ConocoPhillips (NYSE: COP) today reported third-quarter 2023 earnings of $2.8 billion, or $2.32 per share, compared with third-quarter 2022 earnings of $4.5 billion, or $3.55 per share.
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Excluding special items, third-quarter 2023 adjusted earnings were $2.6 billion, or $2.16 per share, compared with third-quarter 2022 adjusted earnings of $4.6 billion, or $3.60 per share. Special items for the current quarter were primarily comprised of a benefit related to the reversal of a tax reserve and a gain associated with the divestiture of a Lower 48 equity investment.
“ConocoPhillips continues to execute well on our returns-focused value proposition,” said Ryan Lance, chairman and chief executive officer. “For the third consecutive quarter, we achieved record production and, with the purchase of the remaining 50% interest in Surmont, raised our full-year guidance. In September, we further progressed our global LNG strategy by securing regasification capacity in the Netherlands. In October, several international projects reached first production, positioning us for 2024 and beyond. And today we announced a 14% increase in our quarterly ordinary dividend, consistent with our long-term objective to deliver top quartile growth relative to the S&P 500.”
Third-Quarter Highlights and Recent Announcements
- Increased the quarterly ordinary dividend by 14% to $0.58 per share.
- Completed the purchase of the remaining 50% interest in Surmont in October for approximately $2.7 billion as well as future contingent payments of up to $0.4 billion CAD ($0.3 billion).
- Achieved first steam at Surmont Pad 267 and startup at the second phase of Montney’s central processing facility (CPF2) in Canada.
- Reached first production ahead of schedule in October at Tommeliten A and partner-operated Breidablikk and Kobra East & Gekko in Norway and partner-operated Bohai Phase 4B in China.
- Further diversified LNG portfolio by signing a 15-year throughput agreement for approximately 1.5 million tonnes per annum of regasification at the Gate LNG Terminal in the Netherlands.
- Delivered company and Lower 48 production of 1,806 thousand barrels of oil equivalent per day (MBOED) and 1,083 MBOED, respectively.
- Generated cash provided by operating activities of $5.4 billion and cash from operations (CFO) of $5.5 billion.
- Distributed $2.6 billion to shareholders through a three-tier framework, including $1.3 billion through the ordinary dividend and variable return of cash (VROC) and $1.3 billion through share repurchases.
- Ended the quarter with cash and short-term investments of $9.7 billion, which included proceeds from long-term debt issuances of $2.7 billion to fund the Surmont acquisition.
Quarterly Dividend and Variable Return of Cash
ConocoPhillips announced a quarterly ordinary dividend of $0.58 per share, payable Dec. 1, 2023, to stockholders of record at the close of business on Nov. 14, 2023. ConocoPhillips paid its fourth quarter VROC of $0.60 per share on Oct. 16, 2023, to stockholders of record at the close of business on Sept. 28, 2023.
Beginning in the first quarter of 2024, ConocoPhillips plans to pay its quarterly ordinary dividend and VROC concurrently and will announce such payments in the same quarter they will be paid.
Third-Quarter Review
Production for the third quarter of 2023 was 1,806 MBOED, an increase of 52 MBOED from the same period a year ago. After adjusting for impacts from closed acquisitions and dispositions, third-quarter 2023 production increased 49 MBOED or 3% 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 production of 1,083 MBOED, including 722 MBOED from the Permian, 232 MBOED from the Eagle Ford and 111 MBOED from the Bakken. In Canada, Surmont Pad 267 achieved first steam and Montney’s CPF2 came online, both in late September. Turnarounds were successfully completed in Norway and Alaska.
Earnings and adjusted earnings decreased from the third quarter of 2022 primarily due to lower prices. The company’s total average realized price was $60.05 per BOE, 28% lower than the $83.07 per BOE realized in the third quarter of 2022.
For the quarter, cash provided by operating activities was $5.4 billion. Excluding working capital, ConocoPhillips generated CFO of $5.5 billion and received proceeds of $0.2 billion primarily from the sale of a Lower 48 equity investment. In addition, the company funded $2.5 billion of capital expenditures and investments, paid $1.3 billion in ordinary dividends and VROC and repurchased $1.3 billion of shares.
Nine-Month Review
ConocoPhillips’ nine-month 2023 earnings were $8.0 billion, or $6.54 per share, compared with nine-month 2022 earnings of $15.4 billion, or $11.93 per share. Nine-month 2023 adjusted earnings were $7.8 billion, or $6.38 per share, compared with nine-month 2022 adjusted earnings of $14.0 billion, or $10.79 per share.
Production for the first nine months of 2023 was 1,801 MBOED, an increase of 70 MBOED from the same period a year ago. After adjusting for impacts from closed acquisitions and dispositions, production increased 72 MBOED or 4% from the same period a year ago. Organic growth from Lower 48 and other development programs more than offset decline and downtime.
Earnings and adjusted earnings for the first nine months of 2023 decreased from the same period a year ago primarily due to lower prices. The company’s total realized price during this period was $58.45 per BOE, 29% lower than the $82.82 per BOE realized in the first nine months of 2022.
In the first nine months of 2023, cash provided by operating activities was $14.7 billion. Excluding a $1.2 billion change in working capital, ConocoPhillips generated CFO of $15.9 billion and received disposition proceeds of $0.6 billion. The company funded $8.4 billion of capital expenditures and investments, repurchased $4.3 billion of shares and paid $4.2 billion in ordinary dividends and VROC.
Outlook
All guidance has been updated to reflect the acquisition of an additional 50% interest in Surmont but excludes any impacts from the previously announced APLNG transaction.
Fourth-quarter 2023 production is expected to be 1.86 to 1.90 million barrels of oil equivalent per day (MMBOED). Full-year production is expected to be approximately 1.82 MMBOED, as compared to prior guidance of 1.80 to 1.81 MMBOED, due to the Surmont acquisition.
Full-year guidance for adjusted operating cost was updated to $8.6 billion versus the prior guidance of $8.3 billion, reflecting the increased working interest at Surmont, increased Lower 48 non-operated activity and inflationary impacts primarily in the Lower 48. Full-year guidance for depreciation, depletion and amortization was updated to $8.3 billion versus prior guidance of $8.2 billion primarily due to the Surmont acquisition.
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