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ConocoPhillips First Quarter 2022 Results

Share Print Bookmark    |    Friday,May 06,2022

ConocoPhillips reported its first quarter 2022 results.

Conoco reported first-quarter 2022 earnings of $5.8 billion, or $4.39 per share, compared with first-quarter 2021 earnings of $1.0 billion, or $0.75 per share. Excluding special items, first-quarter 2022 adjusted earnings were $4.3 billion, or $3.27 per share, compared with first-quarter 2021 adjusted earnings of $0.9 billion, or $0.69 per share. Special items for the current quarter were primarily comprised of a tax benefit related to closure of an audit, a gain associated with the Indonesia divestiture and a gain on Cenovus Energy (CVE) equity.

In addition, ConocoPhillips today announced a $2 billion increase in expected 2022 returns of capital to $10 billion. The company declared both an ordinary dividend of 46 cents per share and a third-quarter variable return of cash (VROC) payment of 70 cents per share.

CEO Ryan Lance said: "The first quarter saw all aspects of the business running well as we continued to deliver on our strategic, financial, and operational plans. We efficiently and safely delivered on our capital scope, enhanced our balance sheet strength and closed strategic transactions that further optimize our diverse, low-cost of supply portfolio. We also increased our targeted 2022 returns to shareholders by an additional 25%, to a new total of $10 billion, as we continue to execute on all elements of our Triple Mandate."

First-Quarter Highlights:

• Announced an increase in expected 2022 returns of capital to shareholders to a total of $10 billion, with the incremental $2 billion to be distributed through share repurchases and VROC tiers.
• Distributed $2.3 billion to shareholders through a three-tier return of capital framework, including $0.9 billion through the ordinary dividend and VROC and $1.4 billion through share repurchases.
• Generated cash provided by operating activities of $5.1 billion and cash from operations (CFO) of $7.0 billion.
• Continued to integrate and optimize the recently acquired Permian assets while efficiently and safely executing company-wide capital programs, delivering record production of 1,747 MBOED in the quarter.
• Received 20-year production license extension in the Norway Greater Ekofisk Area from 2028 to 2048.
• Accelerated progress towards the company's debt reduction target while executing debt transactions that will result in lower annual cash interest expense.
• Closed the purchase of an additional 10% interest in APLNG for $1.4 billion in cash.
• Divested $1.4 billion of noncore assets during the quarter and an additional $0.4 billion in April.
• Completed monetization of the company's CVE common shares, generating proceeds of $1.4 billion during the quarter with funds applied to share repurchases, and $2.5 billion in total proceeds since May 2021.
• Published Plan for the Net-Zero Energy Transition focused on meeting the company's Triple Mandate objectives: reliably and responsibly meeting energy transition pathway demand, delivering competitive returns on and of capital and achieving net-zero operational emissions ambitions.
• Ended the quarter with cash and short-term investments of $7.5 billion.

Quarterly Dividend and Variable Return of Cash

ConocoPhillips announced a quarterly ordinary dividend of 46 cents per share, payable June 1, 2022, to stockholders of record at the close of business on May 17, 2022. In addition, the company announced a third-quarter VROC of 70 cents per share, payable July 15, 2022, to stockholders of record at the close of business on June 28, 2022.

First-Quarter Review

Production for the first quarter of 2022 was 1,747 thousand barrels of oil equivalent per day (MBOED), an increase of 220 MBOED from the same period a year ago. After adjusting for closed acquisitions and dispositions, the conversion of previously acquired Concho contracted volumes from a two-stream to a three-stream basis, and 2021 Winter Storm Uri impacts, first-quarter 2022 production decreased by 36 MBOED or 2% from the same period a year ago. This decrease was primarily due to downtime and seasonality impacts as new production from the Lower 48 and other development programs more than offset decline.

In the Lower 48, production averaged 967 MBOED, including 640 MBOED from the Permian, 208 MBOED from the Eagle Ford and 97 MBOED from the Bakken. Lower 48 ended the quarter with 22 drilling rigs and eight frac crews at work. In Canada, drilling and completion activities continued at Montney while construction progressed on the second phase of the company's processing facility. In Qatar, a planned major turnaround at Train 6 was successfully completed.

Earnings increased from first-quarter 2021 primarily due to higher realized prices and volumes, as well as a tax benefit related to closure of an audit. Excluding special items, adjusted earnings were higher compared with first-quarter 2021 due to higher realized prices and volumes. The company's total average realized price was $76.99 per barrel of oil equivalent (BOE), 70% higher than the $45.36 per BOE realized in the first quarter of 2021, as production remains unhedged and thus realizes the full benefit of higher marker prices.

For the quarter, cash provided by operating activities was $5.1 billion. Excluding a $2.0 billion change in operating working capital, ConocoPhillips generated CFO of over $7 billion. Dispositions generated $2.3 billion, including $1.4 billion from sale of CVE shares, with the proceeds from CVE sales applied to additional share repurchases. The company funded $3.2 billion of capital expenditures and investments, comprised of $1.8 billion in operating capital and $1.4 billion to acquire an additional 10% interest in APLNG. In addition, the company paid $0.9 billion in ordinary dividends and VROC, repurchased $1.4 billion of shares, refinanced its revolving credit facility and paid $1.1 billion to reduce total debt. In April, the company also initiated the early retirement of a $1.25 billion note due 2026 that is expected to settle in May 2022 and further accelerate progress toward the debt reduction target.

Outlook

Second-quarter 2022 production is expected to be 1.67 to 1.73 million barrels of oil equivalent per day (MMBOED), reflecting the impacts of seasonal turnarounds planned in Europe and Canada as well as weather impacts experienced during April in the Bakken. The company's full-year production is expected to be approximately 1.76 MMBOED, reflecting a net reduction of approximately 25 MBOED from acquisitions and dispositions closed as of May 5, 2022.

The company adjusted its 2022 operating capital guidance to $7.8 billion versus the prior guidance of $7.2 billion, reflecting higher partner-operated spend in Lower 48 and inflationary impacts. This guidance excludes $1.4 billion of capital associated with the closed acquisition of an additional 10% interest in APLNG.

Full-year guidance for depreciation, depletion and amortization has decreased to $7.7 billion, reflecting the impact of revised production guidance. All other guidance items remain unchanged.