ConocoPhillips reports loss, cuts capex

ConocoPhillips, a Houston-based, independent oil and gas company, Thursday reported a second-quarter 2015 net loss of $179 million, compared with second-quarter 2014 earnings of $2.1 billion. 

Excluding special items, second-quarter 2015 adjusted earnings were $81 million, or $0.07 per share, compared with second-quarter 2014 adjusted earnings of $2.0 billion, or $1.61 per share. Special items for the current quarter primarily related to a deferred tax charge from a change in Canada’s tax law and non-cash impairments.

Production from continuing operations, excluding Libya, for the second quarter of 2015 was 1,595 MBOED, an increase of 39 MBOED compared with the same period a year ago. The net increase reflects 69 MBOED, or 4 percent growth, after adjusting for 30 MBOED from dispositions and downtime. Growth was primarily due to new production from major projects and development programs, partially offset by normal field decline and downtime.

Adjusted earnings were lower compared with second-quarter 2014 primarily due to lower realized prices, partially offset by higher licensing revenues. The company’s total realized price was $39.09 per barrel of oil equivalent (BOE), compared with $70.17 per BOE in the second quarter of 2014, reflecting lower average realized prices across all commodities.

Operating costs for the quarter were $2.16 billion compared with $2.43 billion in the second quarter of 2014. Adjusted for pension settlement and restructuring costs of $69 million pre-tax, operating costs were improved 14 percent year over year.

“We are lowering our operating cost and capital expenditures guidance, while maintaining our operational targets.”

For the quarter, cash provided by continuing operating activities was $2.0 billion. Excluding a $0.3 billion change in operating working capital, ConocoPhillips generated $2.3 billion in cash from operations. In addition, the company funded $2.4 billion in capital expenditures and investments, paid dividends of $0.9 billion, and increased debt by $2.5 billion.

Ryan Lance, ConocoPhillips chairman and chief executive officer, said: “We continue to deliver on our operational milestones while positioning the company for a period of lower, more volatile prices.”

“We exceeded our production target, made progress on our major project startups and safely executed our planned turnarounds in the quarter. We are lowering our operating cost and capital expenditures guidance, while maintaining our operational targets. To further increase our capital flexibility, we are continuing to shift the portfolio to investments with shorter cycle times, including reductions to deepwater spending.

“In July, we announced an increase to our quarterly dividend as part of our ongoing commitment to return value to shareholders. This increase was more modest than in prior years, but we believe that is prudent given the current environment.”

Outlook

According to its report, the company is on track to achieve the higher end of its 2015 production target of 2 to 3 percent growth compared with 2014 production from continuing operations, excluding Libya. Third-quarter 2015 production, excluding Libya, is expected to be 1,510 to 1,550 MBOED, which reflects planned turnaround activity during the quarter.

The company has reduced its 2015 capital expenditures guidance from $11.5 billion to $11.0 billion. Guidance for operating costs has been reduced from $9.2 billion to $8.9 billion and the corporate segment net expense has been reduced from $1.0 billion to $0.9 billion. The aggregate impact of these reductions is approximately a $0.9 billion benefit to net cash flow.

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