10-QPeriod: Q1 FY2013

CONOCOPHILLIPS Quarterly Report for Q1 Ended Mar 31, 2013

Filed April 30, 2013For Securities:COP

Summary

ConocoPhillips (COP) reported its first quarter 2013 results, highlighting its strategic transition into a pure exploration and production (E&P) company following the separation of its downstream businesses into Phillips 66 in 2012. The company generated $4.6 billion in cash from continuing operations, funded a $3.6 billion capital program, and paid $0.8 billion in dividends. Significant asset dispositions were underway, with approximately $1.1 billion generated in the quarter and an expected $8.5 billion from the planned sales of its interests in Kashagan, Nigeria, and Algeria. The company aims for 3-5% annual production and margin growth through portfolio optimization and investments in high-margin developments, focusing on liquids-rich plays. While overall earnings from continuing operations saw a slight decrease of 7% to $2.024 billion compared to Q1 2012, this was largely due to lower gains from asset sales and reduced commodity prices for crude oil, bitumen, and natural gas liquids. These were partially offset by significantly lower impairments ($1 million vs. $520 million) and higher natural gas prices. Production from continuing operations was 1,555 MBOED, with strong growth in North American shale plays (Eagle Ford, Bakken, Permian) and oil sands, which increased by 42% and 30% respectively year-over-year. Major projects are on schedule for fourth-quarter startup, and new discoveries were made in the Gulf of Mexico.

Financial Highlights

42 data points
Beta

Revenue

$14.17B

Net Income

$2.14B

15.1% Net Margin

EPS (Diluted)

$1.73

Total Assets

$117.78B

Cash & Equivalents

$5.42B

Free Cash Flow

$4.73B

Financial Statements
Beta
Revenue$14.17B
SG&A Expenses$165.00M
Operating Expenses$10.86B
Operating Income$2.01B
Net Income$2.14B
EPS (Basic)$1.74
EPS (Diluted)$1.73
Shares Outstanding (Basic)1.23M
Shares Outstanding (Diluted)1.24M

Key Highlights

  • 1Generated $4.6 billion in cash from continuing operations, demonstrating strong operational cash flow.
  • 2Successfully advanced its asset disposition program, generating $1.1 billion in proceeds during the quarter and anticipating an additional $8.5 billion from upcoming sales.
  • 3Achieved significant production growth in key North American shale plays (Eagle Ford, Bakken, Permian) of 42% and 30% increase in oil sands production year-over-year.
  • 4Reported a substantial decrease in impairments to $1 million (after-tax) in Q1 2013 from $520 million (after-tax) in Q1 2012, significantly boosting profitability.
  • 5Planned major project startups are on schedule for the fourth quarter of 2013.
  • 6Announced new deepwater discoveries (Coronado and Shenandoah) in the Gulf of Mexico, bolstering the exploration portfolio.

Frequently Asked Questions

Following the separation of its downstream businesses into Phillips 66 in 2012, ConocoPhillips is now solely focused on being an independent exploration and production (E&P) company. Its strategy centers on exploring for, developing, and producing crude oil and natural gas globally, aiming for production and cash margin growth, competitive returns on capital, and a compelling dividend.

Commodity prices had a mixed impact. Industry crude prices for WTI decreased by 8% and Brent by 5% year-over-year, contributing to lower earnings. However, U.S. Henry Hub natural gas prices increased by 23% due to colder weather, which was beneficial. Realized natural gas liquids prices declined 34%, and bitumen prices fell 35%.

For the full year 2013, ConocoPhillips expects production from continuing operations to be between 1,485 to 1,520 MBOED. The capital program for the first three months of 2013 was $3.391 billion for continuing operations, supporting key exploration and development activities, particularly in North American shale plays and deepwater projects.

ConocoPhillips is actively optimizing its portfolio through strategic asset dispositions and investments in high-margin developments, with a focus on liquids-rich plays. In Q1 2013, it generated $1.1 billion from asset sales, including properties in Cedar Creek Anticline and its interest in N Block. The company anticipates approximately $8.5 billion in proceeds from the planned sales of its interests in Kashagan, Nigeria, and Algeria, expected to close in 2013.