ConocoPhillips (NYSE: COP) today reported fourth-quarter 2023
earnings of $3.0 billion, or $2.52 per share, compared with
fourth-quarter 2022 earnings of $3.2 billion, or $2.61 per share.
Excluding special items, fourth-quarter 2023 adjusted earnings were
$2.9 billion, or $2.40 per share, compared with fourth-quarter 2022
adjusted earnings of $3.4 billion, or $2.71 per share. Special
items for the current quarter were comprised of a benefit related
to the reversal of a tax reserve, partially offset by a loss on
foreign exchange contracts.
Full-year 2023 earnings were $11.0 billion, or $9.06 per share,
compared with full-year 2022 earnings of $18.7 billion, or $14.57
per share. Excluding special items, full-year 2023 adjusted
earnings were $10.6 billion or $8.77 per share, compared with
full-year 2022 adjusted earnings of $17.3 billion, or $13.52 per
share.
“During 2023, ConocoPhillips continued to demonstrate strong
financial and operational performance, executing on our
returns-focused value proposition,” said Ryan Lance, chairman and
chief executive officer. “We achieved record production, reached
several key milestones across our global operations and returned
$11 billion to shareholders. We also continued to enhance our
portfolio by opportunistically acquiring the remaining 50% of
Surmont, reaching a final investment decision on the Willow project
in Alaska and further progressing our global LNG strategy. We
remain committed to our Triple Mandate of responsibly and reliably
meeting energy transition pathway demand, delivering competitive
returns on and of capital, and achieving our net-zero operational
emissions ambition. Our deep, durable, and diversified portfolio
continues to generate robust cash flow, enabling us to start the
year with a $9 billion return of capital target.”
Full-year summary and recent
announcements
- Generated cash provided by operating activities of $20.0
billion and cash from operations (CFO) of $21.3 billion.
- Distributed $11.0 billion to shareholders through a three-tier
framework, including $5.6 billion through the ordinary dividend and
variable return of cash (VROC) and $5.4 billion through share
repurchases.
- Achieved 17% return on capital employed; 19% cash-adjusted
return on capital employed.
- Ended the year with cash and short-term investments of $6.9
billion.
- Delivered record full-year total company and Lower 48
production of 1,826 thousand barrels of oil equivalent per day
(MBOED) and 1,067 MBOED, respectively.
- Acquired the remaining 50% interest in Surmont for
approximately $2.7 billion as well as future contingent payments of
up to $0.4 billion CAD ($0.3 billion).
- Made final investment decision (FID) on the Willow
project.
- Progressed global LNG strategy through expansion in Qatar, FID
at Port Arthur LNG, regasification agreements in the Netherlands
and offtake agreements in Mexico.
- Reached first production at several subsea tiebacks in Norway,
Surmont Pad 267 in Canada and Bohai Phase 4B in China.
- Commenced startup at the second phase of Montney’s central
processing facility in Canada.
- Awarded Gold Standard Pathway designation by Oil and Gas
Methane Partnership 2.0.
- Accelerated the company’s GHG emissions-intensity reduction
target through 2030 from 40-50% to 50-60%, using a 2016
baseline.
Return of capital update
ConocoPhillips announced its 2024 planned return of capital to
shareholders of $9 billion. The company declared an ordinary
dividend of $0.58 per share and a VROC of $0.20 per share, both
payable March 1, 2024, to stockholders of record at the close of
business on Feb. 19, 2024.
Fourth-quarter review
Production for the fourth quarter of 2023 was 1,902 MBOED, an
increase of 144 MBOED from the same period a year ago. After
adjusting for impacts from closed acquisitions and dispositions,
fourth-quarter 2023 production increased 75 MBOED or 4% from the
same period a year ago.
Lower 48 delivered production of 1,086 MBOED, including 750
MBOED from the Permian, 211 MBOED from the Eagle Ford and 110 MBOED
from the Bakken. First production was achieved at several subsea
tiebacks in Norway, Surmont Pad 267 in Canada and Bohai Phase 4B in
China.
Earnings decreased from the fourth quarter of 2022 primarily due
to lower prices, partially offset by increased volumes and benefits
from special items including the reversal of a tax reserve.
