ConocoPhillips (NYSE: COP) today reported a third-quarter 2016
net loss of $1.0 billion, or ($0.84) per share, compared with a
third-quarter 2015 net loss of $1.1 billion, or ($0.87) per share.
Excluding special items, third-quarter 2016 adjusted earnings were
a net loss of $0.8 billion, or ($0.66) per share, compared with a
third-quarter 2015 adjusted net loss of $0.5 billion, or ($0.38)
per share. Special items for the current quarter included a tax
functional currency change at APLNG, restructuring costs across the
portfolio, the termination of a rig contract for a Gulf of Mexico
deepwater drillship and a deferred tax benefit from a change in
U.K. tax law.
Summary
- Achieved third-quarter production of
1,557 MBOED; increasing the midpoint of full-year production
guidance to 1,565 MBOED.
- Continued efficiencies further reducing
2016 capital expenditures guidance from $5.5 billion to $5.2
billion; shifting capital from major projects to Lower 48
unconventionals.
- Improved production and operating
expenses by 17 percent year over year, resulting in full-year
guidance of $5.7 billion; improved adjusted operating costs by 18
percent year over year; further lowering full-year adjusted
operating cost guidance from $6.8 billion to $6.6 billion.
- Safely executed third-quarter major
turnaround activity in Europe and Alaska.
- First production achieved at APLNG
Train 2 in Australia.
- Signed sale and purchase agreements for
exploration blocks offshore Senegal and for Block B in
Indonesia.
- Repaid $1.25 billion of maturing debt
in October.
“Our underlying business performance is delivering strong
momentum as we head into 2017,” said Ryan Lance, chairman and chief
executive officer. “In the third quarter we achieved cash flow
neutrality, with operating cash flow covering capital expenditures
and the dividend. For the second quarter in a row, we are lowering
2016 guidance on our capital expenditures and adjusted operating
costs, while increasing our 2016 production guidance. We’re hitting
our key operational targets across the business and achieving
important milestones, including the startup of Train 2 at APLNG and
continued ramp up at Surmont. We continued to progress our
announced asset sales and recently retired $1.25 billion of debt.
Our focus throughout the year has been to lower our breakeven
price, improve the balance sheet, position the company to generate
free cash flow and deliver differential performance as prices
recover. We’ve made great strides and look forward to sharing our
future plans with the market at our upcoming Analyst and Investor
Meeting.”
Third-Quarter Review
Production for the third quarter of 2016 was 1,557 thousand
barrels of oil equivalent per day (MBOED), an increase of 3 MBOED
compared with the same period a year ago. The increase was the
result of growth from major projects and development programs,
improved well performance and lower planned downtime, partly offset
by normal field decline and dispositions. When adjusted by 53 MBOED
for the net impact of dispositions and downtime, production
increased 56 MBOED, or 4 percent.
For the quarter, strong operational performance continued across
the portfolio. The company safely completed major turnarounds in
Europe and Alaska. An Alaskan state drilling depth record was
achieved at CD5, which continues to perform well. In Canada,
Surmont fully recovered from wildfire impacts and continues to ramp
up with gross production exceeding 100 MBOED in mid-October. First
production was achieved at APLNG Train 2 in Australia. Work
continued at Alder in Europe, which is expected to start up in the
fourth quarter.
Earnings were essentially flat compared with the third quarter
of 2015. Adjusted earnings were lower compared with third-quarter
2015 primarily due to lower realized prices, lower equity earnings
and unfavorable foreign exchange rate impacts, partially offset by
a reduction in production and operating expenses. The company’s
total realized price was $29.78 per barrel of oil equivalent (BOE),
compared with $32.87 per BOE in the third quarter of 2015,
reflecting lower crude and natural gas prices, partially offset by
higher natural gas liquids and bitumen prices.
For the quarter, cash provided by operating activities was $1.3
billion. Excluding a $0.1 billion change in operating working
capital, ConocoPhillips generated $1.2 billion in cash from
operations. In addition, the company received proceeds from asset
dispositions of $0.1 billion, funded $0.9 billion in capital
expenditures and investments, and paid dividends of $0.3 billion.
