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ConocoPhillips Reports First-Quarter 2019 Results; Operating Plan Continues to Deliver Strong Free Cash Flow and Returns to Shareholders

ConocoPhillips today reported first-quarter 2019 earnings of $1.8 billion, or $1.60 per share, compared with first-quarter 2018 earnings of $0.9 billion, or $0.75 per share. Excluding special items, first-quarter 2019 adjusted earnings were $1.1 billion, or $1.00 per share, compared with first-quarter 2018 adjusted earnings of $1.1 billion, or $0.96 per share. Special items for the current quarter included an unrealized gain on Cenovus Energy equity, recognition of deferred revenue, and amounts recognized from the PDVSA International Chamber of Commerce (ICC) settlement.

First-Quarter Highlights and Recent Announcements

  • Cash provided by operating activities was $2.9 billion. Excluding working capital, cash from operations (CFO) of $2.9 billion exceeded capital expenditures and investments, generating free cash flow of $1.3 billion.
  • Repurchased $0.8 billion of shares and paid $0.3 billion in dividends funded entirely from free cash flow, representing a return of CFO to shareholders of 37 percent.
  • First-quarter production excluding Libya of 1,318 MBOED; year-over-year underlying production grew 5 percent overall and 13 percent on a per debt-adjusted share basis.
  • Grew production from the Lower 48 Big 3 unconventionals by 30 percent year-over-year.
  • Ended the quarter with cash, cash equivalents and restricted cash totaling $6.5 billion and short-term investments of $0.2 billion, equating to $6.7 billion of ending cash and short-term investments.
  • Received a ruling from the International Centre for Settlement of Investment Disputes (ICSID) ordering Venezuela to pay $8.7 billion for unlawful expropriation.
  • Closed the sale of the Greater Sunrise Fields in April for $350 million before customary adjustments.
  • Announced $2.7 billion United Kingdom divestiture agreement in April, plus interest and customary adjustments, subject to regulatory and other approvals.

“ConocoPhillips’ value proposition, priorities and portfolio are designed for the volatile environment that we believe has become the norm,” said Ryan Lance, chairman and chief executive officer. “We continue to execute and deliver on a plan that’s resilient to lower prices, while offering investors upside to higher prices. We approach the business with an aim to level-load our investment and distribution programs, rather than chase cycles up or down, because we believe that is the best way to create sustained value in the energy sector. By focusing on free cash flow generation and distributing a significant portion of cash flows to shareholders, we offer the market a path to value creation in this cyclical business.”

Lance continued, “At our Analyst & Investor Meeting in November we intend to showcase a decade-long plan based on our current portfolio with capital averaging less than $7 billion per year. At a reference price of $50 per barrel WTI, we expect our plan will generate absolute and per-share organic growth and return at least 30 percent of cash from operations to shareholders annually. We believe that our flexibility uniquely positions us to extend our successful strategy for many years, deliver free cash flow at less than $40 per barrel WTI and achieve superior returns across a range of prices.”

First-Quarter Review

Production excluding Libya for the first quarter of 2019 was 1,318 MBOED, an increase of 94 MBOED compared with the same period a year ago. The volume impact from acquisitions and dispositions was a net benefit of 30 MBOED. Excluding this impact, production increased by 64 MBOED. This remaining increase was primarily due to growth from the Big 3 unconventionals, major projects in Alaska, Europe and Asia Pacific, and development programs. Growth more than offset normal field decline, downtime from a planned turnaround in Qatar, and mandated production curtailment in Canada. Production from Libya was 43 MBOED.

During the quarter, the company advanced operational milestones targeted for this year. In Alaska, construction began on the multi-year GMT-2 project and appraisal of the Narwhal and Greater Willow areas continued. In Canada, appraisal drilling finished at a 14-well Montney pad and completion operations began. In the Lower 48, the Big 3 unconventionals produced 326 MBOED, in line with expectations of a flat production profile in the first half of the year. Production from the Big 3 is expected to ramp up in the second half of the year to deliver approximately 19 percent full-year growth. Additionally, resource-enhancing pilots were progressed with the startup of the first multi-well pad utilizing a new completion design in the Eagle Ford. In the Louisiana Austin Chalk, the multi-well exploration program continued through the first quarter. In Norway, peak production from Aasta Hansteen was achieved and Bohai Phase 3 in China continued ramping from two wellhead platforms, with fabrication of a third platform underway.

Earnings were higher compared with the first quarter of 2018 primarily due to an unrealized gain on Cenovus Energy equity, higher volumes and recognition of deferred revenue. Excluding special items, adjusted earnings improved compared with first-quarter 2018 primarily due to higher volumes, partially offset by depreciation expense and production and operating expenses associated with the higher volumes. The company’s total realized price was $50.59 per BOE, compared with $50.49 per BOE in the first quarter of 2018 as higher LNG and bitumen prices were largely offset by lower crude, natural gas liquids and natural gas prices.

For the quarter, cash provided by operating activities was $2.89 billion. Excluding a $0.05 billion change in operating working capital, ConocoPhillips generated $2.94 billion in cash from operations (CFO), which included approximately $0.1 billion from the PDVSA ICC settlement and $0.1 billion from APLNG distributions. The company also incurred $1.6 billion in capital expenditures and investments, $0.8 billion for share repurchases and $0.3 billion for dividends, entirely funded by CFO.

Outlook

Second-quarter 2019 production is expected to be 1,240 to 1,280 MBOED, reflecting the impact from seasonal turnarounds planned in Alaska, Canada and Europe. The guidance excludes Libya and does not include impacts from the recently announced U.K. divestiture agreement.

Full-year guidance for depreciation, depletion and amortization has been decreased to $6.1 billion, reflecting the held-for-sale impact of the U.K. divestiture agreement. The company’s other full-year guidance is unchanged and does not include impacts from the U.K. divestiture agreement.

Full Report

Source: ConocoPhillips

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