10-KPeriod: FY2012

CONOCOPHILLIPS Annual Report, Year Ended Dec 31, 2012

Filed February 19, 2013For Securities:COP

Summary

ConocoPhillips' 2012 10-K filing reveals a company undergoing significant transformation following the separation of its downstream business into Phillips 66 on April 30, 2012. As a pure-play exploration and production (E&P) company, ConocoPhillips is focused on its core upstream activities, with operations spanning 30 countries. The company reported earnings of $7.5 billion from continuing operations in 2012, a slight increase from 2011, primarily driven by higher gains from asset sales and improved LNG and crude oil prices. Despite facing challenges from lower natural gas and bitumen prices, ConocoPhillips demonstrated strong operational execution, achieving 156% organic reserve replacement and returning significant capital to shareholders through dividends and share repurchases totaling $5.1 billion. The company also advanced its strategic asset disposition program, agreeing to sell significant assets expected to generate approximately $9.6 billion in proceeds by mid-2013, which will be used to fund its capital program and enhance financial flexibility.

Financial Highlights

47 data points
Beta

Revenue

$57.97B

Net Income

$8.43B

14.5% Net Margin

EPS (Diluted)

$6.72

Total Assets

$117.14B

Cash & Equivalents

$3.62B

Free Cash Flow

$13.92B

Financial Statements
Beta
Revenue$57.97B
R&D Expenses$221.00M
SG&A Expenses$1.11B
Operating Expenses$46.58B
Operating Income$7.41B
Interest Expense$1.17B
Net Income$8.43B
EPS (Basic)$6.77
EPS (Diluted)$6.72
Shares Outstanding (Basic)1.24M
Shares Outstanding (Diluted)1.25M

Key Highlights

  • 1Completed the separation of its downstream business into Phillips 66 on April 30, 2012, establishing ConocoPhillips as a focused E&P company.
  • 2Achieved earnings of $7.5 billion from continuing operations in 2012, up from $7.2 billion in 2011, driven by asset sales and improved commodity prices.
  • 3Announced plans to raise $8-$10 billion from asset dispositions by the end of 2013, with $2.1 billion realized through December 31, 2012.
  • 4Repurchased 80 million shares of common stock, representing 6% of outstanding shares, at a total cost of $5.1 billion.
  • 5Maintained quarterly dividends at $0.66 per share, consistent with pre-separation levels.
  • 6Achieved 156% organic reserve replacement in 2012, with year-end proved reserves of 8.6 billion barrels of oil equivalent.
  • 7Anticipates 3-5% annual production and margin growth over the next five years through investments in high-margin developments.

Frequently Asked Questions

The separation of the downstream business into Phillips 66 on April 30, 2012, resulted in ConocoPhillips becoming a pure-play exploration and production company. While the results of the former downstream business are now classified as discontinued operations, the separation also provided ConocoPhillips with a special cash distribution of approximately $7.8 billion, which was earmarked for dividends, share repurchases, and debt repayment.

Global oil prices remained relatively flat in 2012. However, U.S. natural gas prices decreased significantly (31%) due to high inventory levels and sustained production from shale plays, negatively impacting realized natural gas and natural gas liquids prices. Bitumen prices also declined. The company's strategy to focus on higher-margin liquids plays and manage costs helped mitigate some of these commodity price pressures.

ConocoPhillips plans to achieve 3-5% annual production and margin growth over the next five years by investing in high-margin developments, optimizing its asset portfolio through strategic dispositions, and focusing on exploration opportunities. The company's capital program for 2013 is expected to be $15.8 billion, directed towards key developments in North America, Europe, Asia Pacific, and other international regions. Capital will also be used for share repurchases and dividends to enhance shareholder returns.

In 2012, ConocoPhillips continued its strategic asset disposition program by agreeing to sell its interest in the North Caspian Sea Production Sharing Agreement (Kashagan), as well as its Nigerian and Algerian businesses. These dispositions were expected to generate approximately $8.5 billion in proceeds and are part of a larger plan to sell $8-$10 billion of noncore assets by the end of 2013.