ROHSTOFF INTERNATIONAL

13:00 | 01.02.2018
ConocoPhillips Reports Fourth-Quarter and Full-Year 2017 Results; Increases Quarterly Dividend by 7.5 Percent and Planned 2018 Share Repurchases to $2 Billion; Announces Preliminary 2017 Year-End Reserves and Bolt-On Transaction in Alaska

ConocoPhillips (NYSE: COP) today reported fourth-quarter 2017 earnings
of $1.6 billion, or $1.32 per share, compared with a fourth-quarter 2016
net loss of $35 million, or ($0.03) per share. Excluding special items,
fourth-quarter 2017 adjusted earnings were $0.5 billion, or $0.45 per
share, compared with a fourth-quarter 2016 adjusted net loss of $0.3
billion, or ($0.26) per share. Special items for the current quarter
were primarily driven by benefits from U.S. tax reform and the
settlement of Ecuador arbitration.

Full-year 2017 earnings were a net loss of $0.9 billion, or ($0.70) per
share, compared with a full-year 2016 net loss of $3.6 billion, or
($2.91) per share. Excluding special items, full-year 2017 adjusted
earnings were $0.7 billion, or $0.60 per share, compared with a
full-year 2016 adjusted net loss of $3.3 billion, or ($2.66) per share.
Shareholder Distributions
Consistent with the company’s returns-focused value proposition and
strategic priorities, ConocoPhillips announced an increase in its
distributions to shareholders, consisting of an increase to the
quarterly dividend and an increase in the previously announced planned
2018 share repurchases.

The board of directors approved a 7.5 percent increase to the quarterly
dividend, from 26.5 cents to 28.5 cents per share. The dividend is
payable on March 1, 2018 to stockholders of record at the close of
business on Feb. 12, 2018.

The company expanded its previously announced 2018 share repurchases by
33 percent, from $1.5 billion to $2.0 billion.
Reserves Update
Preliminary 2017 year-end proved reserves are 5.0 billion barrels of oil
equivalent (BOE). The total reserve replacement ratio, including a
reduction of 1.9 billion BOE from dispositions, is expected to be a
negative 168 percent. Excluding disposition impacts, the organic reserve
replacement ratio is expected to be a positive 200 percent. Excluding
disposition impacts and market factors, replacement from net additions
is expected to be a positive 117 percent.

Net additions excluding market factors and dispositions are expected to
be 605 million BOE, approximately 70 percent of which are from Lower 48
unconventional assets and 15 percent from assets in the Asia Pacific and
Middle East segment. Market factors increased reserves by an additional
431 million BOE. These were primarily related to increased commodity
prices across North American assets.

Final information related to the company’s 2017 oil and gas reserves, as
well as costs incurred, will be provided in ConocoPhillips’ Annual
Report on Form 10-K, to be filed with the Securities and Exchange
Commission in late February.
Bolt-On Transaction in Alaska
The company also announced it has signed a definitive agreement with
Anadarko Petroleum Corporation (NYSE: APC) to acquire its 22 percent
nonoperated interest in the Western North Slope of Alaska, as well as
its interest in the Alpine pipeline, for $400 million in cash, before
customary adjustments. The transaction is subject to regulatory
approval, and has an effective date of Oct. 1, 2017. In 2017, the gross
daily production from these assets was 63 thousand barrels of oil
equivalent per day (MBOED). In addition, ConocoPhillips will have 100
percent interest in approximately 1.2 million acres of exploration and
development lands, including the Willow discovery.
Full-Year 2017 Summary
Achieved full-year production excluding Libya of 1,356 MBOED;
underlying production excluding the impact of closed and planned
dispositions grew 19 percent on a production per debt-adjusted share
basis and 3 percent overall.

Cash provided by operating activities exceeded capital expenditures by
$2.5 billion, and exceeded capital expenditures and dividends by $1.2
billion.

Paid down $7.6 billion of balance sheet debt, ending the year with
debt of $19.7 billion.

Generated $16 billion from asset dispositions.

Announced preliminary year-end proved reserves of 5.0 billion BOE.

Repurchased $3 billion of shares; reduced ending share count by 5
percent year-over-year.

Reached settlement on Ecuador arbitration for $337 million.

“2017 was a very successful year by all measures,” said Ryan Lance,
chairman and chief executive officer. “We accelerated our disciplined,
returns-focused value proposition and delivered on our strategic
priorities. We transformed our portfolio, strengthened our balance
sheet, returned 61 percent of cash flow from operations to shareholders
through our dividend and buyback program, and achieved our operational
milestones, including 200 percent organic reserve replacement.”

