According to the company’s website press release on November 3, 2022, ConocoPhillips (NYSE: COP) reported third-quarter 2022 earnings of $4.5 billion, or $3.55 per share, compared with third-quarter 2021 earnings of $2.4 billion, or $1.78 per share. Excluding special items, third-quarter 2022 adjusted earnings were $4.6 billion, or $3.60 per share, compared with third-quarter 2021 adjusted earnings of $2.4 billion, or $1.77 per share. Special items for the current quarter were primarily driven by a loss on asset sales.
“We continue to deliver competitive returns, meet global energy needs and reduce our emissions consistent with our Triple Mandate. ConocoPhillips distributed $4.3 billion to our shareholders in the third quarter and announced an increase to our ordinary dividend effective in the fourth quarter. Our Lower 48 business unit accomplished record production of more than 1 million barrels of oil equivalent per day. We expanded our global LNG portfolio with opportunities in QatarEnergy’s North Field South LNG project and have agreed to capacity at the prospective German LNG Terminal, enhancing our focus on this valuable energy transition fuel,” said Ryan Lance, chairman and chief executive officer. “By concentrating on low cost-of-supply and low greenhouse gas production, ConocoPhillips is well positioned to compete in near-term cycles and over the long term.”
Third-Quarter Highlights and Recent Announcements
Distributed $4.3 billion to shareholders through a three-tier framework, including $1.5 billion in cash through the ordinary dividend and variable return of cash (VROC) and $2.8 billion through share repurchases.
Increased quarterly dividend by 11% to 51 cents per share and raised existing share repurchase authorization by $20 billion.
Expanded global LNG portfolio through participation in QatarEnergy’s North Field South LNG project and agreed to terminal services in Germany for a 15-year period at the prospective German LNG Terminal.
Set a new 2030 methane emissions intensity target of approximately 0.15% of gas produced, consistent with the company’s commitment to Oil and Gas Methane Partnership (OGMP) 2.0.
Achieved Lower 48 production milestone of greater than 1,000 MBOED, contributing to record global production of 1,754 MBOED while successfully completing planned maintenance turnarounds.
Generated cash provided by operating activities of $8.7 billion and cash from operations (CFO) of $7.2 billion.
Ended the quarter with cash and short-term investments of $10.7 billion.
In addition, ConocoPhillips today announced that Jack Harper, executive vice president, Lower 48, has elected to leave the company due to family medical reasons. In conjunction with this announcement, Nick Olds, currently executive vice president, Global Operations, has become executive vice president, Lower 48, and Andy O’Brien, currently vice president and treasurer, has become senior vice president, Global Operations, and joined the Executive Leadership Team, effective Nov. 1, 2022.
“I want to thank Jack for his leadership, knowledge and experience that have helped drive efficiency and disciplined growth across our substantial Lower 48 organization,” said Lance. “As a highly valued member of our company’s Executive Leadership Team, Jack played an instrumental role in ensuring the integration of our Permian assets. I wish Jack the very best and look forward to Nick and Andy’s ongoing leadership as they assume their new roles.”
Quarterly Dividend, Variable Return of Cash and Share Repurchase Authorization Increase
ConocoPhillips announced a quarterly ordinary dividend of 51 cents per share, payable Dec. 1, 2022, to stockholders of record at the close of business on Nov. 15, 2022. In addition, the company announced a VROC of 70 cents per share, payable Jan. 13, 2023, to stockholders of record at the close of business on Dec. 27, 2022.
The company also announced the Board of Directors approved a $20 billion increase in the existing share repurchase program to $45 billion, consistent with the company’s plan for future share repurchases. Since program inception in late 2016, the company has repurchased $20.7 billion in shares.
Third-Quarter Review
Production for the third quarter of 2022 was 1,754 thousand barrels of oil equivalent per day (MBOED), an increase of 210 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, third-quarter 2022 production increased by 30 MBOED or 2% from the same period a year ago. Organic growth from Lower 48 and other development programs more than offset decline and downtime.
Lower 48 delivered record production of 1,013 MBOED, including 668 MBOED from the Permian, 224 MBOED from the Eagle Ford and 96 MBOED from the Bakken. In Canada, drilling and completion activities continued at Montney, while construction progressed on the second phase of the company’s processing facility. In Norway, the company completed planned subsea template installation scope on the Tommeliten A and Eldfisk North projects with drilling on track to begin in the fourth quarter. In Malaysia, first oil was achieved at Gumusut Phase 3. Turnarounds were successfully completed across the portfolio.
Earnings and adjusted earnings increased from third-quarter 2021 primarily due to higher realized prices. The company’s total average realized price was $83.07 per barrel of oil equivalent (BOE), 46% higher than the $56.92 per BOE realized in the third quarter of 2021, as production remains unhedged and thus realizes the full impact of changes in marker prices.
For the quarter, cash provided by operating activities was $8.7 billion. Excluding a $1.5 billion change in operating working capital, ConocoPhillips generated CFO of $7.2 billion. Dispositions generated $0.4 billion from the sale of Lower 48 noncore assets and contingent payments received. The company funded $2.5 billion of capital expenditures and investments including approximately $0.3 billion for Lower 48 bolt-on acquisitions. The company also distributed $1.5 billion in ordinary dividends and VROC and repurchased $2.8 billion of shares.
Nine-Month Review
ConocoPhillips’ nine-month 2022 earnings were $15.4 billion, or $11.93 per share, compared with nine-month 2021 earnings of $5.5 billion, or $4.09 per share. Nine-month 2022 adjusted earnings were $14.0 billion, or $10.79 per share, compared with nine-month 2021 adjusted earnings of $5.0 billion, or $3.75 per share.
Production for the first nine months of 2022 was 1,731 MBOED, an increase of 178 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 23 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 planned and unplanned downtime.
The company’s total realized price during this period was $82.82 per BOE, 63% higher than the $50.92 per BOE realized in the first nine months of 2021, reflecting higher marker prices.
In the first nine months of 2022, cash provided by operating activities was $21.7 billion. Excluding a $0.4 billion change in operating working capital, ConocoPhillips generated CFO of $22.1 billion. Dispositions generated $3.4 billion, including $1.4 billion from sale of Cenovus Energy (CVE) shares, with the proceeds from CVE sales applied to share repurchases. The company funded $7.6 billion of capital expenditures and investments, comprised of $5.9 billion in operating capital and $1.7 billion to acquire an additional 10% interest in Australia Pacific LNG and Lower 48 bolt-on acquisitions. In addition, the company paid $3.3 billion in ordinary dividends and VROC, repurchased $6.5 billion of shares and paid $3.0 billion to reduce total debt.
Outlook
Fourth-quarter 2022 production is expected to be 1.74 to 1.80 million barrels of oil equivalent per day (MMBOED). The company’s full-year expected production remains unchanged at 1.74 MMBOED.
The company updated its 2022 operating capital guidance to $8.1 billion versus the prior guidance of $7.8 billion, reflecting inflationary impacts and partner-operated well mix in the Lower 48. This guidance excludes $1.7 billion of capital associated with the closed acquisitions of an additional 10% interest in APLNG and bolt-on acquisitions in the Lower 48.
Full-year guidance for adjusted operating cost is $7.7 billion versus the prior guidance of $7.5 billion, reflecting inflationary impacts in the Lower 48. Full-year guidance for depreciation, depletion and amortization has decreased from $7.6 billion to $7.5 billion. Full-year guidance for adjusted corporate segment net loss remains at $0.9 billion.
