10-QPeriod: Q3 FY2013

CONOCOPHILLIPS Quarterly Report for Q3 Ended Sep 30, 2013

Filed November 5, 2013For Securities:COP

Summary

ConocoPhillips reported strong financial performance for the third quarter and first nine months of 2013, driven by a strategic shift towards higher-margin liquid plays and successful asset dispositions. The company's income from continuing operations saw significant year-over-year increases, reflecting higher asset sale gains and improved commodity prices, particularly for crude oil and natural gas. The company continues to execute its asset disposition program, exceeding its initial target with substantial proceeds generated, including a significant $5.4 billion from the sale of its interest in Kashagan. This strategic divestment of non-core assets, coupled with a disciplined capital program focused on high-margin developments, positions ConocoPhillips for future production and cash margin growth. Management's commitment to shareholder returns is evident in the recent 4.5% increase in the quarterly dividend.

Financial Highlights

41 data points
Beta

Revenue

$13.64B

Net Income

$2.48B

18.2% Net Margin

EPS (Diluted)

$2.00

Total Assets

$119.76B

Cash & Equivalents

$3.88B

Free Cash Flow

$3.71B

Financial Statements
Beta
Revenue$13.64B
SG&A Expenses$249.00M
Operating Expenses$11.06B
Operating Income$6.49B
Net Income$2.48B
EPS (Basic)$2.01
EPS (Diluted)$2.00
Shares Outstanding (Basic)1.23M
Shares Outstanding (Diluted)1.24M

Key Highlights

  • 1Income from continuing operations increased by 40% in Q3 2013 and 16% for the first nine months of 2013 compared to the prior year periods, driven by higher asset sale gains and improved commodity prices.
  • 2The company significantly advanced its asset disposition program, exceeding its $8-10 billion goal with $10.7 billion in proceeds generated by October 31, 2013, including a $5.4 billion sale of its Kashagan interest.
  • 3Production from continuing operations remained stable year-over-year, but showed growth when excluding disruptions and asset sales, indicating underlying operational strength.
  • 4The Board of Directors increased the quarterly dividend by 4.5% to $0.69 per share in July 2013, demonstrating a commitment to shareholder returns.
  • 5ConocoPhillips is strategically shifting its portfolio towards higher-margin liquid plays, evidenced by strong production growth in areas like Eagle Ford, Bakken, and Permian.
  • 6Capital expenditures for continuing operations totaled $11.3 billion for the first nine months of 2013, with significant investment in high-margin areas.
  • 7The company successfully resolved a major pooling dispute related to the Trans-Alaska Pipeline System (TAPS), paying $355 million in Q3 2013, which resulted in a reduction of production and operating expenses.

Frequently Asked Questions

The primary drivers for ConocoPhillips' improved financial performance in Q3 2013 were significantly higher gains from asset sales, favorable commodity prices (especially for crude oil and natural gas), and a strategic shift in the company's production mix towards higher-margin liquid plays.

ConocoPhillips is actively executing an asset disposition program, divesting non-strategic assets and exceeding its initial fundraising target. This strategy has generated substantial proceeds, including the recent $5.4 billion from the Kashagan sale. These dispositions, combined with a focus on investing in high-margin developments, are reshaping the company's portfolio to enhance future production and cash margin growth.

For the fourth quarter of 2013, production from continuing operations was expected to be between 1,485 to 1,525 thousand barrels of oil equivalent per day (MBOED). The full-year 2013 production from continuing operations was projected at 1,505 to 1,515 MBOED. The company anticipates that investments in high-margin developments over the next five years will enable 3-5% annual production volume and margin growth, funding capital programs organically.

ConocoPhillips Alaska, Inc. resolved a notice of violation regarding tundra travel damage with the North Slope Borough, agreeing to a penalty of $188,000. The company also reported that it continues to be notified of potential liability under CERCLA and comparable state laws at an increasing number of sites (15 as of September 30, 2013), though it believes future costs will not materially impact its financial statements.