ConocoPhillips Delivers Strong Second-Quarter 2021 Financial and Operational Results Following Recent 10-Year Market Update
ConocoPhillips reported second-quarter 2021 earnings of $2.1 billion, or $1.55 per share, compared with second-quarter 2020 earnings of $0.3 billion, or $0.24 per share. Excluding special items, second-quarter 2021 adjusted earnings were $1.7 billion, or $1.27 per share, compared with a second-quarter 2020 adjusted loss of $1.0 billion, or ($0.92) per share. Special items for the current quarter included a gain on Cenovus Energy shares and a contingent payment from Cenovus associated with the 2017 Canadian disposition, partially offset by corporate expenses.
This quarter’s performance follows a market update held on June 30, during which the company laid out a compelling 10-year plan. The plan, based on a reference oil price of $50 per barrel West Texas Intermediate at 2020 real prices, provided a comprehensive outlook for the business post-Concho acquisition and reaffirmed the company’s commitment to playing a valued role in the energy transition, delivering sector-leading returns on and of capital and reducing greenhouse gas emissions. In conjunction with the market update, the company lowered its capital and adjusted operating cost guidance for 2021 and announced plans to increase 2021 share repurchases by $1 billion, bringing total planned return of capital to shareholders to roughly $6 billion for the year. A replay of the market update is available on the ConocoPhillips Investor Relations website, http://www.conocophillips.com/investor.
“The market update provided a durable plan for the business that is unmatched,” said Ryan Lance, ConocoPhillips chairman and chief executive officer. “We have a stronger, more flexible asset base and greater underlying efficiency resulting from the Concho acquisition and the restructuring work we’ve performed throughout our company. Our updated outlook comes at a time that we believe is a defining moment for the sector. ConocoPhillips uniquely meets this moment with a credible multi-year plan, continued strong execution, resilience with unhedged upside, a track record of peer-leading returns on and of capital, and a clear commitment to ESG excellence. These are the attributes that will reenlist investor interest in our sector, and we are ideally positioned to deliver them through the industry price cycles.”
Second-Quarter Highlights & Recent Announcements
• Delivered strong operational performance across the company’s asset base, including successful planned maintenance turnarounds, resulting in second-quarter production of 1,547 MBOED, excluding Libya.
• Cash provided by operating activities was $4.3 billion. Excluding working capital, cash from operations (CFO) of $4.0 billion exceeded capital expenditures and investments of $1.3 billion, generating free cash flow (FCF) of approximately $2.8 billion.
• Distributed a total of $1.2 billion to shareholders, comprised of $0.6 billion in dividends and $0.6 billion in share repurchases, entirely funded from FCF.
• Ended the quarter with combined cash, cash equivalents and restricted cash of $7.0 billion and short-term investments of $2.3 billion, totaling over $9 billion in ending cash and short-term investments.
• Entered into divestiture agreements during July for certain Lower 48 non-core assets totaling nearly $0.2 billion, subject to customary closing adjustments, as part of the company’s plan to generate $2 to $3 billion in disposition proceeds over the next 18 months.
Production excluding Libya for the second quarter of 2021 was 1,547 thousand barrels of oil equivalent per day (MBOED), an increase of 566 MBOED from the same period a year ago. After adjusting for closed acquisitions and dispositions as well as impacts from the 2020 curtailment program, second-quarter 2021 production increased 46 MBOED or 3% from the same period a year ago. This increase was primarily due to new production from the Lower 48 and other development programs across the portfolio, partially offset by normal field decline. Production from Libya averaged 41 MBOED.
In the Lower 48, production averaged 794 MBOED, including 435 MBOED from the Permian, 227 MBOED from the Eagle Ford and 95 MBOED from the Bakken. In Alaska, drilling commenced at GMT2 and the first Fiord West well spud from the CD2 pad. In Norway, the Tor II project was completed with the remaining three wells of the eight-well program brought on line.
Earnings increased from second-quarter 2020 due to higher realized prices and volumes, partially offset by the absence of the second-quarter 2020 gain following completion of the Australia-West divestiture, as well as higher depreciation expense associated with the higher volumes. Excluding special items, adjusted earnings were higher compared with second-quarter 2020 due to higher realized prices and higher volumes, partially offset by increased depreciation expense associated with the higher volumes. The company’s total average realized price was $50.03 per BOE, 117% higher than the $23.09 per BOE realized in the second quarter of 2020, reflecting higher marker prices and improved realizations.
For the quarter, cash provided by operating activities was $4.3 billion. Excluding working capital, ConocoPhillips generated CFO of $4.0 billion. CFO was reduced by approximately $0.2 billion due to a discretionary pension plan contribution during the period. The company also funded $1.3 billion of capital expenditures and investments, paid $0.6 billion in dividends, repurchased $0.6 billion of shares and reported $1.8 billion in net sales of investments in financial instruments.
ConocoPhillips’ six-month 2021 earnings were $3.1 billion, or $2.31 per share, compared with a six-month 2020 loss of $1.5 billion, or ($1.37) per share. Six-month 2021 adjusted earnings were $2.6 billion, or $1.97 per share, compared with a six-month 2020 adjusted earnings loss of $0.5 billion, or ($0.47) per share.
Production excluding Libya for the first six months of 2021 was 1,518 MBOED, an increase of 388 MBOED from
the same period a year ago. After adjusting for closed acquisitions and dispositions, as well as impacts from the 2020 curtailment program and Winter Storm Uri impacts from 2021, production increased 18 MBOED. This increase was primarily due to new production from the Lower 48 and other development programs across the portfolio, partially offset by normal field decline. Production from Libya averaged 40 MBOED.
The company’s total realized price during this period was $47.79 per BOE, 49% higher than the $32.15 per BOE realized in the first six months of 2020, reflecting higher marker prices and improved realizations.
In the first half of 2021, cash provided by operating activities was $6.3 billion. Excluding a $0.2 billion change in working capital, ConocoPhillips generated CFO of $6.1 billion. CFO was reduced by approximately $1.0 billion due to transaction and restructuring expenses and realized losses on the commodity hedging portfolio acquired from Concho. The company funded $2.5 billion of capital expenditures and investments, paid $1.2 billion in dividends, repurchased $1.0 billion of shares and reported $1.3 billion in net sales of investments in financial instruments.
Third-quarter 2021 production is expected to be 1.48 to 1.52 MMBOED, reflecting seasonal turnarounds planned in Alaska and the Asia Pacific region. This guidance excludes Libya and assumes that previously announced divestitures close during the third quarter of 2021. All other guidance items are unchanged.
ConocoPhillips will host a conference call today at 12:00 p.m. Eastern time to discuss this announcement. To listen to the call and view related presentation materials and supplemental information, go to www.conocophillips.com/investor. A recording and transcript of the call will be posted afterward.