ConocoPhillips (NYSE:COP) today reported a second-quarter 2015
net loss of $179 million, or ($0.15) per share, compared with
second-quarter 2014 earnings of $2.1 billion, or $1.67 per share.
Excluding special items, second-quarter 2015 adjusted earnings were
$81 million, or $0.07 per share, compared with second-quarter 2014
adjusted earnings of $2.0 billion, or $1.61 per share. Special
items for the current quarter primarily related to a deferred tax
charge from a change in Canada’s tax law and non-cash
impairments.
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Ryan Lance, ConocoPhillips Chairman and
Chief Executive Officer (Photo: Business Wire)
Highlights
- Increased quarterly dividend to $0.74
per share in July.
- Achieved second-quarter production of
1,595 MBOED; on track to achieve higher end of 2015 growth
target.
- Four percent year-over-year production
growth from continuing operations, adjusted for Libya, downtime and
dispositions.
- Eleven percent year-over-year reduction
in operating costs; 14 percent reduction when adjusted for pension
settlement and restructuring charges of $69 million pre-tax.
- Achieved major project startup at
Enochdhu in Europe and first steam at Surmont 2 in Canada; on track
for first production at Surmont 2, APLNG, CD5 and Drill Site 2S by
year end.
- Announced reductions in future
deepwater exploration spending.
- Lowering 2015 capital expenditures
guidance from $11.5 billion to $11.0 billion and operating cost
guidance from $9.2 billion to $8.9 billion.
“We continue to deliver on our operational milestones while
positioning the company for a period of lower, more volatile
prices,” said Ryan Lance, chairman and chief executive officer. “We
exceeded our production target, made progress on our major project
startups and safely executed our planned turnarounds in the
quarter. We are lowering our operating cost and capital
expenditures guidance, while maintaining our operational targets.
To further increase our capital flexibility, we are continuing to
shift the portfolio to investments with shorter cycle times,
including reductions to deepwater spending. In July, we announced
an increase to our quarterly dividend as part of our ongoing
commitment to return value to shareholders. This increase was more
modest than in prior years, but we believe that is prudent given
the current environment.”
Operations Update
Lower 48 – Quarterly production increased by 16 thousand
barrels of oil equivalent per day (MBOED) over the same period in
2014, to 556 MBOED. The increase was primarily from growth in
liquids-rich unconventional plays, partially offset by normal field
decline. The Eagle Ford and Bakken collectively delivered 242 MBOED
for the quarter, a 16 percent increase compared with the second
quarter of 2014. Lower 48 crude production grew 9 percent year over
year. In the Gulf of Mexico, appraisal activity is ongoing at Gila,
Shenandoah and Tiber.
Canada – Second-quarter production was 306 MBOED, an
increase of 22 MBOED compared with the second quarter of 2014. The
increase was primarily driven by strong well performance in western
Canada and the oil sands, as well as ramp up at Foster Creek Phase
F, partially offset by impacts from forest fires near Foster Creek.
Bitumen production increased 8 percent compared with the second
quarter of 2014. Surmont 2 achieved first steam and is on track for
first production in the third quarter.
Alaska – Production for the quarter was 174 MBOED, a
decrease of 19 MBOED compared with the same period in 2014. This
decrease was due to normal field decline and downtime, partially
offset by improved well performance. The first wells were spud at
CD5 and Drill Site 2S, with startup expected at both projects in
the fourth quarter. The Kenai liquefied natural gas (LNG) facility
resumed exports and delivered two cargos. Turnaround activities
commenced at Kuparuk and Prudhoe and will continue into the third
quarter.
Europe – Quarterly production was 206 MBOED, a decrease
of 7 MBOED compared with the same period in 2014. The decrease was
primarily the result of normal field decline, partially offset by
new production from major projects and lower downtime. First
production was achieved at Enochdhu and the Alder topsides module
was installed. Turnaround activities at J-Area and Greater Ekofisk
Area were completed ahead of schedule, with ongoing turnaround
activity in the U.K. during the third quarter.
Asia Pacific and Middle East – Second-quarter production
was 349 MBOED, an increase of 27 MBOED compared with the second
quarter of 2014. The increase was primarily the result of growth
from major projects, partially offset by normal field decline. In
Malaysia, Gumusut began its planned turnaround, which will continue
into the third quarter. In July, APLNG achieved a key milestone as
it commenced loading refrigerants to the Curtis Island LNG
facility. The project’s first cargo is expected in the fourth
quarter.
Other International – Production was 4 MBOED in the
second quarter, flat compared with the same period in 2014 when
excluding Libya. The Es Sider Terminal in Libya remains shut-in as
a result of ongoing unrest. In Angola, the Vali-1 exploration well
was plugged and abandoned as a dry hole. During the quarter, the
company announced its exit from Poland.
Second-Quarter Review
Production from continuing operations, excluding Libya, for the
second quarter of 2015 was 1,595 MBOED, an increase of 39 MBOED
compared with the same period a year ago. The net increase reflects
69 MBOED, or 4 percent growth, after adjusting for 30 MBOED from
dispositions and downtime. Growth was primarily due to new
production from major projects and development programs, partially
offset by normal field decline and downtime.
Adjusted earnings were lower compared with second-quarter 2014
primarily due to lower realized prices, partially offset by higher
licensing revenues. The company’s total realized price was $39.09
per barrel of oil equivalent (BOE), compared with $70.17 per BOE in
the second quarter of 2014, reflecting lower average realized
prices across all commodities.