Adjusted earnings decreased due to lower prices, partially offset
by higher volumes. The company’s total average realized price was
$58.21 per BOE, 18% lower than the $71.05 per BOE realized in the
fourth quarter of 2022.
For the quarter, cash provided by operating activities was $5.3
billion. Excluding a $0.2 billion change in working capital,
ConocoPhillips generated CFO of $5.5 billion. The company completed
the acquisition of the remaining 50% interest in Surmont for $2.7
billion. In addition, the company funded $2.9 billion of capital
expenditures and investments, paid $1.4 billion in ordinary
dividends and VROC, and repurchased $1.1 billion of shares.
Full-year review
Production for 2023 was 1,826 MBOED, an increase of 88 MBOED
from the same period a year ago. After adjusting for impacts from
closed acquisitions and dispositions, production increased 73 MBOED
or 4% from the same period a year ago.
The company’s total average realized price during this period
was $58.39 per BOE, 27% lower than the $79.82 per BOE realized in
2022.
In 2023, cash provided by operating activities was $20.0
billion. Excluding a $1.4 billion change in working capital,
ConocoPhillips generated CFO of over $21.3 billion and received
disposition proceeds of $0.6 billion. The company completed the
acquisition of the remaining 50% interest in Surmont for $2.7
billion using long- term debt issuances, funded $11.2 billion in
capital expenditures and investments, paid $5.6 billion in ordinary
dividends and VROC, and repurchased shares of $5.4 billion.
Reserves update
Preliminary 2023 year-end proved reserves are 6.8 billion
barrels of oil equivalent (BBOE), with a total reserve replacement
ratio of 123%.
Final information related to the company’s 2023 oil and gas
reserves will be provided in ConocoPhillips’ Annual Report on the
Form 10-K, to be filed with the SEC in February.
Outlook
The company’s 2024 total capital expenditure guidance is $11.0
to $11.5 billion.
The company’s 2024 production guidance is 1.91 to 1.95 million
barrels of oil equivalent per day (MMBOED). First-quarter 2024
production is expected to be 1.88 to 1.92 MMBOED.
Guidance for 2024 includes adjusted operating cost of $8.9 to
$9.1 billion, adjusted corporate segment net loss of $1.0 to $1.1
billion and depreciation, depletion and amortization of $9.4 to
$9.6 billion. Guidance excludes special items.
ConocoPhillips will host a conference call today at noon Eastern
time to discuss this announcement. To listen to the call and view
related presentation materials and supplemental information, go to
www.conocophillips.com/investor. A recording and transcript of the
call will be posted afterward.
--- # # # ---
About ConocoPhillips
ConocoPhillips is one of the world’s leading exploration and
production companies based on both production and reserves, with a
globally diversified asset portfolio. Headquartered in Houston,
Texas, ConocoPhillips had operations and activities in 13
countries, $96 billion of total assets, and approximately 9,900
employees at Dec. 31, 2023. Production averaged 1,826 MBOED for the
twelve months ended Dec. 31, 2023, and preliminary proved reserves
were 6.8 BBOE as of Dec. 31, 2023.
