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ConocoPhillips Fourth Quarter, Full Year 2022 Results; IDs $11B 2023 Capex

Share Print Bookmark    |    Thursday,March 09,2023

ConocoPhillips reported its fourth quarter and full year 2022 results. It also detailed its 2023 capital outlook.

Outlook

The company's 2023 total capital expenditure guidance is $10.7 to $11.3 billion, which includes $9.1 to $9.3 billion for base capital and $1.6 to $2.0 billion for anticipated major project spending at NFE, NFS, PALNG and Willow. Base capital includes funding for ongoing development drilling programs; exploration and appraisal activities; base maintenance; and projects to reduce the company's Scope 1 and 2 emissions intensity and fund investments in several early-stage low-carbon opportunities that address end-use emissions.

The company has received and is now reviewing the Bureau of Land Management's final Supplemental Environmental Impact Statement for Willow Project, a major milestone in the permitting process that commenced in 2018.

The company's 2023 production guidance is 1.76 to 1.80 million barrels of oil equivalent per day (MMBOED). First-quarter 2023 production is expected to be 1.72 MMBOED to 1.76 MMBOED, which includes 35 MBOED of turnaround and stabilizer expansion in Eagle Ford.

Guidance for 2023 includes adjusted operating cost of $8.2 billion; adjusted corporate segment net loss of $0.9 billion and DD&A of $8.1 billion. Guidance excludes potential special items.

2022 Results

Conoco reported fourth-quarter 2022 earnings of $3.2 billion, or $2.61 per share, compared with fourth-quarter 2021 earnings of $2.6 billion, or $1.98 per share. Excluding special items, fourth-quarter 2022 adjusted earnings were $3.4 billion, or $2.71 per share, compared with fourth-quarter 2021 adjusted earnings of $3.0 billion, or $2.27 per share. Special items for the current quarter were primarily driven by impairment of certain aged, suspended wells and corporate expenses.

Full-year 2022 earnings were $18.7 billion, or $14.57 per share, compared with full-year 2021 earnings of $8.1 billion, or $6.07 per share. Excluding special items, full-year 2022 adjusted earnings were $17.3 billion, or $13.52 per share, compared with full-year 2021 earnings of $8.0 billion, or $6.01 per share.

"In 2022, ConocoPhillips marked 10 years as an independent E&P company with strong financial and operational results across our business, thanks to the hard work and dedication of our talented workforce. We returned $15 billion of capital to shareholders and achieved record production in our Lower 48 assets, while adding new high-quality strategic projects to enhance our global portfolio for decades to come. Building on 60 years of global LNG expertise, we expanded our LNG business in Australia, Germany, Qatar and along the U.S. Gulf Coast. We also set a new methane emissions intensity target in support of our continuing focus on low GHG production," said Ryan Lance, ConocoPhillips chairman and chief executive officer. "As we enter our second decade, we remain committed to our Triple Mandate of responsibly and reliably meeting energy transition pathway demand, delivering competitive returns on and of capital, and achieving our net-zero operational emissions ambitions. Our deep and diversified portfolio of low cost-of-supply assets continues to generate robust cash flow, enabling us to start the year with an $11 billion return of capital target."

Full-Year 2022 Summary

• Generated cash provided by operating activities of $28.3 billion and cash from operations (CFO) of $28.5 billion; ended the year with cash and short-term investments of $9.5 billion.
• Distributed $15 billion to shareholders through three-tier framework including $5.7 billion in cash through the ordinary dividend and variable return of cash (VROC) and $9.3 billion through share repurchases, representing 53% of CFO.
• Expanded global LNG business through participation in QatarEnergy's North Field East (NFE) and North Field South (NFS) projects; executed 15-year regasification agreement at German LNG Terminal; acquired additional 10% interest in APLNG; signed 20-year agreement for 5 MTPA of LNG offtake and executed agreement to purchase 30% equity stake in Phase 1 of Port Arthur LNG (PALNG).
• Delivered full-year production of 1,738 thousand barrels of oil equivalent per day (MBOED) and record Lower 48 production.
• Fully integrated acquired Permian assets and executed multiple acreage swaps, coring up approximately 25,000 acres since acquisition to provide over a year's worth of additional two mile-plus long-lateral drilling inventory.
• Received license extension for Norway's Greater Ekofisk area to 2048 and license adjustments for China's Bohai Penglai Fields to 2039.
• Generated $3.5 billion in disposition proceeds through monetization of the company's Cenovus Energy (CVE) shares and noncore asset sales.
• Retired $3.3 billion in debt toward the company's $5 billion debt reduction target.
• Achieved a record 27% return on capital employed; 31% cash-adjusted return on capital employed.
• Joined Oil and Gas Methane Partnership 2.0, published a Plan for the Net-Zero Energy Transition and set a new 2030 methane emissions intensity target of approximately 0.15% of gas produced, enhancing our commitment to ESG excellence and leadership.

