ConocoPhillips Reports Third-quarter 2023 Results; Announces 14% Increase in Quarterly Ordinary Dividend

Source Press Release
Company ConocoPhillips 
Tags LNG & Gas Storage/Processing, Production/Development, Upstream Activities, Capital Spending, Guidance, Strategy - Corporate, Financial & Operating Data
Date November 02, 2023

ConocoPhillips (NYSE: COP) today reported third-quarter 2023 earnings of $2.8 billion, or $2.32 per share, compared with third-quarter 2022 earnings of $4.5 billion, or $3.55 per share. Excluding special items, third-quarter 2023 adjusted earnings were $2.6 billion, or $2.16 per share, compared with third-quarter 2022 adjusted earnings of $4.6 billion, or $3.60 per share. Special items for the current quarter were primarily comprised of a benefit related to the reversal of a tax reserve and a gain associated with the divestiture of a Lower 48 equity investment.

"ConocoPhillips continues to execute well on our returns-focused value proposition,” said Ryan Lance, chairman and chief executive officer. “For the third consecutive quarter, we achieved record production and, with the purchase of the remaining 50% interest in Surmont, raised our full-year guidance. In September, we further progressed our global LNG strategy by securing regasification capacity in the Netherlands. In October, several international projects reached first production, positioning us for 2024 and beyond. And today we announced a 14% increase in our quarterly ordinary dividend, consistent with our long-term objective to deliver top quartile growth relative to the S&P 500."

Third-Quarter Highlights and Recent Announcements

  • Increased the quarterly ordinary dividend by 14% to $0.58 per share.
  • Completed the purchase of the remaining 50% interest in Surmont in October for approximately $2.7 billion as well as future contingent payments of up to $0.4 billion CAD ($0.3 billion).
  • Achieved first steam at Surmont Pad 267 and startup at the second phase of Montney’s central processing facility (CPF2) in Canada.
  • Reached first production ahead of schedule in October at Tommeliten A and partner-operated Breidablikk and Kobra East & Gekko in Norway and partner-operated Bohai Phase 4B in China.
  • Further diversified LNG portfolio by signing a 15-year throughput agreement for approximately 1.5 million tonnes per annum of regasification at the Gate LNG Terminal in the Netherlands.
  • Delivered company and Lower 48 production of 1,806 thousand barrels of oil equivalent per day (MBOED) and 1,083 MBOED, respectively.
  • Generated cash provided by operating activities of $5.4 billion and cash from operations (CFO) of $5.5 billion.
  • Distributed $2.6 billion to shareholders through a three-tier framework, including $1.3 billion through the ordinary dividend and variable return of cash (VROC) and $1.3 billion through share repurchases.
  • Ended the quarter with cash and short-term investments of $9.7 billion, which included proceeds from long-term debt issuances of $2.7 billion to fund the Surmont acquisition.

Quarterly Dividend and Variable Return of Cash

ConocoPhillips announced a quarterly ordinary dividend of $0.58 per share, payable Dec. 1, 2023, to stockholders of record at the close of business on Nov. 14, 2023.  ConocoPhillips paid its fourth quarter VROC of $0.60 per share on Oct. 16, 2023, to stockholders of record at the close of business on Sept. 28, 2023. Beginning in the first quarter of 2024,  ConocoPhillips plans to pay its quarterly ordinary dividend and VROC concurrently and will announce such payments in the same quarter they will be paid.

Third-Quarter Review

Production for the third quarter of 2023 was 1,806 MBOED, an increase of 52 MBOED from the same period a year ago. After adjusting for impacts from closed acquisitions and dispositions, third-quarter 2023 production increased 49 MBOED or 3% from the same period a year ago. Organic growth from Lower 48 and other development programs more than offset decline and downtime.

Lower 48 delivered production of 1,083 MBOED, including 722 MBOED from the Permian, 232 MBOED from the Eagle Ford and 111 MBOED from the Bakken. In Canada, Surmont Pad 267 achieved first steam and Montney’s CPF2 came online, both in late September. Turnarounds were successfully completed in Norway and Alaska.

Earnings and adjusted earnings decreased from the third quarter of 2022 primarily due to lower prices. The company’s total average realized price was $60.05 per BOE, 28% lower than the $83.07 per BOE realized in the third quarter of 2022.

For the quarter, cash provided by operating activities was $5.4 billion. Excluding working capital, ConocoPhillips generated CFO of $5.5 billion and received proceeds of $0.2 billion primarily from the sale of a Lower 48 equity investment. In addition, the company funded $2.5 billion of capital expenditures and investments, paid $1.3 billion in ordinary dividends and VROC and repurchased $1.3 billion of shares.

Nine-Month Review

ConocoPhillips’ nine-month 2023 earnings were $8.0 billion, or $6.54 per share, compared with nine-month 2022 earnings of $15.4 billion, or $11.93 per share. Nine-month 2023 adjusted earnings were $7.8 billion, or $6.38 per share, compared with nine-month 2022 adjusted earnings of $14.0 billion, or $10.79 per share.

Production for the first nine months of 2023 was 1,801 MBOED, an increase of 70 MBOED from the same period a year ago. After adjusting for impacts from closed acquisitions and dispositions, production increased 72 MBOED or 4% from the same period a year ago. Organic growth from Lower 48 and other development programs more than offset decline and downtime.