Lance continued, “We entered 2018 with strong operational and financial
momentum. While the outlook for commodity prices has improved, our
operating plan remains unchanged and we have already taken clear actions
to demonstrate our commitment to maintain discipline and follow our
priorities. Since the year began, we’ve paid down $2.25 billion of
additional debt, raised our quarterly dividend rate by 7.5 percent,
increased our planned 2018 share buybacks to $2 billion, and announced
an attractive bolt-on transaction in a high-quality, legacy asset with
significant exploration upside. We are focused on safely executing our
2018 operational and financial plan, which is designed to generate
top-tier growth in free cash flow and production per debt-adjusted
share, while delivering superior returns and a compelling payout to
shareholders.”
Fourth-Quarter Review
Production excluding Libya for the fourth quarter of 2017 was 1,219
MBOED, a decrease of 368 MBOED compared with the same period a year ago.
The fourth-quarter volume impact from closed and planned dispositions
was 14 MBOED in 2017 and 427 MBOED in 2016. Excluding the impact of
dispositions, underlying production increased 45 MBOED, or 4 percent.
The increase came from the ramp up of major projects and development
programs, which more than offset normal field decline and downtime.
Production from Libya was 37 MBOED.

In Alaska, first production was achieved from 1H NEWS and additional
wells were brought online at CD-5. In Lower 48, the company acquired
additional early life-cycle unconventional acreage to support future
development. In Canada, record production levels were achieved at
Surmont and exploration drilling progressed in the Montney. In Norway,
the first well was spud at Aasta Hansteen and in Malaysia the final well
was spud for the initial Malikai drilling campaign.

Earnings were higher compared with the fourth quarter of 2016 due to
benefits from U.S. tax reform, higher realized prices and the settlement
of the Ecuador arbitration. The U.S. tax reform non-cash benefit was
approximately $0.9 billion, primarily resulting from the revaluation of
deferred taxes at the lower 21 percent federal statutory rate. Adjusted
earnings were improved compared with fourth-quarter 2016 primarily due
to higher realized prices, higher underlying production, and lower
depreciation expense. The company’s total realized price was $46.10 per
BOE, compared with $32.93 per BOE in the fourth quarter of 2016,
reflecting higher average realized prices across all commodities.

For the quarter, cash provided by operating activities was $2.5 billion,
exceeding $1.5 billion in capital expenditures and investments and $0.3
billion of dividends. In addition, the company repaid debt of $1.3
billion, repurchased company common stock for $1.0 billion, sold $0.8
billion of short-term investments and received proceeds from asset
dispositions of $0.1 billion.
Full-Year Review
Production excluding Libya for 2017 was 1,356 MBOED, compared with 1,567
MBOED for the same period in 2016. The full-year volume impact from
closed and planned dispositions was 191 MBOED in 2017 and 434 MBOED in
2016. Excluding the impact of dispositions, underlying production
increased 32 MBOED, or 3 percent. The increase was a result of major
projects, development programs and improved well performance, which more
than offset normal field decline. Production from Libya was 21 MBOED.

The company’s total realized price during 2017 was $39.19 per BOE,
compared with $28.35 per BOE in 2016. This reflected higher average
realized prices across all commodities.

In 2017, cash provided by operating activities was $7.1 billion,
exceeding $4.6 billion in capital expenditures and investments and
dividends of $1.3 billion. In addition, the company received cash
proceeds from asset dispositions of $13.9 billion, paid $7.9 billion to
reduce debt, repurchased company common stock for $3.0 billion,
purchased a net $1.8 billion in short-term investments, and contributed
$0.6 billion to the U.S. pension fund. At year-end 2017, ConocoPhillips
had $6.3 billion of cash and cash equivalents, and $1.9 billion of
short-term investments. In addition, the company held 208 million common
shares of Cenovus Energy.
Outlook
Full-year 2018 production is expected to be 1,195 to 1,235 MBOED. This
results in approximately 5 percent growth compared with full-year 2017
underlying production, which excludes disposition impacts of 191 MBOED.
First-quarter 2018 production is expected to be 1,180 to 1,220 MBOED.
Production guidance for 2018 excludes Libya.

Guidance for 2018 production and operating expenses and 2018 adjusted
operating cost is $5.7 billion.

The company’s 2018 guidance for capital expenditures is $5.5 billion;
corporate segment net expense is $1.2 billion or $1.0 billion adjusted
corporate segment net expense; depreciation, depletion and amortization
is $5.8 billion; and exploration dry hole and leasehold impairment
expense is $0.2 billion.