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
1995
This news release contains forward-looking statements as defined
under the federal securities laws. Forward-looking statements
relate to future events, plans and anticipated results of
operations, business strategies, and other aspects of our
operations or operating results. Words and phrases such as
“ambition”, “anticipate," “estimate,” “believe,” “budget,”
“continue,” “could,” “intend,” “may,” “plan,” “potential,”
“predict," “seek,” “should,” “will,” “would,” “expect,”
“objective,” “projection,” “forecast,” “goal,” “guidance,”
“outlook,” “effort,” “target” and other similar words can be used
to identify forward-looking statements. 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 be reasonable at the time such forward-looking statement is
made. However, these statements are not guarantees of future
performance and involve certain risks, uncertainties and other
factors beyond our control. Therefore, actual outcomes and results
may differ materially from what is expressed or forecast in the
forward-looking statements. Factors that could cause actual results
or events to differ materially from what is presented include
changes in commodity prices, including a prolonged decline in these
prices relative to historical or future expected levels; global and
regional changes in the demand, supply, prices, differentials or
other market conditions affecting oil and gas, including changes
resulting from any ongoing military conflict, including the
conflicts in Ukraine and the Middle East, and the global response
to such conflict, security threats on facilities and
infrastructure, or from a public health crisis or from the
imposition or lifting of crude oil production quotas or other
actions that might be imposed by OPEC and other producing countries
and the resulting company or third-party actions in response to
such changes; insufficient liquidity or other factors, such as
those listed herein, that could impact our ability to repurchase
shares and declare and pay dividends such that we suspend our share
repurchase program and reduce, suspend, or totally eliminate
dividend payments in the future, whether variable or fixed; changes
in expected levels of oil and gas reserves or production; potential
failures or delays in achieving expected reserve or production
levels from existing and future oil and gas developments, including
due to operating hazards, drilling risks or unsuccessful
exploratory activities; unexpected cost increases, inflationary
pressures or technical difficulties in constructing, maintaining or
modifying company facilities; legislative and regulatory
initiatives addressing global climate change or other environmental
concerns; public health crises, including pandemics (such as
COVID-19) and epidemics and any impacts or related company or
government policies or actions; investment in and development of
competing or alternative energy sources; potential failures or
delays in delivering on our current or future low-carbon strategy,
including our inability to develop new technologies; disruptions or
interruptions impacting the transportation for our oil and gas
production; international monetary conditions and exchange rate
fluctuations; changes in international trade relationships or
governmental policies, including the imposition of price caps, or
the imposition of trade restrictions or tariffs on any materials or
products (such as aluminum and steel) used in the operation of our
business, including any sanctions imposed as a result of any
ongoing military conflict, including the conflicts in Ukraine and
the Middle East; our ability to collect payments when due,
including our ability to collect payments from the government of
Venezuela or PDVSA; our ability to complete any announced or any
future dispositions or acquisitions on time, if at all; the
possibility that regulatory approvals for any announced or any
future dispositions or acquisitions will not be received on a
timely basis, if at all, or that such approvals may require
modification to the terms of the transactions or our remaining
business; business disruptions following any announced or future
dispositions or acquisitions, including the diversion of management
time and attention; the ability to deploy net proceeds from our
announced or any future dispositions in the manner and timeframe we
anticipate, if at all; potential liability for remedial actions
under existing or future environmental regulations; potential
liability resulting from pending or future litigation, including
litigation related directly or indirectly to our transaction with
Concho Resources Inc.; the impact of competition and consolidation
in the oil and gas industry; limited access to capital or insurance
or significantly higher cost of capital or insurance related to
illiquidity or uncertainty in the domestic or international
financial markets or investor sentiment; general domestic and
international economic and political conditions or developments,
including as a result of any ongoing military conflict, including
the conflicts in Ukraine and the Middle East; changes in fiscal
regime or tax, environmental and other laws applicable to our
business; and disruptions resulting from accidents, extraordinary
weather events, civil unrest, political events, war, terrorism,
cybersecurity threats or information technology failures,
constraints or disruptions; and 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
expressly disclaims any obligation to update 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 may 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 (EPS), cash from operations (CFO),
adjusted operating costs, adjusted corporate segment net loss,
return on capital employed (ROCE) and cash adjusted ROCE.
