ConocoPhillips (NYSE: COP) today reported second-quarter 2020
earnings of $0.3 billion, or $0.24 per share, compared with
second-quarter 2019 earnings of $1.6 billion, or $1.40 per share.
Excluding special items, second-quarter 2020 adjusted earnings were
a loss of $1.0 billion, or ($0.92) per share, compared with
second-quarter 2019 adjusted earnings of $1.1 billion, or $1.01 per
share. Special items for the current quarter were primarily due to
a realized gain on the completion of the Australia-West divestiture
and an unrealized gain on Cenovus Energy equity. Cash provided by
operating activities was $0.2 billion. Excluding working capital,
cash from operations (CFO) was $0.7 billion.
“Headline second-quarter performance was dominated by weak
realized prices, coupled with our rational economic action to
curtail production in favor of expected higher future prices,” said
Ryan Lance, chairman and chief executive officer. “Importantly, our
underlying business results were strong, reflecting our ongoing
commitment to safely executing our plans and the dedication of our
workforce during this challenging time. We are monitoring the
market closely to develop a view around the timing and path of
price recovery and to guide our corresponding actions. For example,
as the market strengthened late in the second quarter, we began
reversing our second-quarter curtailments and ramping up production
across the Lower 48, Alaska and Canada. Our financial strength,
flexibility and portfolio diversity represent a distinct
competitive advantage that enables us to navigate and preserve
value in this volatile environment.”
Second-Quarter Highlights and Recent
Announcements
- Ended the quarter with cash, cash equivalents and restricted
cash totaling $3.2 billion and short-term investments of $4.0
billion, equaling $7.2 billion in ending cash and short-term
investments.
- Produced 981 MBOED excluding Libya during the second quarter;
curtailed approximately 225 MBOED.
- Completed the Australia-West divestiture, generating $0.8
billion in proceeds.
- Distributed $0.5 billion in dividends.
- Announced bolt-on acquisition of adjacent acreage in the
liquids-rich Montney in Canada.
Second-Quarter Review
Production excluding Libya for the second quarter of 2020 was
981 thousand barrels of oil equivalent per day (MBOED) after
curtailments of approximately 225 MBOED, resulting in a decrease of
309 MBOED from the same period a year ago. Adjusting for closed
dispositions, second-quarter 2020 production was 957 MBOED, a
decrease of 212 MBOED from the same period a year ago. This
decrease was primarily due to curtailments and normal field
decline, partially offset by growth from the Big 3, in addition to
development programs in Canada and Europe. Excluding disposition
and estimated curtailment impacts, second-quarter 2020 production
was slightly higher than the same period a year ago. There was no
production from Libya as it remained in force majeure during the
quarter.
In the Lower 48, production from the Big 3 averaged 260 MBOED,
including Eagle Ford of 162 MBOED, Permian Unconventional of 52
MBOED and Bakken of 46 MBOED. Lower 48 production included
curtailments of approximately 145 MBOED, primarily in Eagle Ford
and Bakken. At the Surmont operation in Canada, the company
curtailed approximately 30 MBOED. At Montney, ramp up from the
initial 14-well pad continued, increasing average production to 14
MBOED with 50 percent of the production from oil and natural gas
liquids. In addition, completion operations on the second
development pad progressed as planned, with start up on track for
the third quarter of 2020. In Alaska, the company curtailed
approximately 40 MBOED and completed appraisal testing at Narwhal
with encouraging initial results. In China, first oil was achieved
from Bohai Phase 3’s third and final platform.
Earnings decreased from second-quarter 2019 due to lower
realized prices and lower volumes, partially offset by a change in
Cenovus Energy equity market value and a gain from the
Australia-West divestiture. Excluding special items, adjusted
earnings were lower compared with second-quarter 2019 due to lower
realized prices and volumes, partially offset by lower depreciation
expense and production and operating expenses associated with the
lower volumes. The company’s total average realized price was
$23.09 per barrel of oil equivalent (BOE), 54 percent lower than
the $50.50 per BOE realized in the second quarter of 2019,
reflecting lower marker prices and regional differentials.
For the quarter, cash provided by operating activities was $0.2
billion. Excluding a $0.5 billion change in operating working
capital, ConocoPhillips generated CFO of $0.7 billion. CFO included
a benefit of $0.2 billion from the sale of product inventory that
was written down in the first quarter of 2020, which was offset in
operating working capital. The company also generated $0.8 billion
in disposition proceeds from the sale of Australia-West. In
addition, the company funded $0.9 billion of capital expenditures
and investments and distributed $0.5 billion in dividends. The
company also made a finance lease payment of $0.2 billion upon
acceptance of the extended-reach drilling rig in Alaska.
Six-Month Review
ConocoPhillips’ six-month 2020 earnings were a loss of $1.5
billion, or ($1.37) per share, compared with six-month 2019
earnings of $3.4 billion, or $3.00 per share. Six-month 2020
adjusted earnings were a loss of $0.5 billion, or ($0.47) per
share, compared with six-month 2019 adjusted earnings of $2.3
billion, or $2.01 per share.
Production excluding Libya for the first six months of 2020 was
1,130 MBOED, a decrease of 173 MBOED from the same period a year
ago. Adjusting for closed dispositions, production for the first
six months of 2020 was 1,089 MBOED, a decrease of 79 MBOED from the
same period a year ago. This decrease was primarily due to normal
field decline and production curtailments, partially offset by
growth from the Big 3, as well as other development programs in
Europe, Canada and Lower 48. Production from Libya averaged 5 MBOED
for the first six months of 2020.
The company’s total realized price during this period was $32.15
per BOE, compared with $50.55 per BOE in the first six months of
2019. This 36 percent reduction reflected lower marker prices and
regional differentials.
