Yahoo Finance ConocoPhillips (NYSE:COP) Q3 2023 Earnings Call Transcript
ConocoPhillips (NYSE:COP) Q3 2023 Earnings Call Transcript November 2, 2023
ConocoPhillips beats earnings expectations. Reported EPS is $2.33, expectations were $2.04.
Operator: Welcome to the Third Quarter 2023 ConocoPhillips Earnings Conference Call. My name is Liz, and I will be your operator for today's call. [Operator Instructions]. I will now turn the call over to Phil Gresh, Vice President, Investor Relations. Sir, you may begin.
Philip Gresh: Yes. Thank you, and welcome to everyone, to our third quarter 2023 earnings conference call. On the call today are several members of the ConocoPhillips leadership team, including Ryan Lance, Chairman and CEO; and Tim Leach, Adviser to the CEO; Bill Bullock, Executive Vice President and Chief Financial Officer; Dominic Macklon, Executive Vice President of Strategy, Sustainability and Technology; Nick Olds, Executive Vice President of Lower 48; Andy O'Brien, Senior Vice President of Global Operations; Kirk Johnson, Senior Vice President, Lower 48, Assets and Operations; and Will Giraud, Senior Vice President, Corporate Planning and Development. Brian and Bill will kick it off with opening remarks, after which the team will be available for your questions.
A few quick reminders. First, along with today's release, we published supplemental financial materials and a slide presentation, which you can find on the Investor Relations website. Second, during this call, we will make forward-looking statements based on current expectations. Actual results may differ due to factors noted in today's release, and in our periodic SEC filings. We will make reference to some non-GAAP financial measures. Reconciliations to the nearest corresponding GAAP measure can be found in today's release and on our website. And before I turn it over, I just want to flag for today, we'll do one question per caller. So with that, let me turn it over to Ryan.
Ryan Lance: Thank you, Phil, and thank you to everyone for joining our third quarter 2023 earnings conference call. It was another solid quarter for ConocoPhillips, as the team continued to deliver strong underlying performance across the portfolio, and we have achieved several additional project milestones in our international portfolio in early October. Now before I get into the details, I wanted to address the topical news in the industry, which has been the M&A headlines in recent weeks. This is not a surprise to us. We have long said that we expect to see further industry consolidation. ConocoPhillips remains steadfast in our returns-focused value proposition and cost of supply principles, which creates a high bar for M&A.
And as a reminder, we've been actively high grading our own portfolio over the past several years. And as a recent example, we are pleased to have closed on the acquisition of the remaining 50% of Surmont, in early October. An opportunity came along to acquire this asset at a very attractive price that fit our financial framework, an asset we can make better through our full ownership and an acquisition that makes our 10-year plan even better. Surmont is a long life, low declining and low capital intensity asset that we know well. We achieved first steam from Pad 267 in the third quarter, and production is expected to start up in the first quarter of 2024. This is our first new pad addition since 2016, and as we said at our recent analyst meeting, we can leverage existing infrastructure to add additional pads with very limited capital requirements in the years ahead.
Now moving to global LNG. We've also continued to progress our strategy, securing 1.5 mtpa regas capacity at the Gate LNG terminal in the Netherlands. This will take our total European regas capacity to 4.3 mtpa. We have now effectively secured destinations for nearly half of our Port Arthur LNG offtake commitment in the first 6 months. since we sanctioned the project. Now elsewhere in the international portfolio, we started up our second central processing facility, CPF2 in the Montney. And in Norway, we just announced that we have started up 3 project developments ahead of schedule in October. This includes the company-operated Tommeliten Alpha A, subsea tieback project at Ekofisk, which is nearly 6 months earlier than originally planned as well as 2 nonoperated projects.
