Quarterly / Earnings Reports | First Quarter (1Q) Update | Financial Results | Capital Markets | Drilling Activity | Curtailment/Shut-In

ConocoPhillips Reports First Quarter 2020 Results; Curtail Production

Share Print Bookmark    |    Friday,May 01,2020

ConocoPhillips reported its Q1 2020 results.

Conoco reported a first-quarter 2020 loss of $1.7 billion, or ($1.60) per share, compared with first-quarter 2019 earnings of $1.8 billion, or $1.60 per share. Excluding special items, first-quarter 2020 adjusted earnings were $0.5 billion, or $0.45 per share, compared with first-quarter 2019 adjusted earnings of $1.1 billion, or $1.00 per share. Special items for the current quarter were primarily driven by an unrealized loss on Cenovus Energy equity and price-driven non-cash impairments.

Quarterly Dividend

The company also announced a quarterly dividend of 42 cents per share, payable June 1, 2020, to stockholders of record at the close of business on May 11, 2020.

First-Quarter Highlights

• Cash provided by operating activities was $2.1 billion. Excluding working capital, cash from operations (CFO) was $1.6 billion.
• Ended the quarter with cash, cash equivalents and restricted cash totaling $4.2 billion and short-term investments of $3.9 billion, equaling more than $8.0 billion in ending cash and short-term investments.
• Capital Expenditures of $1.6 billion funded from Cash flow.
• Ended the quarter with approximately $14 billion of liquidity, including $6 billion of available revolving credit facility.
• Repurchased $0.7 billion of shares and paid $0.5 billion in dividends.
• Achieved first-quarter production, excluding Libya, of 1,278 MBOED.
• Produced 399 MBOED from the Lower 48 Big 3 unconventionals.
• Started up first Montney pad and infrastructure.
• Generated $0.5 billion in disposition proceeds from Lower 48 non-core asset sales.

Q1 Production

Production excluding Libya for the first quarter of 2020 was 1,278 MBOEPD, a decrease of 40 MBOED from the same period a year ago. Adjusting for closed and pending dispositions, production increased 52 MBOED primarily due to growth from the Big 3, as well as development programs in Europe, Asia Pacific and Lower 48. This growth more than offset normal field decline and impacts from a third-party pipeline outage on the Kebabangan Field in Malaysia. Production from Libya averaged 11 MBOED.

In the Lower 48, production from the Big 3 averaged 399 MBOED, including Eagle Ford of 233 MBOED, Bakken of 96 MBOED and Permian Unconventional of 70 MBOED. In Alaska, the company progressed construction on the multi-year GMT-2 project, which remains on track for startup in late 2021. The company also completed drilling two wells to further appraise the Willow discovery and one well to test the Harpoon prospect, prior to early termination of the 2020 winter exploration program to minimize risks associated with COVID-19. In Canada, the first phase of development at Montney was initiated with the startup of a 14-well pad and associated infrastructure. Additionally, a planned 24-day turnaround in Qatar was completed.

Curtailments

The company recently announced that it expects to voluntarily curtail production due to weak prices. Voluntary curtailments for the month of May are now estimated to be 265 thousand barrels of oil per day (MBOD) gross, comprised of 165 MBOD gross in the Lower 48 and 100 MBOD gross at Surmont. This represents approximately 230 MBOED on a net basis.

The company currently estimates voluntary curtailments for the month of June will be 460 MBOD gross, comprised of 260 MBOD gross in the Lower 48, 100 MBOD gross at Surmont and 100 MBOD gross in Alaska. This represents approximately 420 MBOED on a net basis.

Future voluntary curtailment decisions across our areas of operations will be made on a month-by-month basis. Daily net barrel oil equivalent impacts may vary from estimates due to differences in working interests and product mixes.

The company also expects some level of additional curtailments from infrastructure constraints, actions from partner-operated assets or government mandates.

Further Guidance Temporarily Suspended

Given ongoing uncertainty, continued market volatility, and production curtailments over the coming months, the company recently announced that its original 2020 guidance items should not be relied upon and that further guidance has been temporarily suspended. During this suspension, the company may provide periodic updates, as appropriate. In addition, the previously provided net income and cash flow sensitivities should not be relied upon as current marker prices are outside the reference price ranges to which the previous sensitivities applied.

Financials

Earnings decreased from first-quarter 2019 due to a change in Cenovus Energy equity market value, lower realized prices, and price-driven non-cash impairments. Excluding special items, adjusted earnings were lower compared with first-quarter 2019 due to lower realized prices and volumes, partially offset by decreases in operating costs. Dry hole and lease impairment expenses totaled $67 million pre-tax for the quarter, primarily for the Kamunsu East Field in Malaysia that is no longer in our development plans, as well as a dry hole in Norway. The company’s total average realized price was $38.81 per barrel of oil equivalent (BOE), 23 percent lower than the $50.59 per BOE realized in the first quarter of 2019, reflecting lower marker prices.  

For the quarter, cash provided by operating activities was $2.1 billion. Excluding a $0.5 billion change in operating working capital, ConocoPhillips generated CFO of $1.6 billion. CFO included a non-cash downward inventory valuation adjustment of $0.2 billion driven by lower commodity prices, which was offset in operating working capital. The company also generated $0.5 billion in disposition proceeds from the sale of the Lower 48 Niobrara and Waddell assets. In addition, the company funded $1.6 billion of capital expenditures and investments, repurchased $0.7 billion of shares, and paid $0.5 billion in dividends. Capital expenditures and investments included approximately $0.1 billion for payments toward the 2019 Argentina acreage acquisition, as well as bolt-on acquisitions in Lower 48. The company also purchased $0.9 billion of short-term and long-term financial instruments.

Other Items

Upcoming operational activities for the company include several seasonal turnarounds and maintenance projects typically conducted in the second and third quarters each year. These activities are planned in Alaska, Norway and various areas in the Asia Pacific region.