarter Review
Production excluding Libya for the second quarter of 2019 was
1,290 thousand barrels of oil equivalent per day (MBOED), an
increase of 79 MBOED compared with the same period a year ago.
Excluding a net benefit of 27 MBOED from acquisitions and
dispositions (A&D), production increased by 52 MBOED primarily
due to growth from the Big 3 unconventionals, development programs
and major projects in Alaska, Europe and Asia Pacific. This growth
more than offset normal field decline and downtime from planned
turnarounds. Production from Libya was 42 MBOED.
In Alaska, the winter exploration program was completed with
encouraging results on the Greater Willow Area and Narwhal
appraisal tests. In the Lower 48, ramp-up from the Big 3
unconventionals was accelerated, increasing production for the
quarter to 367 MBOED. In Canada, completion operations on the
14-well Montney pad and infrastructure construction progressed as
planned with startup on track for the fourth quarter. Turnarounds
were successfully completed during the quarter primarily at Greater
Ekofisk in Norway, Surmont in Canada and Prudhoe Bay in Alaska.
Additional turnarounds and maintenance will continue in the third
quarter.
Earnings were lower compared with the second quarter of 2018
primarily due to lower realized prices and a lower unrealized gain
on our Cenovus Energy equity, partially offset by higher volumes
and a financial tax benefit related to the planned U.K.
disposition. Excluding special items, adjusted earnings were lower
compared with second-quarter 2018 due to lower realized prices,
partially offset by higher volumes. Sales volumes for the quarter
were lower than production, reducing earnings by $32 million. The
company’s total realized price was $50.50 per barrel of oil
equivalent (BOE), compared with $54.32 per BOE in the second
quarter of 2018, reflecting the impact of lower marker prices.
For the quarter, cash provided by operating activities was $2.9
billion. Excluding a $0.5 billion change in operating working
capital, ConocoPhillips generated $3.4 billion in cash from
operations (CFO), which included approximately $0.3 billion from
APLNG distributions and $0.1 billion from the PDVSA ICC settlement.
In addition, the company generated $0.6 billion in disposition
proceeds. The company incurred $1.7 billion in capital expenditures
and investments that included approximately $0.1 billion of Lower
48 bolt-on acquisitions, repurchased $1.2 billion in shares and
paid $0.3 billion in dividends, all entirely funded by CFO.
Six-Month Review
ConocoPhillips’ six-month 2019 earnings were $3.4 billion, or
$3.00 per share, compared with six-month 2018 earnings of $2.5
billion, or $2.13 per share. Six-month 2019 adjusted earnings were
$2.3 billion, or $2.01 per share, compared with six-month 2018
adjusted earnings of $2.4 billion, or $2.05 per share.
Production excluding Libya for the first six months of 2019 was
1,303 MBOED, an 87 MBOED increase from 1,216 MBOED for the same
period in 2018. Excluding a net A&D benefit of 28 MBOED,
production increased 59 MBOED, or 5 percent, largely driven by
growth from the Big 3 unconventionals, development programs and
major projects, more than offsetting normal field decline and
higher planned downtime.
The company’s total realized price during this period was $50.55
per BOE, compared with $52.37 per BOE in the first six months of
2018. This reduction reflected lower crude, natural gas liquids and
natural gas prices, partially offset by higher bitumen and
liquefied natural gas prices.
In the first half of 2019, cash provided by operating activities
was $5.8 billion. Excluding a $0.6 billion change in operating
working capital, ConocoPhillips generated $6.4 billion in CFO,
exceeding the total of $3.4 billion in capital expenditures and
investments, $2.0 billion in share repurchases and $0.7 billion in
dividends. In addition, the company generated $0.7 billion in
disposition proceeds. Capital expenditures and investments included
approximately $0.1 billion primarily for Lower 48 bolt-on
acquisitions.
Outlook
Operating plan capital is now expected to be $6.3 billion versus
$6.1 billion, attributable to additional exploration and appraisal
drilling in Alaska and the addition of a drilling rig in the Eagle
Ford Field at mid-year. This guidance excludes approximately $0.3
billion for opportunistic acquisitions completed or announced.
Guidance also excludes obligations under the recently announced
production sharing contract extension awarded by the Government of
Indonesia.
Third-quarter 2019 production is expected to be 1,290 to 1,330
MBOED, reflecting planned turnarounds in Alaska, Europe and Asia
Pacific. Full-year production guidance is 1,310 to 1,340 MBOED. The
guidance excludes Libya.
Guidance for capital expenditures, production and adjusted
operating cost will be updated upon completion of the planned U.K.
disposition.
ConocoPhillips will host a conference call today at 12:00 p.m.
EDT to discuss this announcement. To listen to the call, as well as
view related presentation materials and supplemental information,
go to www.conocophillips.com/investor.
ConocoPhillips will hold an Analyst & Investor Meeting in
Houston on Tuesday, Nov. 19 to outline the company’s 10-year
operating plan and strategy for long-term value creation. Further
information will be available on the company’s website as the date
approaches.