ConocoPhillips will host a conference call today at 12:00 p.m. EST to
discuss this announcement. To listen to the call, as well as view
related presentation materials and supplemental information, go to www.conocophillips.com/investor.

— # # # —
About ConocoPhillips
ConocoPhillips is the world’s largest independent E&P company based on
production and proved reserves. Headquartered in Houston, Texas,
ConocoPhillips had operations and activities in 17 countries, $73
billion of total assets, and approximately 11,400 employees as of Dec.
31, 2017. Production excluding Libya averaged 1,356 MBOED as of Dec. 31,
2017, and preliminary proved reserves were 5.0 billion BOE as of Dec.
31, 2017. For more information, go to www.conocophillips.com.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE
“SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995This news release contains forward-looking statements.
Forward-looking statements relate to future events and anticipated
results of operations, business strategies, and other aspects of our
operations or operating results. In many cases you can identify
forward-looking statements by terminology such as “anticipate,”
“estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,”
“potential,” “predict,” “should,” “will,” “expect,” “objective,”
“projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,”
“target” and other similar words. However, the absence of these words
does not mean that the statements are not forward-looking. Where, in any
forward-looking statement, the company expresses an expectation or
belief as to future results, such expectation or belief is expressed in
good faith and believed to have a reasonable basis. However, there can
be no assurance that such expectation or belief will result or be
achieved. The actual results of operations can and will be affected by a
variety of risks and other matters including, but not limited to changes
in commodity prices; changes in expected levels of oil and gas reserves
or production; operating hazards, drilling risks, unsuccessful
exploratory activities; difficulties in developing new products and
manufacturing processes; unexpected cost increases or technical
difficulties in constructing, maintaining, or modifying company
facilities; international monetary conditions and exchange rate
fluctuations; our ability to liquidate the common stock issued to us by
Cenovus Energy Inc at prices we deem acceptable, or at all; our ability
to complete the sale of our announced dispositions on the timeline
currently anticipated, if at all; the possibility that regulatory
approvals for our announced dispositions will not be received on a
timely basis, if at all, or that such approvals may require modification
to the terms of our announced dispositions or our remaining business;
business disruptions during or following our announced dispositions,
including the diversion of management time and attention; the ability to
deploy net proceeds from our announced dispositions in the manner and
timeframe we currently anticipate, if at all; potential liability for
remedial actions under existing or future environmental regulations;
potential liability resulting from pending or future litigation; limited
access to capital or significantly higher cost of capital related to
illiquidity or uncertainty in the domestic or international financial
markets; and general domestic and international economic and political
conditions; as well as changes in tax, environmental and other laws
applicable to our business. Other factors that could cause actual
results to differ materially from those described in the forward-looking
statements include other economic, business, competitive and/or
regulatory factors affecting our business generally as set forth in our
filings with the Securities and Exchange Commission. Unless legally
required, ConocoPhillips undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise.Cautionary Note to U.S. Investors – The SEC permits oil and
gas companies, in their filings with the SEC, to disclose only proved,
probable and possible reserves. We use the term “resource” in this news
release that the SEC’s guidelines prohibit us from including in filings
with the SEC. U.S. investors are urged to consider closely the oil and
gas disclosures in our Form 10-K and other reports and filings with the
SEC. Copies are available from the SEC and from the ConocoPhillips
website.Use of Non-GAAP Financial Information – To supplement the
presentation of the Company’s financial results prepared in accordance
with U.S. generally accepted accounting principles (GAAP), this news
release and the accompanying supplemental financial information contain
certain financial measures that are not prepared in accordance with
GAAP, including adjusted earnings (calculated on a consolidated and on a
segment-level basis), adjusted earnings per share, operating costs,
adjusted operating costs, replacement from net additions and organic
reserve replacement. Operating costs is defined by the Company as the
sum of production and operating expenses, selling, general and
administrative expenses, and exploration general and administrative
expenses, geological and geophysical and lease rental and other
expenses. Adjusted operating costs is defined as the Company’s operating
costs further adjusted to exclude expenses that are included as
