10-QPeriod: Q3 FY2017

CONOCOPHILLIPS Quarterly Report for Q3 Ended Sep 30, 2017

Filed October 31, 2017For Securities:COP

Summary

ConocoPhillips reported a net income of $420 million for the third quarter of 2017, a significant turnaround from the $1,040 million net loss in the same period of 2016. This improvement was driven by higher commodity prices, substantial gains from asset dispositions totaling over $16 billion in 2017, and disciplined cost management. The company has made considerable progress on its strategic priorities, including debt reduction to below $20 billion by year-end 2017 and a planned $3 billion in share repurchases for the year. The nine-month period ending September 30, 2017, however, still reflects a net loss of $2,434 million. This is largely attributable to significant impairment charges, including a $2.4 billion impairment of the APLNG investment and a combined $2.5 billion impairment for the San Juan Basin and Barnett assets. Despite these non-recurring charges, the underlying operational performance and the successful execution of its asset portfolio optimization strategy indicate a positive trajectory for the company.

Financial Highlights

46 data points
Beta

Revenue

$6.69B

56.3% Gross Margin

Net Income

$420.00M

6.3% Net Margin

EPS (Diluted)

$0.34

Total Assets

$74.86B

Cash & Equivalents

$6.91B

Free Cash Flow

$1.05B

Financial Statements
Beta
Revenue$6.69B
Cost of Revenue$2.93B
Gross Profit$3.76B
SG&A Expenses$110.00M
Operating Expenses$6.54B
Net Income$420.00M
EPS (Basic)$0.35
EPS (Diluted)$0.34
Shares Outstanding (Basic)1.21M
Shares Outstanding (Diluted)1.22M

Key Highlights

  • 1ConocoPhillips returned to profitability in Q3 2017, reporting a net income of $420 million, a substantial improvement from a net loss of $1,040 million in Q3 2016.
  • 2The company completed significant asset dispositions totaling over $16 billion in 2017, including the sale of Canadian assets to Cenovus Energy and the San Juan Basin and Panhandle assets.
  • 3Debt has been significantly reduced, with the company on track to be below $20 billion by year-end 2017, down from $27.3 billion at the end of 2016.
  • 4Share repurchases are proceeding aggressively, with plans to repurchase $3 billion in 2017, and $2.2 billion already repurchased by September 30, 2017.
  • 5Despite strong Q3 performance, the nine-month period resulted in a net loss of $2,434 million, largely due to substantial impairment charges on assets like APLNG and others in the Lower 48 segment.
  • 6Production, excluding Libya, was 1,202 thousand barrels of oil equivalent per day (MBOED) in Q3 2017, showing a 1.4% underlying year-over-year growth on a debt-adjusted share basis.
  • 7Capital expenditures for full-year 2017 were lowered to $4.5 billion, reflecting disciplined capital allocation.

Frequently Asked Questions

ConocoPhillips reported a net income of $420 million for the third quarter of 2017, a significant improvement compared to a net loss of $1,040 million in the same period of 2016. This turnaround was primarily driven by higher commodity prices, substantial gains from asset sales, and effective cost management.

The company is actively reducing its debt, aiming to be below $20 billion by year-end 2017, a notable decrease from $27.3 billion at the end of 2016. ConocoPhillips is also returning capital to shareholders through an increased dividend and a robust share repurchase program, with plans to buy back $3 billion of stock in 2017.

ConocoPhillips completed several major asset dispositions in 2017, including its Canadian assets to Cenovus Energy for approximately $11 billion, the San Juan Basin for $2.5 billion, and the Panhandle assets for $178 million. These dispositions are part of a strategy to divest non-core assets and are expected to yield over $16 billion in proceeds for the full year.

The net loss of $2,434 million for the nine-month period ending September 30, 2017, is largely due to significant non-cash impairment charges. These include a $2.4 billion impairment of the APLNG investment and combined impairments totaling $2.5 billion related to the San Juan Basin and Barnett assets. These charges, while impacting the nine-month results, do not alter the positive profitability trend seen in the third quarter.