The company believes that the non-GAAP measure adjusted earnings
(both on an aggregate and a per-share basis), adjusted operating
costs and adjusted corporate segment net loss are useful to
investors to help facilitate comparisons of the company’s operating
performance associated with the company’s core business operations
across periods on a consistent basis and with the performance and
cost structures of peer companies by excluding items that do not
directly relate to the company’s core business operations. Adjusted
earnings is defined as earnings removing the impact of special
items. Adjusted EPS is a measure of the company’s diluted net
earnings per share excluding special items. Adjusted operating
costs is defined as the sum of production and operating expenses
and selling, general and administrative expenses, adjusted to
exclude expenses that do not directly relate to the company’s core
business operations and are included as adjustments to arrive at
adjusted earnings to the extent those adjustments impact operating
costs. Beginning in 2024, the company will utilize a definition of
adjusted operating costs that no longer includes exploration
general and administrative expenses, geological and geophysical and
lease rental and other expenses. The company believes this revised
definition will serve as a more useful tool for comparison against
the performance and cost structures of peer companies and will be
more easily understood by the investment community. Adjusted
corporate segment net loss is defined as corporate and other
segment earnings adjusted for special items. The company further
believes that the non-GAAP measure CFO is useful to investors to
help understand changes in cash provided by operating activities
excluding the timing effects associated with operating working
capital changes across periods on a consistent basis and with the
performance of peer companies. ROCE is a measure of the
profitability of the company’s capital employed in its business
operations compared with that of its peers. The company calculates
ROCE as a ratio, the numerator of which is net income, and the
denominator of which is average total equity plus average total
debt. The net income is adjusted for after- tax interest expense,
for the purposes of measuring efficiency of debt capital used in
operations; net income is also adjusted for non-operational or
special items impacts to allow for comparability in the long-term
view across periods. The company believes ROCE is a good indicator
of long-term company and management performance as it relates to
capital efficiency, both absolute and relative to the company’s
primary peer group. The basis of cash adjusted ROCE utilizes ROCE
as defined above and further adjusts for cash and cash equivalents,
restricted cash, and short-term investments as well as the
after-tax interest income generated by these capital sources, as
the company may retain these sources for other strategic purposes
and not fully employ such capital for use in operations. As such,
cash adjusted ROCE is useful for comparability across periods that
may be cyclically impacted by significant cash-related
transactions. The company believes that the above-mentioned
non-GAAP measures, 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 in the release.
Other Terms – This news release also contains the term pro forma
underlying production. Pro forma underlying production reflects the
impact of closed acquisitions and closed dispositions as of
December 31, 2023. The impact of closed acquisitions and
dispositions assumes a closing date of January 1, 2022. The company
believes that underlying production is useful to investors to
compare production reflecting the impact of closed acquisitions and
dispositions on a consistent go-forward basis across periods and
with peer companies. Return of capital is defined as the total of
the ordinary dividend, share repurchases and variable return of
cash (VROC).
Reserve replacement is defined by the company as a ratio
representing the change in proved reserves, net of production,
divided by current year production. The company believes that total
reserve replacement is useful to investors to help understand how
changes in proved reserves, net of production compare with the
company’s current year production.
References in the release to earnings refer to net income.
ConocoPhillips Table 1: Reconciliation of earnings to
adjusted earnings $ Millions, Except as Indicated
4Q23
4Q22
2023 FY
2022 FY
Pre-tax IncomeTax After-tax Per shareof
commonstock(dollars) Pre-tax IncomeTax
After-tax Per shareof commonstock(dollars)
Pre-tax IncomeTax After-tax Per shareof
commonstock(dollars) Pre-tax IncomeTax
After-tax Per shareof commonstock(dollars)
Earnings
$
3,007
$
2.52
$
3,249
$
2.61
$
10,957
$
9.06
$
18,680
$
14.57
Adjustments: (Gain) loss on asset sales¹
—
—
—
—
(21
)
5
(16
)
(0.01
)
(94
)
(6
)
(100
)
(0.08
)
(968
)
200
(768
)
(0.59
)
Tax adjustments
—
(203
)
(203
)
(0.17
)
—
(23
)
(23
)
(0.02
)
—
(347
)
(347
)
(0.30
)
—
(531
)
(531
)
(0.42
)
(Gain) loss on CVE shares
—
—
—
—
—
—
—
—
—
—
—
—
(251
)
—
(251
)
(0.19
)
Gain on debt extinguishment and exchange fees
—
—
—
—
—
—
—
—
—
—
—
—
(44
)
52
8
—
Transaction and restructuring expenses
—
—
—
—
—
—
—
—
—
—
—
—
28
(8
)
20
0.01
(Gain) loss on FX derivative
73
(15
)
58
0.05
—
—
—
—
132
(27
)
105
0.09
10
(2
)
8
—
Pending claims and settlements
—
—
—
—
87
(21
)
66
0.05
—
—
—
—
67
8
75
0.06
Exploration Expenses
—
—
—
—
129
(30
)
99
0.08
—
—
—
—
129
(30
)
99
0.08
Adjusted earnings / (loss)
$
2,862
$
2.40
$
3,375
$
2.71
$
10,615
$
8.77
$
17,340
$
13.52
1Includes 3Q23 divestiture of Lower 48 equity investment. 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.