In the first half of 2020, cash provided by operating activities
and CFO were both $2.3 billion. The company also generated $1.3
billion in disposition proceeds. In addition, the company funded
$2.5 billion of capital expenditures and investments, paid $0.9
billion in dividends and repurchased $0.7 billion of shares.
Capital expenditures and investments included approximately $0.1
billion for payments toward the 2019 Argentina acreage acquisition
and Lower 48 bolt-on acquisitions.
Other Items
The company continues to monitor netback pricing and evaluate
curtailments across our assets on a month-by-month basis. Based on
the company’s economic criteria, we restored curtailed production
in Alaska during the month of July. We also began bringing some
curtailed volumes in the Lower 48 back on line in July and expect
to be fully restored in September. At Surmont, the company began
restoring production in July though the ramp up will be slower due
to planned turnarounds in the third quarter and limited staffing in
the field as a COVID-19 mitigation measure.
Upcoming operational activities for the company include several
seasonal turnarounds and maintenance projects typically conducted
in the second half of the year. These activities are planned in
various areas across the company.
Given ongoing variability and uncertainty in the outlook for
production curtailments, the company will continue to suspend
forward-looking guidance and sensitivities.
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 supplemental information, go to www.conocophillips.com/investor.
--- # # # ---
About ConocoPhillips
Headquartered in Houston, Texas, ConocoPhillips had operations
and activities in 16 countries, $63 billion of total assets, and
approximately 9,700 employees at June 30, 2020. Production
excluding Libya averaged 1,130 MBOED for the six months ended June
30, 2020, and proved reserves were 5.3 BBOE as of Dec. 31, 2019.
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, such as pandemics (including
coronavirus (COVID-19)) and epidemics and any related company or
government policies and actions to protect the health and safety of
individuals or government policies or actions to maintain the
functioning of national or global economies and markets; global and
regional changes in the demand, supply, prices, differentials or
other market conditions affecting oil and gas and the resulting
company actions in response to such changes, including changes
resulting from the imposition or lifting of crude oil production
quotas or other actions that might be imposed by the Organization
of Petroleum Exporting Countries and other producing countries;
changes in commodity prices; changes in expected levels of oil and
gas reserves or production; operating hazards, drilling risks,
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 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; 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 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 and cash from operations (CFO).
The company believes that the non-GAAP measures adjusted
earnings (both on an aggregate and a per-share basis) 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 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 terms
underlying production. Underlying production excludes Libya and
reflects the impact of closed dispositions with an assumed close
date of January 1, 2019. The company believes that underlying
production is useful to investors to compare production excluding
Libya and reflecting the impact of closed and pending 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
2Q20
2Q19
2020 YTD
2019 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
$
260
0.24
1,580
1.40
(1,479
)
(1.37
)
3,413
3.00
Adjustments: Net gain on asset sales
(589
)
(5
)
(594
)
(0.56
)
(61
)
(32
)
(93
)
(0.08
)
(551
)
(14
)
(565
)
(0.52
)
(61
)
(32
)
(93
)
(0.08
)
Unrealized (gain) loss on CVE shares
(551
)
-
(551
)
(0.51
)
(30
)
-
(30
)
(0.03
)
1,140
-
1,140
1.05
(373
)
-
(373
)
(0.33
)
Impairments
(214
)
55
(159
)
(0.15
)
95
(22
)
73
0.06
556
(122
)
434
0.40
155
(35
)
120
0.10
Alberta tax credit
-
(48
)
(48
)
(0.04
)
-
-
-
-
-
(48
)
(48
)
(0.04
)
-
-
-
-
Pending claims and settlements
(3
)
-
(3
)
-
(135
)
15
(120
)
(0.11
)
(32
)
-
(32
)
(0.03
)
(265
)
(53
)
(318
)
(0.28
)
Deferred tax adjustments
-
92
92
0.09
-
(27
)
(27
)
(0.02
)
-
92
92
0.09
-
(27
)
(27
)
(0.02
)
Unrealized (gain) loss on FX derivative
12
(3
)
9
0.01
24
(5
)
19
0.02
(63
)
13
(50
)
(0.05
)
30
(6
)
24
0.02
Alberta tax rate change
-
-
-
-
-
(25
)
(25
)
(0.02
)
-
-
-
-
-
(25
)
(25
)
(0.02
)
Capital loss tax benefit
-
-
-
-
-
(234
)
(234
)
(0.21
)
-
-
-
-
-
(234
)
(234
)
(0.21
)
Recognition of deferred revenue
-
-
-
-
-
-
-
-
-
-
-
-
(248
)
52
(196
)
(0.17
)
Adjusted earnings / (loss)
$
(994
)
(0.92
)
1,143
1.01
(508
)
(0.47
)
2,291
2.01
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 underlying production
In MBOED, Except as Indicated
2Q20
2Q19
2020 YTD
2019 YTD
Total Reported Production
981
1,332
1,135
1,346
Adjustments: Libya
-
(42
)
(5
)
(43
)
Total Production excluding Libya
981
1,290
1,130
1,303
Closed Dispositions1
(24
)
(121
)
(41
)
(135
)
Total Underlying Production
957
1,169
1,089
1,168
1Includes production from the completed U.K., various Lower 48
dispositions and Australia-West disposition.
ConocoPhillips
Table 3: Reconciliation of net cash provided by operating
activities to cash from operations $ Millions, Except as
Indicated
2Q20
2020 YTD
Net Cash Provided by Operating Activities
157
2,262
Adjustments: Net operating working capital changes
(519
)
(22
)
Cash from operations
676
2,284
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200730005076/en/
John C. Roper (media) 281-293-1451
john.c.roper@conocophillips.com
Investor Relations 281-293-5000
investor.relations@conocophillips.com
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