--- # # # ---
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, $71 billion of total assets, and approximately 10,900
employees as of June 30, 2019. Production excluding Libya averaged
1,303 MBOED for the six months ended June 30, 2019, and proved
reserves were 5.3 BBOE as of Dec. 31, 2018. 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," "on track," "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. The actual results of operations 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 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 dispositions or
acquisitions on the timeline currently anticipated, if at all; the
possibility that regulatory approvals for our announced
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 our announced dispositions, acquisitions or our
remaining business; business disruptions during or following our
announced dispositions or acquisitions, including the diversion of
management time and attention; the ability to deploy net proceeds
from our announced dispositions in the manner and timeframe we
currently anticipate, if at all; our ability to develop our
portfolio within expected capital levels; potential liability for
remedial actions under existing or future environmental
regulations; potential liability resulting from pending or future
litigation; 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; changes in tax,
environmental and other laws applicable to our business; and
disruptions resulting from extraordinary weather events, civil
unrest, war, terrorism or cyber attack. 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 (SEC). 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.
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) and free
cash flow.
The company believes that the non-GAAP measures adjusted
earnings (both on an aggregate and a per share basis) is 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 impact of working capital changes across
periods on a consistent basis and with the performance of peer
companies. The company also believes that free cash flow is useful
to investors as it provides a measure to compare CFO after
deduction of capital expenditures and investments across periods on
a consistent basis. 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’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 – The release also contains the terms underlying
production and production per debt-adjusted share. Underlying
production excludes Libya and reflects the impact of closed
acquisitions and dispositions (A&D) with an assumed close date
of January 1, 2018. 2Q 2018 underlying production includes 27 MBOED
for the net A&D impact. Production per debt-adjusted share is
calculated on an underlying production basis using ending period
debt divided by ending share price plus ending shares outstanding.
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. The
company believes that production per debt-adjusted share is useful
to investors as it provides a consistent view of production on a
total equity basis by converting debt to equity and allows for
comparisons across 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
2Q19 2Q18 2019 YTD 2018 YTD
Pre-tax Incometax After-tax Per share
ofcommonstock(dollars)
Pre-tax Incometax
After-tax Per shareof commonstock(dollars)
Pre-tax Incometax After-tax Per shareof
commonstock(dollars)
Pre-tax Incometax
After-tax Per shareof commonstock(dollars)
Earnings
$
1,580
1.40
1,640
1.39
3,413
3.00
2,528
2.13
Adjustments: Capital loss tax benefit
-
(234
)
(234
)
(0.21
)
-
-
-
-
-
(234
)
(234
)
(0.21
)
-
-
-
-
Pending claims and settlements
(135
)
15
(120
)
(0.11
)
-
-
-
-
(265
)
(53
)
(318
)
(0.28
)
(135
)
65
(70
)
(0.06
)
Net gain on asset sales
(61
)
(32
)
(93
)
(0.08
)
(50
)
14
(36
)
(0.03
)
(61
)
(32
)
(93
)
(0.08
)
(50
)
14
(36
)
(0.03
)
Deferred tax adjustments
-
(27
)
(27
)
(0.02
)
-
-
-
-
-
(27
)
(27
)
(0.02
)
-
-
-
-
Alberta tax rate change
-
(25
)
(25
)
(0.02
)
-
-
-
-
-
(25
)
(25
)
(0.02
)
-
-
-
-
Unrealized gain on CVE equity
(6
)
(5
)
(11
)
(0.01
)
(387
)
43
(344
)
(0.29
)
(343
)
(6
)
(349
)
(0.31
)
(271
)
44
(227
)
(0.19
)
Impairments
95
(22
)
73
0.06
(53
)
21
(32
)
(0.03
)
155
(35
)
120
0.10
(43
)
19
(24
)
(0.02
)
Recognition of deferred income
-
-
-
-
(60
)
-
(60
)
(0.05
)
(248
)
52
(196
)
(0.17
)
(60
)
-
(60
)
(0.05
)
Pension settlement expense
-
-
-
-
147
(26
)
121
0.10
-
-
-
-
147
(26
)
121
0.10
Premiums on early debt retirement
-
-
-
-
2
-
2
-
-
-
-
-
208
(13
)
195
0.17
Adjusted earnings / (loss)
$
1,143
1.01
1,291
1.09
2,291
2.01
2,427
2.05
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 net cash provided by operating activities to free
cash flow $ Millions, Except as Indicated
2Q19
2019 YTD Net Cash Provided by Operating Activities
2,891
5,785
Adjustments: Net operating working capital changes
(531
)
(585
)
Cash from operations
3,422
6,370
Capital expenditures and investments
(1,729
)
(3,366
)
Free Cash Flow
1,693
3,004
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190730005182/en/
Daren Beaudo (media) 281-293-2073
daren.beaudo@conocophillips.com
Investor Relations 281-293-5000
investor.relations@conocophillips.com
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