2016-10-27 18:40:00
CONOCOPHILLIPS NET LOSS $3.6 BLN
ConocoPhillips (NYSE: COP) 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.
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