The company also sold $1.1 billion of short-term investments in
anticipation of debt maturities in October.
Nine-Month Review
ConocoPhillips’ nine-month 2016 earnings were a net loss of $3.6
billion, or ($2.88) per share, compared with a nine-month 2015 net
loss of $1.0 billion, or ($0.80) per share. Nine-month 2016
adjusted earnings were a net loss of $3.0 billion, or ($2.40) per
share, compared with a nine-month 2015 adjusted net loss of $0.6
billion, or ($0.50) per share.
Production for the first nine months of 2016 was 1,560 MBOED,
compared with 1,586 MBOED for the same period in 2015. Production
decreased due to normal field decline and dispositions, partly
offset by new production from major projects and development
programs as well as improved well performance. When adjusted by 67
MBOED for the net impact of dispositions and downtime, production
increased 41 MBOED, or 3 percent.
The company’s total realized price during this period was $26.84
per BOE, compared with $36.27 per BOE in the first nine months of
2015. This reflected lower average realized prices across all
commodities.
For the nine months ended Sept. 30, 2016, cash provided by
operating activities was $2.96 billion. Excluding a $0.17 billion
change in operating working capital, ConocoPhillips generated $3.13
billion in cash from operations. In addition, the company received
proceeds from asset dispositions of $0.4 billion, funded $3.9
billion in capital expenditures and investments, and paid dividends
of $0.9 billion. The company also increased debt by $3.8 billion
and purchased $0.2 billion in short-term investments.
Outlook
The company increased the midpoint of full-year 2016 production
guidance to 1,565 MBOED, reflecting a range of 1,560 to 1,570 MBOED
on strong year-to-date performance across Lower 48, Europe and Asia
Pacific. Fourth-quarter 2016 production guidance is 1,555 to 1,595
MBOED. Production guidance excludes Libya.
Guidance for production and operating expenses is $5.7 billion,
which results in improved adjusted operating cost guidance of $6.6
billion versus prior guidance of $6.8 billion.
Guidance for capital expenditures has been lowered to $5.2
billion versus prior guidance of $5.5 billion. The company’s other
guidance items remain unchanged.
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.
The company will provide a strategy update and announce its
preliminary 2017 operating plan at its Analyst and Investor Meeting
on Nov. 10, 2016 in New York City. A live webcast of the meeting
will be made available on the ConocoPhillips Investor Relations
site, 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 20
countries, $94 billion of total assets, and approximately 14,900
employees as of Sept. 30, 2016. Production averaged 1,560 MBOED for
the nine months ended Sept. 30, 2016, and proved reserves were 8.2
billion BOE as of Dec. 31, 2015. 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 – 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 excluding working capital, cash flow
neutrality, breakeven price and free cash flow. Operating costs is
defined by the Company as the sum of production and operation
expenses, selling, general and administrative expenses, and
exploration general and administrative expenses, geological and
geophysical and lease rental and other expenses. Adjusted operating
costs is defined as the Company’s operating costs further adjusted
to exclude expenses that are included as adjustments to adjusted
earnings to the extent those adjustments impact production and
operating expenses, selling, general and administrative expenses,
and exploration general and administrative expenses, geological and
geophysical and lease rental and other expenses. Cash flow
neutrality is achieved when cash from operations covers capital
expenditures and investments, working capital changes associated
with investing activities, and dividends paid. Breakeven price is
the Brent price at which cash from operations equals the capital
expenditures and investments required to maintain flat production,
working capital changes associated with investing activities and
dividends paid. Free cash flow is cash from operations in excess of
capital expenditures and investments required to maintain flat
production, working capital changes associated with investing
activities, and dividends paid. The company believes that the
non-GAAP measures cash flow neutrality, breakeven price, and free
cash flow are useful to investors as they provide measures to
compare cash from operations after deduction of capital
expenditures and investments, working capital changes associated
with investing activities, and dividends paid across periods on a
consistent basis.