adjustments to arrive at adjusted earnings to the extent those
adjustments impact production and operating expenses, selling, general
and administrative expenses, and exploration general and administrative
expenses, geological and geophysical and lease rental and other
expenses. Replacement from net additions is defined by the Company as a
ratio representing the net change in proved reserves excluding
production, sales and market factors divided by production. Organic
reserve replacement is defined by the Company as a ratio representing
the net change in proved reserves excluding dispositions and divided by
production.The Company believes that the non-GAAP measures adjusted earnings
(both on an aggregate and a per share basis), operating costs, and
adjusted operating costs are useful to investors to help facilitate
comparisons of the Company’s operating performance and controllable
costs associated with the Company’s core business operations across
periods on a consistent basis and with the performance and cost
structures of peer companies in a manner that, when viewed in
combination with the Company’s results prepared in accordance with GAAP,
provide a more complete understanding of the factors and trends
affecting the Company’s business and performance. The Company further
believes that the non-GAAP measure adjusted operating costs provides a
more indicative measure of the Company’s underlying, controllable costs
of operations by excluding other items that do not directly relate to
the Company’s core business operations. The Company believes that the
non-GAAP measure replacement from net additions is useful to investors
to help understand how net additions to the Company’s reserves from all
sources other than changes in market factors, such as price, and
dispositions compare with the Company’s production. The Company believes
replacement from net additions, when viewed in combination with the
Company’s results prepared in accordance with GAAP, provides a more
complete understanding of the factors and trends affecting the Company’s
business and performance. The Company believes that the non-GAAP measure
organic reserve replacement is useful to investors to help understand
how net additions to the Company’s reserves from all sources other than
changes in dispositions compare with the Company’s production. The
Company believes organic reserve replacement, when viewed in combination
with the Company’s results prepared in accordance with GAAP, provides a
more complete understanding of the factors and trends affecting the
Company’s business and performance. The Company’s Board of Directors and
management also use these non-GAAP measures to analyze the Company’s
operating performance across periods when overseeing and managing the
Company’s business.Each of the non-GAAP measures included in this news release and the
accompanying supplemental financial information has limitations as an
analytical tool and should not be considered in isolation or as a
substitute for an analysis of the Company’s results calculated in
accordance with GAAP. In addition, because not all companies use
identical calculations, the Company’s presentation of non-GAAP measures
in this news release and the accompanying supplemental financial
information may not be comparable to similarly titled measures disclosed
by other companies, including companies in our industry. The Company may
also change the calculation of any of the non-GAAP measures included in
this news release and the accompanying supplemental financial
information from time to time in light of its then existing operations
to include other adjustments that may impact its operations.Reconciliations of each non-GAAP measure presented in this news
release to the most directly comparable financial measure calculated in
accordance with GAAP are included below.The release also contains the terms underlying production, production
per debt-adjusted share and free cash flow. Underlying production
excludes Libya and closed and planned dispositions. Production per
debt-adjusted share is calculated on an underlying production basis
using ending period debt divided by ending share price plus ending
shares outstanding. Free cash flow is cash provided by operating
activities excluding operating working capital in excess of capital
expenditures and investments. The Company believes that free cash flow
is useful to investors as it provides measures to compare cash provided
by operating activities excluding operating working capital after
deduction of capital expenditures and investments across periods on a
consistent basis. The Company believes that underlying production is
useful to investors to compare production excluding Libya and the full
impact of closed and planned dispositions on a consistent go-forward
basis with peer companies. The Company believes that production per
debt-adjusted share is useful to investors as it provides a consistent
view of production on a total equity basis by converting debt to equity
and allows for comparisons across peer companies.References in the release to earnings refer to net income/(loss)
attributable to ConocoPhillips.
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
ConocoPhillipsTable 1: Reconciliation of earnings to adjusted earnings
$ Millions, Except as Indicated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4Q17

