Times continue to be challenging for the oil and gas industry as shown in the second-quarter 2020 earnings report by ConocoPhillips which reported growing losses. The Houston-based company, with foundations in Oklahoma reported actual earnings of $0.3 billion compared to the $1.6 billion in the second quarter a year ago, but the adjusted earnings reflected a $1 billion loss.
The second quarter 2020 earnings were 24 cents a share. A year ago, they were $1.40 a share. The $1 billion loss or 92 cents a share in adjusted earnings this year compare with second-quarter 2019 adjusted earnings of $1.1 billion or $1.01 per share.
Combined with earnings from the first quarter of 2020, the six-month earnings for the company were a loss of $1.5 billion or $1.37 per share. At this time a year ago, ConocoPhillips reported a six-month earnings of $3.4 billion or $3 a share. The Adjusted earnings at the end of six-months in 2020 were a loss of $0.5 billion or 47 cents a share while a year ago, the six-month adjusted earnings were $2.3 billion or $2.01 per share.
“Headline second-quarter performance was dominated by weak realized prices, coupled with our rational economic action to curtail production in favor of expected higher future prices,” said Ryan Lance, chairman and chief executive officer.
“We are monitoring the market closely to develop a view around the timing and path of price recovery and to guide our corresponding actions. For example, as the market strengthened late in the second quarter, we began reversing our second-quarter curtailments and ramping up production across the Lower 48, Alaska and Canada,” he added.
Here are highlights of the second quarter results:
- Ended the quarter with cash, cash equivalents and restricted cash totaling $3.2 billion and short-term investments of $4.0 billion, equaling $7.2 billion in ending cash and short-term investments.
- Produced 981 MBOED excluding Libya during the second quarter; curtailed approximately 225 MBOED.
- Completed the Australia-West divestiture, generating $0.8 billion in proceeds.
- Distributed $0.5 billion in dividends.
- Announced bolt-on acquisition of adjacent acreage in the liquids-rich Montney in Canada.
Second-Quarter Review
Production excluding Libya for the second quarter of 2020 was 981 thousand barrels of oil equivalent per day (MBOED) after curtailments of approximately 225 MBOED, resulting in a decrease of 309 MBOED from the same period a year ago. Adjusting for closed dispositions, second-quarter 2020 production was 957 MBOED, a decrease of 212 MBOED from the same period a year ago. This decrease was primarily due to curtailments and normal field decline, partially offset by growth from the Big 3, in addition to development programs in Canada and Europe. Excluding disposition and estimated curtailment impacts, second-quarter 2020 production was slightly higher than the same period a year ago. There was no production from Libya as it remained in force majeure during the quarter.
In the Lower 48, production from the Big 3 averaged 260 MBOED, including Eagle Ford of 162 MBOED, Permian Unconventional of 52 MBOED and Bakken of 46 MBOED. Lower 48 production included curtailments of approximately 145 MBOED, primarily in Eagle Ford and Bakken. At the Surmont operation in Canada, the company curtailed approximately 30 MBOED. At Montney, ramp up from the initial 14-well pad continued, increasing average production to 14 MBOED with 50 percent of the production from oil and natural gas liquids. In addition, completion operations on the second development pad progressed as planned, with start up on track for the third quarter of 2020. In Alaska, the company curtailed approximately 40 MBOED and completed appraisal testing at Narwhal with encouraging initial results. In China, first oil was achieved from Bohai Phase 3’s third and final platform.
Earnings decreased from second-quarter 2019 due to lower realized prices and lower volumes, partially offset by a change in Cenovus Energy equity market value and a gain from the Australia-West divestiture. Excluding special items, adjusted earnings were lower compared with second-quarter 2019 due to lower realized prices and volumes, partially offset by lower depreciation expense and production and operating expenses associated with the lower volumes. The company’s total average realized price was $23.09 per barrel of oil equivalent (BOE), 54 percent lower than the $50.50 per BOE realized in the second quarter of 2019, reflecting lower marker prices and regional differentials.
For the quarter, cash provided by operating activities was $0.2 billion. Excluding a $0.5 billion change in operating working capital, ConocoPhillips generated CFO of $0.7 billion. CFO included a benefit of $0.2 billion from the sale of product inventory that was written down in the first quarter of 2020, which was offset in operating working capital. The company also generated $0.8 billion in disposition proceeds from the sale of Australia-West. In addition, the company funded $0.9 billion of capital expenditures and investments and distributed $0.5 billion in dividends. The company also made a finance lease payment of $0.2 billion upon acceptance of the extended-reach drilling rig in Alaska.
Six-Month Review
Production excluding Libya for the first six months of 2020 was 1,130 MBOED, a decrease of 173 MBOED from the same period a year ago. Adjusting for closed dispositions, production for the first six months of 2020 was 1,089 MBOED, a decrease of 79 MBOED from the same period a year ago. This decrease was primarily due to normal field decline and production curtailments, partially offset by growth from the Big 3, as well as other development programs in Europe, Canada and Lower 48. Production from Libya averaged 5 MBOED for the first six months of 2020.
The company’s total realized price during this period was $32.15 per BOE, compared with $50.55 per BOE in the first six months of 2019. This 36 percent reduction reflected lower marker prices and regional differentials.
In the first half of 2020, cash provided by operating activities and CFO were both $2.3 billion. The company also generated $1.3 billion in disposition proceeds. In addition, the company funded $2.5 billion of capital expenditures and investments, paid $0.9 billion in dividends and repurchased $0.7 billion of shares. Capital expenditures and investments included approximately $0.1 billion for payments toward the 2019 Argentina acreage acquisition and Lower 48 bolt-on acquisitions.
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Source: ConocoPhillips