CONOCO NET LOSS $2.54 BLN
ConocoPhillips (NYSE: COP) reported a second-quarter 2016 net loss of $1.1 billion,or ($0.86) per share, compared with a second-quarter 2015 net loss of $179 million, or ($0.15) per share. Excluding special items, second-quarter 2016 adjusted earnings were anet loss of $985 million, or ($0.79) per share, compared with second-quarter 2015 adjusted earnings of $81 million, or $0.07 per share. Special items for the current quarter were related to non-cashimpairments in the Lower 48, primarily in the Gulf of Mexico; pension settlement expense; deferred tax adjustments; and a gain onan asset sale.
- Exceeded second-quarter guidance with production of 1,546 MBOED; increasing full-yearguidance.
- Lowering 2016 capital expenditures guidance from $5.7 billion to $5.5 billion.
- Improved productionand operating expenses by 20 percent year over year; improved adjusted operating costs by 18 percent year over year; lowering full-year adjusted operating cost guidance.
- Safely executed second-quarter major turnaround activity in Europeand Alaska; activity ongoing in the third quarter.
- Achieved first production at Foster Creek Phase G in Canada; Surmont production restored to prior quarter levels after wildfires.
- On track for first cargo from APLNG Train 2in Australia and first production from Alder in Europe in the fourth quarter of 2016.
- Lowered debt by $0.8 billion.
- Completed non-coreasset sales of $0.2 billion, bringing the six-month 2016 total to $0.4 billion; signed a sale and purchase agreement for exploration blocks offshore Senegalin July.
"The price environmentremains challenging, but our business is running well and we continue to beat our production, capital expenditures and operating cost targets," said Ryan Lance, chairman and chief executive officer. "During the quarter, we successfully completed significant turnaround activity and saw strong performance across the portfolio, which enabled us to improve our full-year guidance for production, capital expenditures and adjusted operating costs. Weare continuing to ramp up production from our APLNG and Surmont projects, and achieved first production at Foster Creek Phase G in Canada. Our financial position improved as we reduced our debt by $0.8 billion and generated asset sale proceeds of $0.2 billion, remaining on track for about $1 billion of asset sale proceeds this year. We remain focused on successfully executing our operating plan, lowering the breakeven price of the business and positioning for strong momentum as prices recover."
Production for the second quarter of 2016 was 1,546 thousand barrels of oil equivalent per day (MBOED), a decrease of 49 MBOED compared with the same period a year ago. The decrease was the result of normal field decline, dispositions, planned downtime and the impact of wildfires in Canada, partly offset by growth from major projects and development programs and improved well performance. When adjusted for 95 MBOED from dispositions and downtime, production increased 46 MBOED, or 3 percent.
For the quarter, operational performance was strong across the portfolio. The company safely progressed several major turnarounds in Europe and Alaska, which will continue inthe third quarter. The Lower 48 delivered strong production, primarily from the unconventionals, and there were positive results from the Shenandoah 5 appraisal well in the Gulf of Mexico. CD5 and Drill Site 2S in Alaska continue to perform well, with an additional phase approved at CD5. By the end of June, Surmont production was restored to first-quarter levels after the wildfires and first production was achieved with the commissioning of Foster Creek Phase G. Production began to ramp up from Kebabangan in Malaysia and the APLNG project in Australia continued to operate above expectations, with Train2 expected to start up in the fourth quarter of 2016.
The company progressed its phased exit from deepwater exploration with the signing of a sale and purchase agreement for three exploration blocks offshore Senegal in July. The company also recorded a dry hole and lease hold impairment at the Gibson and Tiber prospects in the Gulf ofMexico.
Adjusted earnings were lower compared with second-quarter 2015 primarily due to lower realized prices. The company's total realized price was $27.79 per barrel of oil equivalent (BOE), compared with $39.06 per BOE in the second quarter of 2015, reflecting lower average realized prices across all commodities.
For the quarter, cash provided by operating activities was $1.26 billion. Excluding a change in operating working capital, ConocoPhillips generated $1.23 billion in cash from operations and received proceeds from asset dispositions of $0.2 billion. The company funded $1.1 billion in capital expenditures and investments, and paid dividends of $0.3 billion. Additionally, the company repaid debt of $0.8billion and purchased $1.0 billion in shortterm investments.
ConocoPhillips' six-month 2016 earnings were a net loss of $2.5 billion, or ($2.04) per share,compared with six month 2015 earnings of $93 million, or $0.07 per share. Six-month 2016 adjusted earnings were a net loss of $2.2 billion, or ($1.74) per share, compared with a six-month 2015 adjusted net loss of $141 million, or ($0.11) per share.
Production for the first six months of 2016 was 1,562 MBOED, compared with 1,603 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.
The company's total realized price during this period was $25.31 per BOE, compared with $37.99 per BOE in the first six months of 2015. This reflected lower average realized prices across all commodities.
In the first half of 2016, cash provided by operating activities was $1.7billion. Excluding a $0.2 billion change in operating working capital, ConocoPhillips generated $1.9 billion in cash from operations and received proceeds from asset dispositions of $0.4 billion. The company funded $3.0 billionin capital expenditure sand investments, and paid dividends of $0.6 billion. Additionally, the company increased debt by $3.8 billion and purchased $1.3 billion in short-term investments.
The company is increasing its full-year 2016 production guidance to 1,540 to 1,570 MBOED, reflecting strong year-to-date performance across most of the portfolio. Third-quarter 2016 production guidance is 1,510 to 1,550 MBOED, which reflects significant planned turnaround activity during the quarter. Guidance for production and operating expenses is expected to be $5.8 billion, which results in improved adjusted operating costs of $6.8 billion versus prior guidance of $7.0 billion. The company entered into an agreement to terminate its final Gulf of Mexico drillship contract for approximately $140 million before tax, which is expected to be recorded in the third quarter as a special item.
Guidance for capital expenditures has been lowered to $5.5 billion versus prior guidance of $5.7 billion.
Depreciation, depletion and amortization guidance has been increased to $9.2 billion for the full year as a result of increased volumes and increased expense associated with price-related reserve revisions. The company's other guidance items remain unchanged, with corporate segment net expense of $1.0 billion and exploration dry hole and leasehold impairment expense of $0.8 billion.
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