Operating costs for the quarter were $2.16 billion compared with
$2.43 billion in the second quarter of 2014. Adjusted for pension
settlement and restructuring costs of $69 million pre-tax,
operating costs were improved 14 percent year over year.
For the quarter, cash provided by continuing operating
activities was $2.0 billion. Excluding a $0.3 billion change in
operating working capital, ConocoPhillips generated $2.3 billion in
cash from operations. In addition, the company funded $2.4 billion
in capital expenditures and investments, paid dividends of $0.9
billion, and increased debt by $2.5 billion.
Six-Month Review
ConocoPhillips’ six-month 2015 earnings were $93 million, or
$0.07 per share, compared with six-month 2014 earnings of $4.2
billion, or $3.38 per share. Six-month 2015 adjusted earnings were
a net loss of $141 million, or ($0.11) per share, compared with
six-month 2014 adjusted earnings of $4.3 billion, or $3.42 per
share.
Production from continuing operations, excluding Libya, for the
first six months of 2015 was 1,603 MBOED, compared with 1,543 MBOED
for the same period in 2014. Production increased due to new
production from development programs and major projects, partially
offset by normal field decline.
The company’s total realized price during this period was $38.03
per BOE, compared with $70.68 per BOE in the first six months of
2014. This reflected lower average realized prices across all
commodities.
Operating costs for the first half of 2015 were $4.30 billion
compared with $4.74 billion in 2014. Adjusted for restructuring and
pension settlement costs of $173 million pre-tax, operating costs
were improved 13 percent year over year.
In the first half of 2015, cash provided by continuing operating
activities was $4.0 billion. Excluding a $0.4 billion change in
operating working capital, ConocoPhillips generated $4.4 billion in
cash from operations. Additionally, the company funded $5.7 billion
in capital expenditures and investments, paid dividends of $1.8
billion, and increased debt by $2.4 billion.
As of June 30, 2015, ConocoPhillips had $3.8 billion of cash and
cash equivalents. The company ended the second quarter with debt of
$24.9 billion and a debt-to-capital ratio of 34 percent.
Outlook
The company is on track to achieve the higher end of its 2015
production target of 2 to 3 percent growth compared with 2014
production from continuing operations, excluding Libya.
Third-quarter 2015 production, excluding Libya, is expected to be
1,510 to 1,550 MBOED, which reflects planned turnaround activity
during the quarter.
The company has reduced its 2015 capital expenditures guidance
from $11.5 billion to $11.0 billion. Guidance for operating costs
has been reduced from $9.2 billion to $8.9 billion and the
corporate segment net expense has been reduced from $1.0 billion to
$0.9 billion. The aggregate impact of these reductions is
approximately a $0.9 billion benefit to net cash flow.
Guidance for depreciation, depletion and amortization of $9.0
billion, and exploration dry hole and leasehold impairment expense
of $0.8 billion are unchanged. Guidance excludes any special
items.
ConocoPhillips will host a conference call today at 12:00 p.m.
EDT to discuss its second-quarter results and provide an
operational update. To listen to the call, and view related
presentation materials and supplemental information, go to
www.conocophillips.com/investor.
--- # # # ---
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 25
countries, $32 billion in annualized revenue, $112 billion of total
assets, and approximately 18,100 employees as of June 30, 2015.
Production, excluding Libya, averaged 1,603 MBOED for the six
months ended June 30, 2015, and proved reserves were 8.9 billion
BOE as of Dec. 31, 2014. 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," "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;
international monetary conditions; potential liability for remedial
actions under existing or future environmental regulations;
potential liability resulting from pending or future litigation;
limited access to capital or significantly higher cost of capital
related to illiquidity or uncertainty in the domestic or
international financial markets; and general domestic and
international economic and political conditions; as well as changes
in tax, environmental and other laws applicable to our business.
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. 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.
Use of Non-GAAP Financial Information – This news release
includes the terms adjusted earnings, adjusted earnings per share
and operating costs. These are non-GAAP financial measures. These
terms are included to help facilitate comparisons of company
operating performance across periods and with peer companies.
References in the release to earnings refer to net income/(loss)
attributable to ConocoPhillips.
ConocoPhillips
Reconciliation of Earnings to Adjusted Earnings $ Millions,
Except as Indicated
2Q YTD 2015
2014 2015 2014 Earnings $
(179 ) 2,081 93 4,204
Adjustments: Net gain on asset sales (29 ) - (29 ) - Impairments
140 109 140 109 Loss on capacity agreements - - - 83 Qatar
depreciation adjustment - - - 28 International tax law changes 129
- (426 ) - Restructuring 10 - 71 - Pending claims and settlements -
(154 ) - (115 ) Tax impact from country exit (28 ) - (28 ) -
Pension settlement expense 38 - 38 - Discontinued operations -
other ¹ - (33 ) - (53 )
Adjusted earnings $ 81
2,003 (141 ) 4,256
1 Includes Kashagan, Algeria
and Nigeria
Earnings per share of common stock (dollars)
$
(0.15 ) 1.67 0.07 3.38
Adjusted earnings per share of common stock (dollars)
$ 0.07 1.61 (0.11 ) 3.42
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150730005288/en/
ConocoPhillipsDaren Beaudo (media),
281-293-2073daren.beaudo@conocophillips.comSidney J. Bassett
(investors), 281-293-5000sid.bassett@conocophillips.comVladimir R.
dela Cruz (investors),
281-293-5000v.r.delacruz@conocophillips.com
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