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
and controllable costs associated with the Company’s core business
operations across periods on a consistent basis and with the
performance and cost structures of peer companies in a manner that,
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 further believes that the non-GAAP measure
adjusted operating costs provides a more indicative measure of the
Company’s underlying, controllable costs of operations by excluding
other items that do not directly relate to the Company’s core
business operations. Cash from operations excluding working capital
is useful to investors to help facilitate comparisons of the
Company’s financial performance across periods. 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 below.
References in the release to earnings refer to net income/(loss)
attributable to ConocoPhillips.
ConocoPhillipsReconciliation of Earnings to
Adjusted Earnings$ Millions, Except as Indicated
3Q16
3Q15 2016 YTD 2015 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 $ (1,040 ) (0.84
) (1,071 ) (0.87 ) (3,580
) (2.88 ) (978 ) (0.80
) Adjustments: Impairments 57 (15 ) 42 0.04 345 (150 ) 195
0.15 688 (255 ) 433 0.35 620 (285 ) 335 0.27 Pension settlement
expense 23 (7 ) 16 0.01 78 (22 ) 56 0.05 151 (46 ) 105 0.08 130 (36
) 94 0.07 International tax law changes - (161 ) (161 ) (0.13 ) - -
- - - (161 ) (161 ) (0.13 ) - (426 ) (426 ) (0.34 ) Restructuring
145 (49 ) 96 0.08 241 (85 ) 156 0.13 145 (49 ) 96 0.08 362 (135 )
227 0.18 Net gain on asset sales (37 ) 5 (32 ) (0.02 ) - - - - (93
) 25 (68 ) (0.05 ) (39 ) 10 (29 ) (0.02 ) Deferred tax adjustment -
- - - - - - - - (68 ) (68 ) (0.05 ) - - - - Tax impact from country
exit - - - - - - - - - - - - - (28 ) (28 ) (0.02 ) Pending claims
and settlements (13 ) 5 (8 ) (0.01 ) - - - - (13 ) 5 (8 ) (0.01 ) -
- - - Rig termination 134 (47 ) 87 0.07 383 (137 ) 246 0.20 134 (47
) 87 0.07 383 (137 ) 246 0.20 APLNG tax functional currency change
174 - 174 0.14 - - - - 174 - 174 0.14 - - - - Depreciation volume
adjustment - - -
- (75 ) 27 (48 )
(0.04 ) - - - -
(75 ) 27 (48 ) (0.04 )
Adjusted
earnings / (loss)
$ (826 ) (0.66 )
(466 ) (0.38
) (2,990 )
(2.40 ) (607
) (0.50 )
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.
ConocoPhillipsReconciliation of Production and Operating
Expenses to Adjusted Operating Costs$ Millions, Except as
Indicated
3Q16 3Q15
2016 YTD
FY 2016 Guidance
Production and operating expenses 1,526
1,834 4,325 5,700 Production and operating
expenses - percent reduction -17 % Adjustments:
Selling, general and administrative (G&A) expenses 203 293 556
700 Exploration G&A, G&G and lease rentals
270 536 562
700 Operating costs 1,999 2,663 5,443 7,100 Operating costs
unadjusted - percent reduction -25 % Adjustments to exclude
special items Less restructuring (145 ) (241 ) (145 ) (145 ) Less
pension settlement expense (23 ) (78 ) (151 ) (151 ) Less
impairments - - (36 ) (36 ) Less rig termination (134 ) (335 ) (134
) (134 ) Less pending claims and settlements
(43 ) - (43 ) (43 )
Adjusted
operating costs 1,654
2,009 4,934
~6,600 Adjusted operating costs - percent reduction
-18 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161027005292/en/
ConocoPhillipsDaren Beaudo, 281-293-2073
(media)daren.beaudo@conocophillips.comorSidney J. Bassett,
281-293-5000 (investors)sid.bassett@conocophillips.comorVladimir R.
dela Cruz, 281-293-5000
(investors)v.r.delacruz@conocophillips.com
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