10-QPeriod: Q2 FY2016

CONOCOPHILLIPS Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 2, 2016For Securities:COP

Summary

ConocoPhillips reported a significant net loss for the quarter and six months ended June 30, 2016, primarily driven by lower commodity prices, which impacted revenues and equity in earnings of affiliates. The company experienced a substantial decrease in sales and other operating revenues compared to the prior year, reflecting the challenging business environment in the energy sector. Despite these headwinds, ConocoPhillips focused on cost management, capital discipline, and maintaining balance sheet strength. The company reduced capital expenditure guidance and continued to optimize its asset portfolio through non-core dispositions. Liquidity remained a key focus, with the company issuing new debt and securing a term loan to navigate the low price environment. While production volumes showed resilience, particularly when adjusted for dispositions and downtime, the overall financial results were heavily influenced by the prevailing commodity price slump. Investors should note the company's efforts to conserve cash, manage debt, and its outlook for production, while being aware of the sensitivity of earnings to volatile energy prices.

Financial Highlights

42 data points
Beta

Revenue

$5.35B

Net Income

-$1.07B

-20.0% Net Margin

EPS (Diluted)

$-0.86

Total Assets

$96.05B

Cash & Equivalents

$2.86B

Free Cash Flow

$1.26B

Financial Statements
Beta
Revenue$5.35B
SG&A Expenses$167.00M
Operating Expenses$7.22B
Net Income-$1.07B
EPS (Basic)$-0.86
EPS (Diluted)$-0.86
Shares Outstanding (Basic)1.24B
Shares Outstanding (Diluted)1.24B

Key Highlights

  • 1Reported a substantial net loss attributable to ConocoPhillips of $1.071 billion for Q2 2016 and $2.540 billion for the first six months of 2016, a significant decline from the prior year's results.
  • 2Total revenues and other income decreased by 36% to $5.575 billion for Q2 2016 and by 35% to $10.590 billion for the first six months of 2016, primarily due to lower commodity prices.
  • 3Capital expenditures and investments were reduced to $2.954 billion for the first six months of 2016, down from $5.739 billion in the prior year, with full-year guidance further reduced to $5.5 billion.
  • 4The company issued new debt, raising $4.594 billion in the first six months of 2016, and obtained a $1.6 billion term loan facility to enhance liquidity.
  • 5Production volumes showed some resilience, with adjusted production increasing 3% in Q2 2016 compared to Q2 2015 when accounting for downtime and dispositions.
  • 6ConocoPhillips reduced its quarterly dividend to $0.25 per share in February 2016 to conserve cash.
  • 7The company continued to optimize its asset portfolio through non-core asset dispositions, generating $363 million in proceeds in the first six months of 2016.

Frequently Asked Questions

The primary driver behind ConocoPhillips' financial performance during this period was the significant decline in global commodity prices for crude oil and natural gas. This directly impacted sales revenues, equity in earnings of affiliates, and overall profitability, leading to a substantial net loss for both the quarter and the six-month period.

ConocoPhillips is employing several strategies to manage its liquidity and financial position. These include reducing capital expenditures, issuing new debt and securing term loans to bolster cash reserves, reducing the quarterly dividend to conserve cash, and actively pursuing dispositions of non-core assets. The company is focused on maintaining balance sheet strength and financial flexibility.

ConocoPhillips is increasing its full-year 2016 production guidance to a range of 1,540 to 1,570 thousand barrels of oil equivalent per day (MBOED). This outlook reflects strong year-to-date performance across most of its portfolio, partially offset by planned turnarounds and normal field decline. The company anticipates some impact in the third quarter due to scheduled turnaround activities.

Yes, the company reported impairments, particularly in the Lower 48 and Europe and North Africa segments. These were primarily driven by lower natural gas prices, increased asset retirement obligation estimates, and the decision to reduce deepwater exploration spending, leading to impairments of undeveloped leaseholds.