ConocoPhillips Table 2:
Reconciliation of net cash provided by operating activities to cash
from operations $ Millions, Except as Indicated
4Q23
2023 FY
Net Cash Provided by Operating Activities
5,263
19,965
Adjustments: Net operating working capital changes
(231
)
(1,382
)
Cash from operations
5,494
21,347
ConocoPhillips Table 3: Return on capital employed (ROCE)
and cash adjusted ROCE $ Millions, Except as Indicated
ROCE CASH ADJUSTED ROCE Numerator 2023
FY 2022 FY 2023 FY 2022 FY Net Income
(loss)
10,957
18,680
10,957
18,680
Adjustment to exclude special items
(342
)
(1,340
)
(342
)
(1,340
)
After-tax interest expense
616
641
616
641
After-tax interest income
—
—
(324
)
(152
)
ROCE Earnings
11,231
17,981
10,907
17,829
Denominator Average total equity¹
47,925
48,801
47,925
48,801
Average total debt²
17,470
17,742
17,470
17,742
Average total cash³
—
—
(8,444
)
(8,589
)
Average capital employed
65,395
66,543
56,951
57,953
ROCE (percent)
17
%
27
%
19
%
31
%
¹Average total equity is the average of beginning total
equity and ending total equity by quarter. ²Average total debt is
the average of beginning long-term debt and short-term debt and
ending long-term debt and short-term debt by quarter. ³Average
total cash is the average of beginning cash, cash equivalents,
restricted cash and short-term investments and ending cash, cash
equivalents, restricted cash and short-term investments by quarter.
ConocoPhillips Table 4: Reconciliation of reported
production to pro forma underlying production MBOED, except as
indicated
4Q23
4Q22
2023 FY 2022 FY Total Reported ConocoPhillips
Production
1,902
1,758
1,826
1,738
Closed Dispositions¹
—
(4
)
(1
)
(21
)
Closed Acquisitions²
2
75
50
80
Total Pro Forma Underlying Production
1,904
1,829
1,875
1,797
Estimated Uplift from 2 to 3 stream conversion³
—
—
—
5
¹Includes production related to the 2022 Indonesia disposition and
various Lower 48 dispositions. ²Includes production related to the
acquisition of an additional 50% interest in Surmont, an additional
10% shareholding interest in APLNG, an additional 4% shareholding
interest in Libya and a Lower 48 bolt-on acquisition. ³Estimated
production impacts from the conversion of Concho two-stream
contracted volumes to a three-stream (crude oil, natural gas and
natural gas liquids) reporting basis, which are not included in
Total Production and Total Underlying Production.
ConocoPhillips Table 5: Reconciliation of production and
operating expenses to adjusted operating costs $ Millions,
Except as Indicated
2023 FY 2024 FYGuidance
Production and Operating Expenses
7,693
8,300 - 8,400
Selling, general and administrative (G&A) expenses
705
600 - 700
Operating Costs
8,398
8,900 - 9,100
Adjustments to exclude special items: None
—
—
Adjusted operating costs
8,398
8,900 - 9,100
*Beginning with 2024 guidance, this measure no longer
includes Exploration G&A, G&G, and lease rentals in the
calculation of Operating Costs. Total exploration G&A, G&G,
and lease rentals for full-year 2023 were $0.2B. Additional details
can be found in the non-GAAP reconciliations posted on the
company's website.
ConocoPhillips Table 6: Reconciliation
of adjusted corporate segment net loss $ Millions, Except as
Indicated
2023 FY 2024 FYGuidance Corporate
and Other Earnings
(821)
(1,000) - (1,100)
Adjustments to exclude special items: (Gain) loss on FX derivative
132
—
Income tax on special items
(27)
—
Adjusted corporate segment net loss
(716)
(1,000) - (1,100)
ConocoPhillips Table 7: Calculation of reserve
replacement ratio MMBOE, except as indicated End of 2022
6,599
End of 2023
6,758
Change in reserves
159
Production¹
678
Change in reserves excluding production¹
837
2023 preliminary reserve replacement ratio
123
%
¹Production includes fuel gas.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240206009940/en/
Dennis Nuss (media) 281-293-1149
dennis.nuss@conocophillips.com
Investor Relations 281-293-5000
investor.relations@conocophillips.com
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