ConocoPhillips slashes capex as more red ink spills

Ekofisk complex

U.S. oil major ConocoPhillips decided to cut its 2017 capital spending after posting a deeper loss for this year’s second quarter compared to the one recorded a year ago. 

The company on Thursday reported a second-quarter 2017 loss of $3.4 billion, compared with a second-quarter 2016 loss of $1.1 billion.

Excluding special items, second-quarter 2017 adjusted earnings were $0.2 billion, compared with a second-quarter 2016 adjusted loss of $1 billion.

Special items for the current quarter were primarily driven by a non-cash impairment of APLNG, non-cash impairments from the previously announced San Juan and Barnett dispositions, and premiums on early debt retirement, partially offset by gains from the previously announced Canada disposition.

Full-year guidance for capital expenditures has been lowered to $4.8 billion.

The company achieved second-quarter production excluding Libya of 1,425 mboed; a decrease of 121 mboed compared with the same period a year ago.

ConocoPhillips reduced its year-over-year operating expenses by 8 percent and adjusted operating costs by 13 percent.

Ryan Lance, chairman and chief executive officer, said: “We are on track to far surpass our initial debt reduction and shareholder payout targets, while accelerating strong underlying financial and operational performance. We remain focused on lowering our breakeven price for the business, generating free cash flow and delivering strong per-share growth with improving returns through the price cycles.”

The company’s third-quarter 2017 production is expected to be 1,170 to 1,210 mboed, which excludes Libya and reflects expected impacts from the San Juan, Barnett and Panhandle dispositions. The company’s full-year production on the same basis is expected to be 1,340 to 1,370 mboed.

Production and operating expenses are expected to be $5 billion, which results in adjusted operating costs of $5.7 billion, reflecting the impact of asset sales. Dry hole expense guidance is $400 million, which results in adjusted dry hole and leasehold impairment expense of $450 million.

The company expects to reduce debt to less than $20 billion by year-end 2017, and expects full-year share repurchases of $3 billion with accelerating production growth on a per-share basis.

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