10-QPeriod: Q3 FY2018

CONOCOPHILLIPS Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 30, 2018For Securities:COP

Summary

ConocoPhillips reported a strong third quarter and first nine months of 2018, driven by improved realized commodity prices and significant debt reduction. Net income attributable to the company surged to $1.86 billion ($1.59 per diluted share) in Q3 2018, a substantial increase from $420 million ($0.34 per diluted share) in Q3 2017. For the first nine months, net income was $4.39 billion, a significant turnaround from a net loss of $2.43 billion in the prior year period. The company also made substantial progress on its capital allocation priorities, ahead of schedule on debt reduction targets and increasing its dividend. Strategic acquisitions in Alaska and asset dispositions in the Lower 48 and Europe were highlighted, alongside a significant settlement agreement with PDVSA. The company's financial strength was bolstered by cash flow from operations, which nearly doubled year-over-year for the nine-month period. ConocoPhillips ended the quarter with a solid liquidity position and received credit rating upgrades from Fitch and Moody's. Management remains focused on delivering value through returns, maintaining financial discipline, and strategically deploying capital.

Financial Highlights

45 data points
Beta

Revenue

$9.45B

62.6% Gross Margin

Net Income

$1.86B

19.7% Net Margin

EPS (Diluted)

$1.59

Total Assets

$70.56B

Cash & Equivalents

$3.72B

Free Cash Flow

$3.41B

Financial Statements
Beta
Revenue$9.45B
Cost of Revenue$3.53B
Gross Profit$5.92B
SG&A Expenses$119.00M
Net Income$1.86B
EPS (Basic)$1.60
EPS (Diluted)$1.59
Shares Outstanding (Basic)1.16M
Shares Outstanding (Diluted)1.17M

Key Highlights

  • 1Net income attributable to ConocoPhillips was $1.86 billion for Q3 2018, up from $420 million in Q3 2017.
  • 2Nine-month net income reached $4.39 billion, a significant improvement from a net loss of $2.43 billion in the same period of 2017.
  • 3The company achieved its debt reduction target of $15 billion, 18 months ahead of schedule.
  • 4ConocoPhillips increased its quarterly dividend twice in 2018, reaching $0.305 per share.
  • 5Significant strategic transactions included acquisitions in Alaska and announced dispositions in the Lower 48 and Europe.
  • 6A major settlement agreement with PDVSA for approximately $2 billion was reached, with initial payments received in Q3 2018.
  • 7Cash provided by operating activities for the first nine months of 2018 was $9.15 billion, a substantial increase from $4.60 billion in 2017.
  • 8The company received credit rating upgrades from Fitch and Moody's.

Frequently Asked Questions

The primary driver of ConocoPhillips' improved financial performance was significantly higher realized commodity prices, particularly for crude oil, which boosted sales and other operating revenues. Additionally, the company recognized $325 million after-tax from a settlement agreement with PDVSA, and benefited from lower depreciation, depletion, and amortization (DD&A) expenses.

ConocoPhillips has actively managed its debt, reducing it by $4.7 billion in the first nine months of 2018 to reach its $15 billion target ahead of schedule. The company is also prioritizing shareholder returns through dividend increases and substantial share repurchases, with $2.1 billion repurchased year-to-date in 2018 and an expanded share repurchase authorization.

Key strategic activities included the acquisition of Anadarko Petroleum's interest in the Western North Slope of Alaska, agreements to acquire BP's nonoperated interest in the Greater Kuparuk Area in Alaska while selling a ConocoPhillips subsidiary to BP, and an agreement to sell its interest in the Greater Sunrise Fields to the government of Timor-Leste. The company also continued its asset dispositions in the Lower 48, notably the agreement to sell its Barnett asset.

For the fourth quarter of 2018, production was expected to be between 1,275 to 1,315 MBOED. Full-year 2018 capital expenditures and investments guidance was adjusted to $6.1 billion, excluding acquisition-related costs, reflecting investments in key exploration and development programs across various segments.