CONOCO LOSS $1.1 BLN
ConocoPhillips (NYSE: COP) reported a third-quarter 2015 net loss of $1.1 billion, or ($0.87) per share, compared with third-quarter 2014 earnings of $2.7 billion, or $2.17 per share. Excluding special items, third-quarter 2015 adjusted earnings were a net loss of $466 million, or ($0.38) per share, compared with third-quarter 2014 adjusted earnings of $1.6 billion, or $1.29 per share. Special items for the current quarter related primarily to the termination of a rig contract for a Gulf of Mexico deepwater drillship, non-cash impairments, restructuring costs and pension settlement expense.
- Increased quarterly dividend to $0.74 per share in July.
- Accelerating capital and operating cost reductions; further reduced 2015 capital expenditures guidance from $11.0 billion to $10.2 billion and operating cost guidance from $8.9 billion to $8.2 billion.
- Achieved third-quarter production of 1,554 MBOED; on track to exceed full-year 2015 production guidance.
- Four percent year-over-year production growth from continuing operations, adjusted for Libya, downtime and dispositions.
- Special items of $654 million pre-tax drove a 9 percent year-over-year increase in operating costs; however, adjusted for special items, underlying operating costs improved 18 percent.
- Achieved first oil at Surmont 2 in Canada during the quarter, as well as CD5 and Drill Site 2S in Alaska in October; on track for first cargo at APLNG by year end.
- Successfully completed major turnarounds in the Alaska, Europe, and Asia Pacific and Middle East segments.
"We are accelerating actions to position our company for low and volatile prices, while improving the underlying performance of the business," said Ryan Lance, chairman and chief executive officer. "We are on track to deliver seven major project startups and exceed our volume targets for the year. We are exercising flexibility in our capital program, dramatically lowering our cost structure and divesting assets that do not compete for funding in our portfolio. These steps will make us more flexible and resilient for the future. We remain committed to a compelling dividend, affordable growth and strong financial performance."
Production from continuing operations, excluding Libya, for the third quarter of 2015 was 1,554 MBOED, an increase of 81 MBOED compared with the same period a year ago. Growth was primarily due to new production from major projects and development programs, partially offset by normal field decline. The net increase in production reflects 56 MBOED, or 4 percent growth, after adjusting for 25 MBOED from dispositions and downtime.
Adjusted earnings were lower compared with third-quarter 2014 primarily due to lower realized prices. The company's total realized price was $32.91 per barrel of oil equivalent (BOE), compared with $64.78 per BOE in the third quarter of 2014, reflecting lower average realized prices across all commodities.
Special items for the quarter resulted in after-tax impacts of $246 million from the termination of a rig contract for a Gulf of Mexico deepwater drillship, $195 million from non-cash impairments in the Lower 48 and Asia Pacific and Middle East segments, $156 million from restructuring costs, $56 million of pension settlement expenses and a $48 million decrease in depreciation from a third-quarter revision in the Lower 48.
Operating costs for the quarter were $2.66 billion compared with $2.44 billion in the third quarter of 2014. Adjusted for rig termination, restructuring charges and pension settlement expense, totaling $0.65 billion pre-tax, operating costs were improved 18 percent year over year or $0.43 billion.
For the quarter, cash provided by continuing operating activities was $1.9 billion. Excluding a $0.6 billion change in operating working capital, ConocoPhillips generated $1.3 billion in cash from operations. Adjusted for the $0.3 billion working capital impact from special items, cash from operations excluding working capital would have been $1.6 billion during the quarter. In addition, the company funded $2.2 billion in capital expenditures and investments and paid dividends of $0.9 billion.
ConocoPhillips' nine-month 2015 earnings were a net loss of $978 million, or ($0.80) per share, compared with nine-month 2014 earnings of $6.9 billion, or $5.54 per share. Nine-month 2015 adjusted earnings were a net loss of $607 million, or ($0.50) per share, compared with nine-month 2014 adjusted earnings of $5.9 billion, or $4.71 per share.
Production from continuing operations, excluding Libya, for the first nine months of 2015 was 1,586 MBOED, compared with 1,520 MBOED for the same period in 2014. Production increased due to new production from major projects and development programs as well as improved well performance, partially offset by normal field decline.
The company's total realized price during this period was $36.31 per BOE, compared with $68.71 per BOE in the first nine months of 2014. This reflected lower average realized prices across all commodities.
Operating costs for the first nine months of 2015 were $6.96 billion compared with $7.17 billion in 2014. Adjusted for rig termination, restructuring charges and pension settlement expense, totaling $0.83 billion pre-tax, operating costs were improved 15 percent year over year or $1.04 billion.
For the nine months ended Sept. 30, 2015, cash provided by continuing operating activities was $6.0 billion. Excluding a $0.2 billion change in operating working capital, ConocoPhillips generated $5.8 billion in cash from operations. Additionally, the company funded $7.9 billion in capital expenditures and investments, paid dividends of $2.7 billion and increased debt by $2.4 billion.
As of Sept. 30, 2015, ConocoPhillips had $2.4 billion of cash and cash equivalents. The company ended the third quarter with debt of $24.9 billion and a debt-to-capital ratio of 36 percent.
Fourth-quarter production guidance is 1,585 to 1,625 MBOED. Full-year 2015 production guidance is 1,585 to 1,595 MBOED, resulting in expected year-over-year growth of 3 to 4 percent from continuing operations, excluding Libya.
The company has further reduced its 2015 capital expenditures guidance to $10.2 billion compared with initial 2015 guidance of $11.5 billion. The company has also reduced 2015 operating cost guidance to $8.2 billion compared with initial guidance of $9.2 billion. For both capital and operating costs, approximately half of these reductions are due to market factors, while the remainder are the result of discretionary actions to lower costs.
Corporate segment net expense has been reduced to $0.8 billion. 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 expects to release its 2016 capital and operating plan on Dec. 10, 2015. Management also plans to host a call in conjunction with the release. Additional details will be provided at a later date.
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GAZPROM - The parties discussed relevant issues related to bilateral cooperation, including the Baltic LNG project. Emphasis was placed on the priority measures aimed at developing a joint design concept (pre-FEED).
BHGE - U.S. Rig Count is up 11 rigs from last week to 1,063, with oil rigs up 8 to 869, gas rigs up 4 to 193, and miscellaneous rigs down 1 to 1. Canada Rig Count is up 13 rigs from last week to 195, with oil rigs up 8 to 127 and gas rigs up 5 to 68.
REUTERS - Brent crude futures had risen $1.02 cents, or 1.3 percent, to $81.28 a barrel by 0637 GMT. The contract dropped 3.4 percent on Thursday following sharp falls in equity markets and indications that supply concerns have been overblown. U.S. West Texas Intermediate (WTI) crude futures were up 80 cents, or 1.1 percent, at $71.77 a barrel, after a 3 percent fall in the previous session. WTI is on track for a 3.5 percent drop this week.
EIA - Brent crude oil spot prices averaged $79 per barrel (b) in September, up $6/b from August. EIA expects Brent spot prices will average $74/b in 2018 and $75/b in 2019. EIA expects West Texas Intermediate (WTI) crude oil prices will average about $6/b lower than Brent prices in 2018 and in 2019.