10-QPeriod: Q1 FY2018

CONOCOPHILLIPS Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 1, 2018For Securities:COP

Summary

ConocoPhillips reported a significant increase in net income for the first quarter of 2018 compared to the same period in 2017, driven by higher commodity prices and improved operational efficiencies. Total revenues increased by 17% year-over-year, with net income attributable to ConocoPhillips rising by 52% to $888 million. This strong performance was supported by a 4% increase in underlying production (excluding Libya and dispositions) and a 26% increase in production per debt-adjusted share. The company demonstrated a commitment to its capital allocation priorities, including increasing its quarterly dividend by 7.5%, reducing debt by $2.65 billion, and repurchasing $0.5 billion in common stock. ConocoPhillips also announced an agreement to acquire Anadarko Petroleum's nonoperated interest in Alaska's Western North Slope, signaling strategic growth initiatives. The company maintained a solid liquidity position with $5.0 billion in cash and cash equivalents.

Financial Highlights

45 data points
Beta

Revenue

$8.80B

57.8% Gross Margin

Net Income

$888.00M

10.1% Net Margin

EPS (Diluted)

$0.75

Total Assets

$70.73B

Cash & Equivalents

$4.98B

Free Cash Flow

$2.40B

Financial Statements
Beta
Revenue$8.80B
Cost of Revenue$3.71B
Gross Profit$5.08B
SG&A Expenses$99.00M
Net Income$888.00M
EPS (Basic)$0.75
EPS (Diluted)$0.75
Shares Outstanding (Basic)1.18M
Shares Outstanding (Diluted)1.19M

Key Highlights

  • 1Net income attributable to ConocoPhillips increased 52% to $888 million in Q1 2018, compared to $586 million in Q1 2017.
  • 2Total revenues rose 17% to $8.8 billion in Q1 2018, driven by higher realized prices for crude oil, natural gas, and NGLs.
  • 3Underlying production (excluding Libya and dispositions) increased 4% year-over-year, with production per debt-adjusted share growing by 26%.
  • 4The company returned capital to shareholders by increasing its quarterly dividend by 7.5% and repurchasing $0.5 billion in common stock.
  • 5Debt was significantly reduced by $2.65 billion during the quarter, bringing total debt to $17.0 billion.
  • 6ConocoPhillips announced a strategic acquisition of Anadarko Petroleum's Alaskan assets for $400 million.
  • 7Exploration expenses decreased significantly by 83%, primarily due to the absence of large charges recorded in the prior year.

Frequently Asked Questions

The increase in net income was primarily driven by higher realized crude oil and natural gas prices, lower depreciation, depletion, and amortization (DD&A) expense, reduced exploration expenses, a favorable transportation cost ruling in Alaska, and lower impairment and production/operating expenses. These positive factors were partially offset by the absence of significant deferred tax benefits recognized in the prior year and premiums paid on debt retirements.

ConocoPhillips is executing its capital allocation priorities by increasing its quarterly dividend, significantly reducing debt, and repurchasing its common stock. The company aims to maintain financial strength, grow its dividend, reduce debt to a target level, and then strategically invest in growth opportunities.

In addition to managing its existing portfolio, ConocoPhillips announced an agreement to acquire Anadarko Petroleum's nonoperated interest in the Western North Slope of Alaska, a move that strengthens its position in a resource-rich region. The company also acquired additional acreage in Canada's Montney region.

ConocoPhillips adopted several new accounting standards, including ASC Topic 606 (Revenue from Contracts with Customers) and ASU No. 2016-01 (Recognition and Measurement of Financial Assets and Liabilities). The adoption of these standards did not have a material impact on the consolidated financial statements in terms of overall revenue recognition, but did lead to some reclassifications and changes in presentation, particularly regarding equity investments and deferred taxes.