The FINANCIAL — ConocoPhillips on April 26 reported first-quarter 2018 earnings of $0.9 billion, or $0.75 per share, compared with first-quarter 2017 earnings of $0.6 billion, or $0.47 per share.
Excluding special items, first-quarter 2018 adjusted earnings were $1.1 billion, or $0.96 per share, compared with a first-quarter 2017 adjusted loss of $0.2 billion, or ($0.14) per share. Special items for the current quarter were primarily driven by premiums on early debt retirement and unrealized losses on Cenovus Energy equity, partially offset by favorable outcomes from pending claims and settlements, according to ConocoPhillips.
Achieved first-quarter production excluding Libya of 1,224 MBOED; year-over-year underlying production excluding the impact of closed and planned dispositions grew 4 percent overall and 26 percent on a production per debt-adjusted share basis.
Grew year-over-year production in the Lower 48 Big 3 – Eagle Ford, Bakken and Delaware – by 20 percent.
Increased quarterly dividend by 7.5 percent.
Paid down $2.7 billion of balance sheet debt. Ended the quarter with $17.0 billion of debt and $5.0 billion of cash and cash equivalents.
Increased planned share repurchases by 33 percent; repurchased $0.5 billion in the first quarter; on track for full-year share repurchases of $2 billion.
Cash provided by operating activities exceeded capital expenditures, dividends and share repurchases.
Acquired additional liquids-rich Montney acreage in Canada during the quarter and announced central Louisiana Austin Chalk entry.
Successfully completed six-well exploration and appraisal drilling program in Alaska.
“We continue to differentiate ourselves by executing on our strategic, financial, and operational plans,” said Ryan Lance, chairman and chief executive officer. “We remain focused on creating value for our shareholders by maintaining discipline, following our priorities and staying committed to our returns-focused value proposition. We safely delivered our plan again this quarter, while generating a strong improvement in free cash flow, reducing our debt and returning over 30 percent of cash from operations to shareholders through our dividend and buyback program.”
Production excluding Libya for the first quarter of 2018 was 1,224 thousand barrels of oil equivalent per day (MBOED), a decrease of 360 MBOED compared with the same period a year ago. The first-quarter volume impact from dispositions was 402 MBOED in 2017. Excluding the impact of dispositions, underlying production increased 42 MBOED, or 4 percent. The increase primarily came from ramp up of the Big 3 unconventional assets, which more than offset normal field decline. Production from Libya was 45 MBOED.
In Alaska, the encouraging results of three Willow appraisal wells support the previously announced estimate of a recoverable resource potential of more than 300 million barrels of oil, and three exploration wells represented new discoveries on the Western North Slope. GMT-1 development drilling commenced and the project is on track to deliver first oil in the fourth quarter of 2018. In Canada, the company increased its acreage position by more than 30 percent in the liquids-rich Montney and continued appraisal drilling, and Surmont began partial use of condensate diluent to improve netbacks. In Europe, progress continued at Aasta Hansteen and Clair Ridge, with both projects expected to deliver first production by the end of the year. In China, Bohai Phase 3 activities continued as planned. Off the northwest coast of Australia, the rig for the final phase of Bayu-Undan development was mobilized and drilling began in April. In the Lower 48, production from the company’s Big 3 unconventional assets grew 20 percent year-over-year. The company also announced its acquisition of early life-cycle unconventional acreage in the Austin Chalk in central Louisiana.
Earnings were higher compared with the first quarter of 2017 due to higher realized prices, reduced depreciation expense and lower exploration expense, partially offset by a first-quarter 2017 financial tax accounting benefit related to the Canada disposition. Adjusted earnings were improved compared with first-quarter 2017 primarily due to higher realized prices and reduced depreciation expense. The company’s total realized price was $50.49 per barrel of oil equivalent (BOE), compared with $36.18 per BOE in the first quarter of 2017, reflecting higher average realized prices on a more liquids-weighted portfolio.
For the quarter, cash provided by operating activities was $2.4 billion. Excluding a $0.1 billion change in working capital, ConocoPhillips generated $2.5 billion in cash from operations, exceeding $1.5 billion in capital expenditures and investments, $0.5 billion of repurchased shares, and $0.3 billion of dividends. In addition, the company paid $2.9 billion to reduce debt and sold $1.6 billion of short-term investments. After the quarter ended, the company received the final installment of the Ecuador arbitration award, as well as its first discretionary distribution from APLNG.
Second-quarter 2018 production is expected to be 1,170 to 1,210 MBOED, which reflects seasonal turnarounds. The company increased full-year 2018 production guidance to 1,200 to 1,240 MBOED to reflect first-quarter outperformance and a change in disposition assumptions. These and other improvements more than offset the impact from a third-party gas pipeline in Malaysia that is now assumed to be out of service for the entire year. Production guidance excludes Libya.
The company’s 2018 capital guidance of $5.5 billion is unchanged. This guidance excludes acquisition investment for the previously announced $0.4 billion bolt-on transaction in Alaska and the $0.1 billion acquisition of additional acreage in the Montney in Canada. The company’s other full-year guidance items are also unchanged.