10-QPeriod: Q3 FY2012

CONOCOPHILLIPS Quarterly Report for Q3 Ended Sep 30, 2012

Filed October 30, 2012For Securities:COP

Summary

ConocoPhillips reported its third-quarter and nine-month results for 2012, marked by the significant separation of its downstream businesses into Phillips 66 on April 30, 2012. This separation has redefined ConocoPhillips as an independent exploration and production (E&P) company, with historical downstream results now classified as discontinued operations. For the third quarter of 2012, the company reported net income attributable to ConocoPhillips of $1.8 billion, or $1.46 per diluted share, a decrease from $2.6 billion in the prior year quarter, impacted by lower commodity prices and the absence of discontinued operations income. For the nine months ended September 30, 2012, net income attributable to ConocoPhillips was $7.0 billion, or $5.55 per diluted share, down from $9.0 billion in the same period of 2011, reflecting the separation and asset dispositions. Key financial and operational shifts include a substantial decrease in total assets and revenues primarily due to the spin-off of Phillips 66. The company continues to focus on its core E&P business, advancing major projects in North America and Australia, and managing a strategic asset disposition program. Liquidity remains strong, supported by operating cash flows, asset sale proceeds, and access to credit facilities, enabling continued capital expenditures, dividend payments, and share repurchases.

Financial Highlights

46 data points
Beta

Revenue

$14.14B

Net Income

$1.80B

12.7% Net Margin

EPS (Diluted)

$1.46

Total Assets

$115.37B

Cash & Equivalents

$1.27B

Free Cash Flow

$3.52B

Financial Statements
Beta
Revenue$14.14B
SG&A Expenses$329.00M
Operating Expenses$11.12B
Operating Income$5.59B
Net Income$1.80B
EPS (Basic)$1.47
EPS (Diluted)$1.46
Shares Outstanding (Basic)1.22M
Shares Outstanding (Diluted)1.23M

Key Highlights

  • 1Separation of Downstream Business: ConocoPhillips completed the spin-off of its downstream businesses into Phillips 66 on April 30, 2012, with financial results now reported as discontinued operations.
  • 2Reduced Revenue and Assets: Total revenues and assets significantly decreased compared to the prior year, largely due to the separation of the downstream segment.
  • 3Net Income Decline: Net income attributable to ConocoPhillips for the third quarter and nine months of 2012 decreased year-over-year, reflecting lower commodity prices and the impact of the separation.
  • 4Strategic Asset Dispositions: The company continued its asset disposition program, generating proceeds and focusing its portfolio on core E&P assets.
  • 5Capital Program and Shareholder Returns: ConocoPhillips maintained its capital expenditure program and continued to return capital to shareholders through dividends and share repurchases.
  • 6Focus on E&P Growth: The company is advancing major development projects in North America (e.g., Eagle Ford, Bakken, Canadian oil sands) and Australia (APLNG) to drive future production and margin growth.
  • 7Strong Liquidity Position: The company maintained a strong liquidity position with significant operating cash flows and access to credit facilities.

Frequently Asked Questions

The separation of the downstream business into Phillips 66 on April 30, 2012, resulted in the downstream segment's results being classified as 'discontinued operations' for all periods presented. This significantly reduced ConocoPhillips' reported revenues, assets, and liabilities, as the company now solely focuses on exploration and production (E&P).

While crude oil prices saw some increase, natural gas prices were depressed in the U.S. due to high inventory levels. Lower natural gas and natural gas liquids prices, along with some crude oil price fluctuations, negatively impacted realized prices and earnings, particularly in the Lower 48 and Latin America segment. Conversely, higher LNG and some crude oil prices offered some offsetting benefits in other segments.

ConocoPhillips continued to allocate capital towards its E&P growth projects and maintained its commitment to shareholder returns. The company paid dividends of $0.66 per share for the quarter and repurchased shares opportunistically under its authorized program. Funds from asset sales and a special cash distribution from Phillips 66 provided additional liquidity for these activities.

Yes, the company recognized impairments, notably a $213 million impairment for the Mackenzie Gas Project development costs and associated leasehold costs in Canada due to the indefinite suspension of the project. The company also completed several asset dispositions, including its interest in Naryanmarneftegaz (NMNG) and certain fields in the North Sea, as part of its ongoing portfolio optimization strategy.