Earnings and adjusted earnings for the first nine months of 2023 decreased from the same period a year ago primarily due to lower prices. The company’s total realized price during this period was $58.45 per BOE, 29% lower than the $82.82 per BOE realized in the first nine months of 2022.

In the first nine months of 2023, cash provided by operating activities was $14.7 billion. Excluding a $1.2 billion change in working capital, ConocoPhillips generated CFO of $15.9 billion and received disposition proceeds of $0.6 billion. The company funded $8.4 billion of capital expenditures and investments, repurchased $4.3 billion of shares and paid $4.2 billion in ordinary dividends and VROC.

Outlook

All guidance has been updated to reflect the acquisition of an additional 50% interest in Surmont but excludes any impacts from the previously announced APLNG transaction.

Fourth-quarter 2023 production is expected to be 1.86 to 1.90 million barrels of oil equivalent per day (MMBOED). Full-year production is expected to be approximately 1.82 MMBOED, as compared to prior guidance of 1.80 to 1.81 MMBOED, due to the Surmont acquisition.

Full-year guidance for adjusted operating cost was updated to $8.6 billion versus the prior guidance of $8.3 billion, reflecting the increased working interest at Surmont, increased Lower 48 non-operated activity and inflationary impacts primarily in the Lower 48. Full-year guidance for depreciation, depletion and amortization was updated to $8.3 billion versus prior guidance of $8.2 billion primarily due to the Surmont acquisition.

Full-year guidance for capital and adjusted corporate segment net loss remains 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  . A recording and transcript of the call will be posted afterward.

                                             
                                             
    ConocoPhillips   
    Table 1: Reconciliation of earnings to adjusted earnings   
    $ Millions, Except as Indicated   
                                             
      3Q23    3Q22    2023 YTD    2022 YTD   
      Pre-tax  Income tax  After-tax  Per share of common stock (dollars)    Pre-tax  Income tax  After-tax  Per share of common stock (dollars)    Pre-tax  Income tax  After-tax  Per share of common stock (dollars)    Pre-tax  Income tax  After-tax  Per share of common stock (dollars)   
    Earnings      2,798    2.32          4,527  3.55        7,950      6.54          15,431    11.93     
    Adjustments:                                         
    (Gain) loss on asset sales1  (94  (6    (100  (0.08    70    (16    54  0.04    (94  (6    (100    (0.08    (947  94      (853  (0.66   
    Tax adjustments    (144    (144  (0.12              (144    (144    (0.12      (407    (407  (0.33   
    (Gain) loss on CVE shares                                    (251      (251  (0.20   
    (Gain) loss on debt extinguishment and exchange fees                                    (44  52        0.01     
    Transaction and restructuring expenses                                    28    (8    20    0.02     
    (Gain) Loss on FX derivative  59    (12    47    0.04              59    (12    47      0.04      10    (2      0.01     
    Pending claims and settlements              (20  29      0.01                  (20  29        0.01     
    Adjusted earnings / (loss)      2,601    2.16          4,590  3.60        7,753    6.38          13,965    10.79     
    1Includes 3Q23 divestiture of Lower 48 equity investment.   
    The income tax effects of the special items are primarily calculated based on the statutory rate of the jurisdiction in which the discrete item resides.   
ConocoPhillips                 
  Table 2: Reconciliation of reported production to pro forma underlying production       
  In MBOED, Except as Indicated                 
                   
        3Q23  3Q22      2023 YTD  2022 YTD   
  Total Reported ConocoPhillips Production  1,806  1,754      1,801    1,731     
                   
  Closed Dispositions1      (12    (1  (27   
  Closed Acquisitions 2      15        17     
  Total Pro Forma Underlying Production      1,806  1,757      1,800    1,721     
                   
  Estimated Uplift from 2 to 3 stream conversion3           
                   
  1Includes production related to the 2022 Indonesia disposition and various Lower 48 dispositions. 
  2Includes production related to the acquisitions related to additional 10% shareholding interest in APLNG, additional 4% shareholding interest in Libya and a Lower 48 bolt-on acquisition. 
  3Estimated production impacts from the conversion of Concho two-stream contracted volumes to a three-stream (crude oil, natural gas and natural gas liquids) reporting basis, which are not included in Total Production and Total Underlying Production. 
ConocoPhillips Table 3: Reconciliation of net cash provided by operating activities to free cash flow $ Millions, Except as Indicated   
  3Q23    2023 YTD 
Net Cash Provided by Operating Activities  5,445      14,702   
Adjustments:       
Net operating working capital changes  (23    (1,151 
Cash from operations  5,468      15,853   
ConocoPhillips       
  Table 4: Reconciliation of production and operating expenses to adjusted operating costs       
  $ Millions, Except as Indicated       
         
      2023 FY Guidance   
         
  Production and operating expenses    ~7,700   
  Selling, general and administrative (G&A) expenses    ~700   
  Exploration G&A, G&G and lease rentals    ~200   
  Operating costs    ~8,600   
         
  Adjustments to exclude special items:       
  None     
  Adjusted operating costs    ~8,600   
ConocoPhillips       
  Table 5: Reconciliation of adjusted corporate segment net loss       
  $ Millions, Except as Indicated       
         
      2023 FY Guidance   
         
  Corporate and Other earnings    ~(850)   
         
  Adjustments to exclude special items:       
  (Gain) loss on FX derivative    ~60   
  Income tax on special items    ~(10)   
  Adjusted corporate segment net loss    ~(800)   
Source: EvaluateEnergy® ©2024 EvaluateEnergy Ltd