Finally, in China, our partner started at Bohai Phase 4b ahead of schedule, in October. So as you can see, our diversified international portfolio continues to be a strong differentiator for our company. Shifting to results. We have record global and Lower 48 production in the third quarter, and we raised our full year production guidance to account for the closing of the Surmont acquisition, all this while achieving continued capital efficiency improvements as our full year capital guidance remains unchanged. We also continued to deliver on our returns to our shareholders. We increased our quarterly ordinary dividend by 14%, consistent with our long-term objective to deliver top quartile increases relative to the S&P 500. We have distributed $8.5 billion in dividends and buybacks year-to-date, and we remain on track for our $11 billion full year target.
And we did this while funding the shorter and longer-term organic capital growth opportunities that we see across the entire portfolio. The team continues to execute well. Our deep durable and diversified asset base continues to get better and better, and we are well positioned to generate competitive returns, and cash flow for decades to come. Now let me turn the call over to Bill to cover our third quarter performance in more detail.
William Bullock: Thanks, Ryan. In the third quarter, we generated $2.16 per share in adjusted earnings. We produced 1,806,000 barrels of oil equivalent per day, representing 3% underlying growth year-over-year. Planned turnarounds were successfully completed in Norway and Alaska and Lower 48 production averaged 1,083,000 barrels a day equivalent per day, including 722,000 from the Permian, 232,000 from the Eagle Ford, and 111,000 from the Bakken. Lower 48 underlying production grew 8% year-on-year with new wells online and strong well performance relative to our expectations. Moving to cash flows. Third quarter CFO was $5.5 billion, including APLNG distributions of $442 million. Third quarter capital expenditures were $2.5 billion which included $360 million for longer cycle projects.
And through the end of the third quarter, we have now funded $875 million for Port Arthur LNG, out of our planned $1.1 billion for the year. Regarding returns of capital, we delivered $2.6 billion to shareholders in the third quarter. This was via $1.3 billion in share buybacks and $1.3 billion in ordinary dividends and VROC payments. And today, as Ryan said, we announced an increase to our organic dividend of 14% to $0.58 per share. We ended the quarter with cash and short-term investments of $9.7 billion, which included proceeds from the $2.7 billion of long-term debt that we issued to fund the Surmont acquisition, which closed in early October. Before shifting to guidance, I do want to take a quick moment to update about our VROC. Beginning in 2024, we will be aligning both the announcement timing and subsequent payment of our VROC with our ordinary dividend.
Therefore, you can expect us to provide details on our first quarter VROC payment on the fourth quarter call in February. Now turning to guidance, which now reflects additional 50% of Surmont starting in early October, we forecast fourth quarter production to be in a range of 1.86 million to 1.9 million barrels of oil equivalent per day. Full year production guidance is now roughly 1.82 million barrels of oil equivalent today. Now to put this production guidance in the context, we expect underlying growth for both the fourth quarter and the full year to be roughly 4% year-over-year, which includes Lower 48 production growth of roughly 7%. And this is very consistent with our full year guidance and our long-term plan we laid out at our Analyst and Investor Meeting.
For APLNG, we expect distributions of $300 million in the fourth quarter and $1.9 billion for the full year. And while APLNG distributions can vary quarter-to-quarter, a normalized run rate to think about moving forward is around $400 million per quarter at current price levels. Shifting to adjusted operating costs. We raised our full year guidance by $300 million to $8.6 billion. This was driven by our increased working interest in Surmont, increased Lower 48 non-operated activity and inflationary impacts on the Lower 48. We've also raised our DD&A guidance by $100 million to $8.3 billion, which is also primarily due to Surmont. And full year adjusted corporate net loss guidance remains unchanged at roughly $800 million, and the second half run rate is a good starting point for 2024.
Finally, our full year capital spending guidance range is also unchanged. So to wrap up, we had another solid operational quarter. We continued to deliver on our strategic initiatives across our diverse portfolio, and we remain highly competitive on our shareholder distributions. That concludes our prepared remarks. I'll now turn it back over to the operator to start the Q&A.
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