Return of Capital Update

ConocoPhillips announced its 2023 planned return of capital to shareholders of $11 billion. The company declared a quarterly ordinary dividend of $0.51 per share, payable March 1, 2023, to stockholders of record at the close of business on Feb. 14, 2023. In addition, the company announced a VROC of $0.60 per share, payable April 14, 2023, to stockholders of record at the close of business on March 29, 2023.

Fourth-Quarter Review

Production for the fourth quarter of 2022 was 1,758 MBOED, an increase of 150 MBOED from the same period a year ago. After adjusting for closed acquisitions and dispositions and the conversion of previously acquired Concho-contracted volumes from a two-stream to a three-stream basis, fourth-quarter 2022 production decreased by 3 MBOED or 0.2% from the same period a year ago. Organic growth from Lower 48 and other development programs more than offset decline; however, total company fourth-quarter production was lower overall, primarily due to weather and downtime impacts in Lower 48.

In Lower 48, production averaged 997 MBOED, including Permian of 671 MBOED, Eagle Ford of 214 MBOED, and Bakken of 96 MBOED. In Canada, drilling and completion activities continued at Montney with the fourth pad coming online during the quarter while construction progressed on the second phase of the company's central processing facility. In Norway, the company progressed drilling programs on the Tommeliten A and Eldfisk North projects. In Libya, the company acquired an additional 4.1% interest in the Waha Concession, bringing current ownership to 20.4%.

Earnings increased from fourth-quarter 2021 primarily due to higher volumes and improved realized prices, in addition to the absence of both 2021 non-cash impairments and gains on CVE equity. This was partially offset by higher operating costs and depreciation, depletion and amortization (DD&A) associated with higher volumes, in addition to commercial and inventory timing and impairment of certain aged, suspended wells. Adjusted earnings increased primarily due to higher volumes and improved realized prices, partially offset by higher operating costs and DD&A associated with higher volumes, and commercial and inventory timing.

The company's total average realized price was $71.05 per barrel of oil equivalent (BOE), 8% higher than the $65.56 per BOE realized in the fourth quarter of 2021. Production remains unhedged, thus realizing the full impact of changes in marker prices.

For the fourth quarter, cash provided by operating activities was $6.6 billion. Excluding a $0.1 billion change in operating working capital, ConocoPhillips generated CFO of $6.5 billion. The company funded $2.5 billion of capital expenditures and investments, including $2.2 billion in base capital and approximately $0.3 billion for acquisitions and NFE payments. The company distributed $2.4 billion in ordinary dividends and VROC and repurchased $2.7 billion of shares.

Full-Year Review

Production for 2022 was 1,738 MBOED, an increase of 171 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, production decreased 16 MBOED or 1% from the same period a year ago. Organic growth from Lower 48 and other development programs more than offset decline; however, production was lower overall, primarily due to fourth quarter weather impacts and downtime in Lower 48.

The company's total realized price for 2022 was $79.82 per BOE, 46% higher than the $54.63 per BOE realized in 2021, reflecting higher marker prices.

In 2022, cash provided by operating activities was $28.3 billion. Excluding a $0.2 billion change in operating working capital, ConocoPhillips generated CFO of $28.5 billion. Dispositions generated $3.5 billion, including $1.4 billion from the sale of CVE shares, $0.5 billion for CVE contingency payments, $0.7 billion from the sale of Indonesia and approximately $0.8 billion from sales of noncore assets. The company funded $10.2 billion of capital expenditures and investments, including $8.1 billion in base capital and approximately $2.1 billion which includes the acquisition of an additional 10% interest in APLNG, Lower 48 bolt-on acquisitions and NFE payments. In addition, the company paid $5.7 billion in ordinary dividends and VROC, repurchased $9.3 billion of shares and retired $3.3 billion in debt.

Reserves Update

Preliminary 2022 year-end proved reserves are 6.6 billion BOE, with total reserve replacement ratio of 176%, including closed acquisitions and dispositions and market factors. Reserve changes excluding closed acquisitions and dispositions result in an organic reserve replacement ratio of 177%.

Final information related to the company's 2022 oil and gas reserves, will be provided in ConocoPhillips' Annual Report on Form 10-K, to be filed with the SEC in February.