Quarterly / Earnings Reports | Third Quarter (3Q) Update

ConocoPhillips Reports Q3 2019 Results

Share Print Bookmark    |    Tuesday,October 29,2019

ConocoPhillips reported third-quarter 2019 earnings of $3.1 billion, or $2.74 per share, compared with third-quarter 2018 earnings of $1.9 billion, or $1.59 per share.

Excluding special items, third-quarter 2019 adjusted earnings were $0.9 billion, or $0.82 per share, compared with third-quarter 2018 adjusted earnings of $1.6 billion, or $1.36 per share. Special items for the current quarter were primarily due to a gain realized on the completed United Kingdom (U.K.) divestiture.

Highlights:

• Cash provided by operating activities was $2.3 billion. Excluding working capital, cash from operations (CFO) of $2.6 billion exceeded capital expenditures and investments, generating free cash flow of $1.0 billion.
• Repurchased $0.75 billion of shares and paid $0.34 billion in dividends in the third quarter, representing a return of 41 percent of CFO to shareholders.
• Third-quarter production excluding Libya of 1,322 MBOED; year-over-year underlying production grew 7 percent overall and 6 percent on a debt-adjusted share basis.
• Increased production from the Lower 48 Big 3 unconventionals by 21 percent year-over-year.
• Executed turnarounds in Alaska, Malaysia and Norway.
• Ended the quarter with cash, cash equivalents and restricted cash totaling $7.5 billion and short-term investments of $0.9 billion, equaling $8.4 billion of ending cash and short-term investments.
• Completed the U.K. divestiture, generating $2.2 billion in proceeds.
• Completed the previously announced Alaska Nuna discovered resource acquisition for approximately $0.1 billion.
• Announced the Australia-West divestiture agreement for $1.4 billion, plus customary closing adjustments, subject to regulatory and other approvals.
• Announced a 38 percent increase in the quarterly dividend to 42 cents per share, and $3.0 billion in planned 2020 share repurchases.

Chairman & CEO Ryan Lance said: "This business is all about having a sustainable strategy with consistent execution. We believe ConocoPhillips offers both - a shareholder-friendly, returns-oriented value proposition and strong delivery on our commitments. This quarter extends our successful track record of performance since we reset our value proposition in 2016. In November, we'll present a 10-year capital and financial plan at our Analyst & Investor Meeting that emphasizes free cash flow generation with competitive returns on capital and returns of capital. We look forward to sharing a long-term outlook that fulfills our purpose of creating value for all stakeholders."

Third-Quarter Review

Production excluding Libya for the third quarter of 2019 was 1,322 thousand barrels of oil equivalent per day (MBOED), a 98 MBOED increase over the same period a year ago. Adjusting for closed dispositions and acquisitions, underlying production increased 83 MBOED primarily due to production growth from the Big 3 unconventionals, development programs and major projects in Alaska, Europe and Asia Pacific. This growth more than offset normal field decline. Production from Libya averaged 44 MBOED.

In the Lower 48, production from the Big 3 unconventionals averaged 379 MBOED. The company also completed construction and commissioning of the Montney Phase 1 gas plant in Canada, with startup awaiting completion of a third-party pipeline. In Malaysia, production from the Kebabangan Field continued ramping up and first oil was achieved from Gumusut Phase 2. Turnarounds were completed during the quarter in Alaska, Malaysia and Norway.

Earnings increased compared with third-quarter 2018 primarily due to the gain from the U.K. divestiture, partially offset by lower realized prices. Excluding special items, adjusted earnings were lower compared with third-quarter 2018 due to lower realized prices and higher exploration expenses from increased dry hole costs, partially offset by higher volumes. The company's total realized price was $47.07 per barrel of oil equivalent (BOE), 18 percent lower than the $57.71 per BOE realized in the third quarter of 2018, reflecting lower marker prices.

For the quarter, cash provided by operating activities was $2.3 billion. Excluding a $0.3 billion change in operating working capital, ConocoPhillips generated $2.6 billion in CFO. CFO included approximately $0.1 billion from the PDVSA ICC settlement and was reduced by a $0.3 billion U.K. pension fund contribution. In addition, the company generated $2.2 billion in disposition proceeds. The company incurred $1.7 billion in capital expenditures and investments that included approximately $0.1 billion for the Alaska acreage acquisition. In addition, the company repurchased $0.75 billion in shares and paid $0.34 billion in dividends.

Nine-Month Review

ConocoPhillips' nine-month 2019 earnings were $6.5 billion, or $5.72 per share, compared with nine-month 2018 earnings of $4.4 billion, or $3.72 per share. Nine-month 2019 adjusted earnings were $3.2 billion, or $2.83 per share, compared with nine-month 2018 adjusted earnings of $4.0 billion, or $3.41 per share.

Production excluding Libya for the first nine months of 2019 was 1,310 MBOED, an 89 MBOED increase from 1,221 MBOED for the 2018 period. Adjusting for closed dispositions and acquisitions, underlying production increased 69 MBOED primarily due to growth from the Big 3 unconventionals, development programs and major projects in Alaska, Europe and Asia Pacific. This growth more than offset normal field decline. Production from Libya averaged 43 MBOED for the first nine months of 2019.

The company's total realized price during the first nine months of 2019 was $49.35 per BOE, 9 percent lower compared with $54.20 per BOE in 2018. This reduction reflected lower crude, natural gas liquids and natural gas prices, partially offset by higher liquefied natural gas and bitumen prices.

For the nine months ended Sept. 30, 2019, cash provided by operating activities was $8.1 billion. Excluding a $0.9 billion change in operating working capital, ConocoPhillips generated $9.0 billion in CFO, exceeding the total of $5.0 billion in capital expenditures and investments, $2.8 billion in share repurchases and $1.0 billion in dividends. In addition, the company generated $2.9 billion in disposition proceeds. Capital expenditures and investments included approximately $0.2 billion primarily for Lower 48 bolt-on acquisitions and the Alaska acreage acquisition.

Outlook

Fourth-quarter 2019 production is expected to be 1,265 to 1,305 MBOED. The guidance excludes Libya and reflects the impacts from the completed U.K. divestiture. All other guidance items are unchanged.