CONOCO LOSS $2.4 BLN
CONOCO - ConocoPhillips (NYSE: COP) reported third-quarter 2017 earnings of $0.4 billion, or $0.34 per share, compared with a third-quarter 2016 loss of $1.0 billion, or ($0.84) per share. Excluding special items, third-quarter 2017 adjusted earnings were $0.2 billion, or $0.16 per share, compared with a third-quarter 2016 adjusted loss of $0.8 billion, or ($0.66) per share. Special items for the current quarter were primarily driven by a net gain from previously announced dispositions and a tax benefit related to our prior decision to exit Nova Scotia deepwater exploration, partially offset by premiums on early debt retirement.
- Achieved third-quarter production excluding Libya of 1,202 MBOED; 1.4 percent year-over-year underlying production growth excluding the impact of closed or signed dispositions; underlying production grew 19 percent on a production per debt-adjusted share basis.
- Lowering full-year 2017 expected capital expenditures to $4.5 billion, a 10 percent reduction from initial guidance.
- Maintaining full-year production guidance despite impacts from Hurricane Harvey, which were offset by increased volumes from our globally diverse portfolio.
- Cash provided by operating activities has exceeded capital and dividends year-to-date.
- Reduced year-over-year production and operating expenses by 20 percent and adjusted operating costs by 15 percent.
- Closed San Juan and Panhandle dispositions. Expect over $16 billion of dispositions during 2017.
- Repurchased $1.0 billion in shares, which reduced ending share count by 2 percent from the end of the second quarter. On track for $3 billion in share repurchases in 2017.
- Reduced balance sheet debt by $2.4 billion and received credit rating upgrade. On track for less than $20 billion of debt by year-end.
- Released final project financing loan guarantee for APLNG in Australia after successful two-train lenders' test.
"We are pleased with our financial and operational performance for the quarter and the outstanding resilience of our employees during Hurricane Harvey," said Ryan Lance, chairman and chief executive officer. "We continued to deliver transformational actions to reset our company through non-core asset sales, debt reduction and share repurchases. While the outlook for commodity prices has improved, we remain committed to our disciplined strategy. We are focused on free cash flow generation, strong financial returns, shareholder value creation and distributions through the cycles. We look forward to updating the market on our plan at the upcoming Analyst and Investor Meeting."
Production excluding Libya for the third quarter of 2017 was 1,202 thousand barrels of oil equivalent per day (MBOED), a decrease of 355 MBOED compared with the same period a year ago. Excluding the third-quarter volume impact from closed and signed dispositions of 58 MBOED in 2017 and 429 MBOED in 2016, underlying production increased 16 MBOED, or 1.4 percent. Underlying production increased from the ramp up of several major projects and multiple development programs, which more than offset normal field decline and hurricane downtime.
In the Lower 48, 12 operated drilling rigs were running in the Eagle Ford, Bakken, and Delaware unconventional areas. During the quarter, Eagle Ford production was impacted by 15 MBOED from Hurricane Harvey, but was fully restored by quarter end. Record production was achieved at Surmont and appraisal activity continues at Montney in Canada. In Alaska, the first well was spud at 1H NEWS, which remains on track for first oil by year-end. Project work progressed in Europe, with the Aasta Hansteen topsides sail-away completed. In Australia, the APLNG two-train lenders' test was completed with performance exceeding target, resulting in the release of the final project financing loan guarantee. Turnarounds were successfully completed at Prudhoe Bay in Alaska and Britannia in the United Kingdom. Production from Libya was 24 MBOED for the quarter.
Earnings improved compared with the third quarter of 2016 due to higher realized prices, reduced depreciation expense, lower exploration expense, impacts from dispositions as well as the absence of special item impacts from a tax functional currency change at APLNG and restructuring costs. Adjusted earnings improved compared with the third quarter of 2016 due to higher realized prices, reduced depreciation expense, lower exploration expense and impacts from dispositions. The company's total realized price was $39.49 per barrel of oil equivalent (BOE), compared with $29.78 per BOE in the third quarter of 2016, reflecting higher average realized prices across all commodities.
For the quarter, cash provided by operating activities was $1.1 billion. This was reduced by a $0.6 billion U.S. pension fund contribution driven by a discretionary decision to accelerate funding of future obligations. The company funded $1.1 billion in capital expenditures and investments and paid dividends of $0.3 billion. In addition, the company received proceeds from asset dispositions of $3.0 billion, paid $2.5 billion to reduce debt and repurchased $1.0 billion of company common stock.
ConocoPhillips' nine-month 2017 earnings were a loss of $2.4 billion, or ($1.98) per share, compared with a nine-month 2016 loss of $3.6 billion, or ($2.88) per share. Nine-month 2017 adjusted earnings were $0.2 billion, or $0.16 per share, compared with a nine-month 2016 adjusted loss of $3.0 billion, or ($2.40) per share.
Production excluding Libya for the first nine months of 2017 was 1,403 MBOED, compared with 1,560 MBOED for the same period in 2016. Excluding the nine-month impact from closed and signed dispositions of 247 MBOED in 2017 and 432 MBOED in 2016, underlying production increased 28 MBOED, or 2.4 percent. Excluding the impact of dispositions, underlying production increased from new production from major projects, development programs and improved well performance, which more than offset normal field decline. Production from Libya was 15 MBOED.
The company's total realized price during this period was $37.10 per BOE, compared with $26.84 per BOE in the first nine months of 2016. This reflected higher average realized prices across all commodities.
For the nine months ended Sept. 30, 2017, cash provided by operating activities was $4.6 billion. Excluding a $0.1 billion change in operating working capital, ConocoPhillips generated $4.5 billion in cash from operations, exceeding $3.1 billion in capital expenditures and investments and dividends of $1.0 billion. In addition, the company received proceeds from asset dispositions of $13.7 billion, paid $6.6 billion to reduce debt, purchased $2.6 billion in short-term investments and repurchased company common stock of $2.0 billion.
Fourth-quarter and full-year 2017 production is expected to be 1,195 to 1,235 MBOED and 1,350 to 1,360 MBOED, respectively. This excludes Libya and reflects expected impacts from the Barnett disposition.
Full-year guidance for capital expenditures has been lowered to $4.5 billion. The company's other guidance items remain unchanged.
The company expects to reduce debt to less than $20 billion by year-end 2017, and expects full-year share repurchases of $3 billion, accelerating performance on a per debt-adjusted share basis.
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