CONOCO NET LOSS $3.6 BLN
CONOCOPHILLIPS (NYSE: COP) reported a fourth-quarter 2016 net loss of $35 million, or ($0.03) per share, compared with a fourth-quarter 2015 net loss of $3.5 billion, or ($2.78) per share. Excluding special items, fourth-quarter 2016 adjusted earnings were a net loss of $318 million, or ($0.26) per share, compared with a fourth-quarter 2015 adjusted net loss of $1.1 billion, or ($0.90) per share. Special items for the current quarter were primarily driven by gains on a sale in Senegal and a Minnesota iron ore reversionary interest, as well as net benefits from non-cash impairments.
Full-year 2016 earnings were a net loss of $3.6 billion, or ($2.91) per share, compared with a full-year 2015 net loss of $4.4 billion, or ($3.58) per share. Excluding special items, full-year 2016 adjusted earnings were a net loss of $3.3 billion, or ($2.66) per share, compared with a full-year 2015 adjusted net loss of $1.7 billion, or ($1.40) per share.
"Our recent performance highlights the significant changes we've made as a company to respond to a world of lower and more volatile commodity prices," said Ryan Lance, chairman and chief executive officer. "For the second quarter in a row our cash from operating activities exceeded capital expenditures and dividends paid.
Our capital intensity and cost structure are dramatically lower, we've increased our dividend, and our debt reduction and share buyback programs are underway. We are delivering our operational milestones and our 18 BBOE of resources with an average cost of supply less than $40 per barrel Brent represents a deep source of high-return future investments. Our disciplined, returns-focused value proposition will enable us to deliver predictable performance to shareholders through the cycles."
• Achieved full-year production excluding Libya of 1,567 MBOED; 3 percent production growth adjusted for downtime and dispositions.
• Capital expenditures of $4.9 billion, a more than 50 percent reduction compared with 2015.
• Reduced production and operating expenses by 19 percent year over year; reduced adjusted operating costs by 19 percent year over year.
• Achieved project startups at APLNG Train 2 in Australia, Foster Creek Phase G and Christina Lake Phase F in Canada, Alder in Europe, Malikai in Malaysia, and Bohai wellhead platform J in China.
• Significant discovery at the Willow prospect in Alaska.
• Generated proceeds of $1.3 billion from asset dispositions.
• Announced preliminary year-end proved reserves of 6.4 billion BOE.
• Initiated $3 billion share buyback program in mid-November.
Production excluding Libya for the fourth quarter of 2016 was 1,587 thousand barrels of oil equivalent per day (MBOED), a decrease of 12 MBOED compared with the same period a year ago. The decrease was the result of normal field decline and dispositions, partly offset by new production from major projects and development programs, improved well performance, and lower downtime. Excluding the net impact from dispositions of 70 MBOED and reduced downtime of 13 MBOED, production increased 45 MBOED, or 3 percent.
For the quarter, strong operational performance continued across the portfolio. In the Lower 48, the operated rig count increased to eight at year-end, with rigs added in the Eagle Ford and Bakken. Record production levels were achieved in the oil sands assets in Canada, driven in part by continued ramp up at Surmont and first production from Christina Lake Phase F. In Alaska, the first phase of the Drill Site 2S project was successfully concluded. First production was achieved at Alder in Europe and development drilling continued in the Greater Ekofisk Area. APLNG Train 2 achieved first cargo in Australia and first oil was achieved at Malikai in Malaysia and at the Bohai wellhead platform J in China. Production also resumed in Libya and averaged 9 MBOED for the quarter.
Earnings were higher compared with the fourth quarter of 2015 due to lower non-cash impairments, which were treated as special items, higher realized prices and lower exploration expenses. Adjusted earnings were improved compared with fourth-quarter 2015 primarily due to higher realized prices and lower exploration expense. The company's total realized price was $32.93 per barrel of oil equivalent (BOE), compared with $28.54 per BOE in the fourth quarter of 2015, reflecting higher average realized prices across all commodities.
For the quarter, cash provided by operating activities was $1.44 billion. Excluding a $0.31 billion change in operating working capital, ConocoPhillips generated $1.75 billion in cash from operations. In addition, the company received proceeds from asset dispositions of $0.9 billion, funded $1.0 billion in capital expenditures and investments, repaid debt of $1.4 billion, paid dividends of $0.3 billion, and repurchased company common stock for $0.1 billion.
Production excluding Libya for 2016 was 1,567 MBOED, compared with 1,589 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, improved well performance, and lower downtime. Excluding the net impact from dispositions of 72 MBOED and reduced downtime of 6 MBOED, production increased 44 MBOED, or 3 percent.
Earnings were higher compared with 2015 primarily due to reduced non-cash impairments that were treated as special items, partially offset by lower realized prices. Adjusted earnings were lower compared with 2015 primarily due to lower realized prices. The company's total realized price during 2016 was $28.35 per BOE, compared with $34.34 per BOE in 2015. This reflected lower average realized prices across all commodities.
In 2016, cash provided by operating activities was $4.4 billion. Excluding a $0.5 billion change in operating working capital, ConocoPhillips generated $4.9 billion in cash from operations. In addition, the company received proceeds from asset dispositions of $1.3 billion, funded $4.9 billion in capital expenditures and investments, paid dividends of $1.3 billion, and repurchased company common stock for $0.1 billion. The company also increased debt by $2.3 billion and purchased a net $0.1 billion in short-term investments. At yearend 2016, ConocoPhillips had $3.6 billion of cash and cash equivalents, and $0.1 billion of short-term investments.
Full-year 2017 production is expected to be 1,540 to 1,570 MBOED. This results in flat to 2 percent growth compared with full-year 2016 production, excluding Libya, of 1,540 MBOED when adjusted for 2016 dispositions of 27 MBOED. First-quarter 2017 production is expected to be 1,540 to 1,580 MBOED. Production guidance for 2017 excludes Libya and the impact of future dispositions.
Guidance for production and operating expenses is $6.1 billion, which results in adjusted operating cost guidance of $6.0 billion.
The company's 2017 guidance for capital expenditures is $5.0 billion; corporate segment net expense is $1.3 billion or $1.2 billion adjusted corporate segment net expense; depreciation, depletion and amortization is $8.0 billion; and exploration dry hole and leasehold impairment expense is $0.2 billion.