4Q16

2017 FY

2016 FY

Pre-tax
 

 
Incometax
 

 
After-tax
 

 
Per share ofcommonstock(dollars)

Pre-tax
 

 
Incometax
 

 
After-tax
 

 
Per share ofcommonstock(dollars)

Pre-tax
 

 
Incometax
 

 
After-tax
 

 
Per share ofcommonstock(dollars)

Pre-tax
 

 
Incometax
 

 
After-tax
 

 
Per share ofcommonstock(dollars)
Earnings

$1,579

1.32

(35)

(0.03)

(855)

(0.70)

(3,615)

(2.91)
Adjustments:

Impairments

89

(26

)

63

0.05

(122

)

70

(52

)

(0.04

)

6,600

(1,507

)

5,093

4.17

566

(185

)

381

0.31

Pension settlement expense

14

(4

)

10

0.01

52

(15

)

37

0.03

130

(38

)

92

0.08

203

(61

)

142

0.11

Restructuring

(1

)

(1

)

0.00

13

(5

)

8

0.01

43

(15

)

28

0.02

158

(54

)

104

0.08

Rig termination

43

(15

)

28

0.02

134

(47

)

87

0.07

Net gain on asset sales

(146

)

8

(138

)

(0.11

)

(2,086

)

(441

)

(2,527

)

(2.07

)

(239

)

33

(206

)

(0.16

)

Pending claims and settlements

(337

)

(337

)

(0.28

)

(330

)

(90

)

(420

)

(0.34

)

(13

)

5

(8

)

(0.01

)

Premiums on early debt retirement

17

(4

)

13

0.01

302

(64

)

238

0.19

Nova Scotia deepwater exploration exit

(114

)

(114

)

(0.09

)

APLNG tax functional currency change

174

174

0.14

Malaysia deferred tax recognition

(47

)

(47

)

(0.04

)

(47

)

(47

)

(0.04

)

Minnesota iron ore reversionary interest

(92

)

1

(91

)

(0.08

)

(92

)

1

(91

)

(0.07

)

International tax law changes

(161

)

(161

)

(0.13

)

U.S. Tax Reform

(852

)

(852

)

(0.71

)

(852

)

(852

)

(0.70

)

Deferred tax adjustment

 

 

 

 

65

 

 

 

 

65

 

 

 

0.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28

 

 

 

28

 

 

 

0.02

 

 

 

 

(68

)

 

 

(68

)

 

 

(0.05

)
Adjusted earnings / (loss)
 

 

 

 

 

 

 
$540
 

 

 
0.45
 

 

 

 

 

 

 
(318)
 

 
(0.26)

 

 

 

 

 

 
739
 

 

 
0.60
 

 

 

 

 

 

 
(3,308)
 

 
(2.66)

 

The income tax effects of the special items are primarily calculated
based on the statutory rate of the jurisdiction in which the
discrete item resides.

 

 

 

 

 

 

 
ConocoPhillipsTable 2: Reconciliation of production and operating expenses to
adjusted operating costs
$ Millions, Except as Indicated

 

 

 

 

 

 

 

FY 2017
 

 
FY 2018Guidance

 
Production and operating expenses
5,173

5,050
Adjustments:

Selling, general and administrative (G&A) expenses

561

350

Exploration G&A, G&G and lease rentals

 

372

 

 

 

300

Operating costs

6,106

5,700

 

Adjustments to exclude special items:

Less restructuring

(43

)

Less pension settlement expense

(130

)

Less rig termination

 

(43

)

 

 


Adjusted operating costs
 
5,890
 

 

 
~5,700
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ConocoPhillipsTable 3: Reconciliation of adjusted corporate segment net expense
$ Millions, Except as Indicated

 

 

 

 

FY 2017
 

 
FY 2018Guidance

 
Corporate and Other earnings
(2,136)

(1,150)

 

Adjustments to exclude special items:

Less pension settlement expense

130

60

Less premiums on early debt retirement

302

225

Less pending claims and settlements

(10

)

Less licensing revenue

(100

)

Less tax on special items

 

774

 

 

 

(35

)
Adjusted corporate segment net expense
 
(940)
 

 
~(1,000)
 

 

 

 

 

 

 

 

 

 

 

 

 

ConocoPhillipsTable 4: Reconciliation of preliminary year-end reserves to
replacement from additions
MMBOE, Except as Indicated

 

End of 2016

6,424

End of 2017

 

 

5,038

 

Change in reserves

(1,386

)

 

Production1

 

 

518

 

Change in reserves excluding production1

(868

)

Total reserve replacement ratio

-168

%

 

Sales

 

 

(1,904

)

Changes in reserves excluding production1 and sales

1,036

Organic reserve replacement ratio

200

%

 

Market factors

 

 

431

 

Changes in reserves excluding production1, sales and
market factors

605

Replacement from additions

117

%

 
1 Production includes fuel gas and Libya
 

 

 

 

 

 

 

 

 

 

 

 

 

ConocoPhillips

Table 5: Reconciliation of dry hole and leasehold impairment

$ Millions, Except as Indicated

 

 

 

 

FY 2017
 

 
FY 2018Guidance

 

Dry holes

430

150

Leasehold impairment

 

136

 

 

 

50

Dry hole and leasehold impairment

566

200

 

Adjustment to exclude special items:

Less impairments

 

(89

)

 

 


Adjusted dry hole and leasehold impairment
 
477
 

 

 
~200
 

 

 

 

 

 

View source version on businesswire.com: http://www.businesswire.com/news/home/20180201005275/en/


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