Little earnings growth reported by ConocoPhillips in 2Q

ConocoPhillips  reported second-quarter 2019 earnings of $1.6 billion, or $1.40 per share, compared with second-quarter 2018 earnings of $1.6 billion, or $1.39 per share.

Excluding special items, second-quarter 2019 adjusted earnings were $1.1 billion, or $1.01 per share, compared with second-quarter 2018 adjusted earnings of $1.3 billion, or $1.09 per share.

Special items for the current quarter were primarily driven by a financial tax benefit related to the previously announced U.K. disposition, settlement of certain tax disputes, and amounts recognized from the PDVSA International Chamber of Commerce (ICC) settlement.

Second-Quarter Highlights

  • Cash provided by operating activities was $2.9 billion. Excluding working capital, cash from operations (CFO) of $3.4 billion exceeded capital expenditures and investments, generating free cash flow of $1.7 billion.
  • Increased 2019 planned share repurchases to $3.5 billion.
  • Repurchased $1.2 billion of shares and paid $0.3 billion in dividends in the second quarter; both funded entirely from free cash flow, representing a return of 47 percent of CFO to shareholders.
  • Second-quarter production excluding Libya of 1,290 MBOED exceeded the high end of guidance; year-over-year underlying production grew 4 percent overall and 6 percent on a per debt-adjusted share basis.
  • Grew production from the Lower 48 Big 3 unconventionals by 26 percent year-over-year.
  • Executed turnarounds in Europe, Canada and Alaska.
  • Ended the quarter with cash, cash equivalents and restricted cash totaling $6.2 billion and short-term investments of $0.7 billion, equating to $6.9 billion of ending cash and short-term investments.
  • Generated $0.6 billion in proceeds from dispositions.
  • Acquired approximately $0.1 billion in Lower 48 Big 3 bolt-on interests and acreage.

“This was our seventh consecutive quarter of generating free cash flow while executing our disciplined plans and delivering on our targets,” said Ryan Lance, chairman and chief executive officer. “Over that time frame we fully funded our capital expenditures, dividends and buybacks within cash from operations.”

Production excluding Libya for the second quarter of 2019 was 1,290 thousand barrels of oil equivalent per day (MBOED), an increase of 79 MBOED compared with the same period a year ago. Excluding a net benefit of 27 MBOED from acquisitions and dispositions (A&D), production increased by 52 MBOED primarily due to growth from the Big 3 unconventionals, development programs and major projects in Alaska, Europe and Asia Pacific. This growth more than offset normal field decline and downtime from planned turnarounds. Production from Libya was 42 MBOED.

In Alaska, the winter exploration program was completed with encouraging results on the Greater Willow Area and Narwhal appraisal tests. In the Lower 48, ramp-up from the Big 3 unconventionals was accelerated, increasing production for the quarter to 367 MBOED. In Canada, completion operations on the 14-well Montney pad and infrastructure construction progressed as planned with startup on track for the fourth quarter. Turnarounds were successfully completed during the quarter primarily at Greater Ekofisk in Norway, Surmont in Canada and Prudhoe Bay in Alaska. Additional turnarounds and maintenance will continue in the third quarter.

Earnings were lower compared with the second quarter of 2018 primarily due to lower realized prices and a lower unrealized gain on Cenovus Energy equity, partially offset by higher volumes and a financial tax benefit related to the planned U.K. disposition. Excluding special items, adjusted earnings were lower compared with second-quarter 2018 due to lower realized prices, partially offset by higher volumes. Sales volumes for the quarter were lower than production, reducing earnings by $32 million. The company’s total realized price was $50.50 per barrel of oil equivalent (BOE), compared with $54.32 per BOE in the second quarter of 2018, reflecting the impact of lower marker prices.

ConocoPhillips’ six-month 2019 earnings were $3.4 billion, or $3.00 per share, compared with six-month 2018 earnings of $2.5 billion, or $2.13 per share. Six-month 2019 adjusted earnings were $2.3 billion, or $2.01 per share, compared with six-month 2018 adjusted earnings of $2.4 billion, or $2.05 per share.