ConocoPhillips cuts capital budget again, posts 3Q profit

Oct. 26, 2017
ConocoPhillips is trimming its 2017 capital budget by another $300 million to $4.5 billion as it remains focused on lowering breakeven prices and generating free cash flow.  

ConocoPhillips is trimming its 2017 capital budget by another $300 million to $4.5 billion as it remains focused on lowering breakeven prices and generating free cash flow. The Houston independent after the second quarter cut $200 million from its original budget of $5 million for the year.

ConocoPhillips reported third-quarter earnings of $400 million compared with a third-quarter 2016 loss of $1 billion. Excluding special items, third-quarter adjusted earnings were $200 million compared with a third-quarter 2016 adjusted loss of $800 million.

Special items for the quarter were primarily driven by a net gain from previously announced dispositions and a tax benefit related to the firm’s prior decision to exit Nova Scotia deepwater exploration.

Earnings improved year-over-year because of higher realized prices, reduced depreciation expense, lower exploration expense, impacts from dispositions, and the absence of special item impacts from a tax functional currency change at Australia Pacific LNG (APLNG) and restructuring costs, the firm said.

For the quarter, cash provided by operating activities was $1.1 billion. The firm said it reduced year-over-year production and operating expenses by 20% and adjusted operating costs by 15%.

ConocoPhillips’s 9-month earnings were a loss of $2.4 billion compared with a 9-month 2016 loss of $3.6 billion. Nine-month adjusted earnings were $200 million compared with a 9-month 2016 adjusted loss of $3 billion.

Production movement

The firm's production excluding Libya for the third quarter was 1.202 million boe/d, down 355,000 boe/d from the same period a year ago.

Excluding the third-quarter volume impact from closed and signed dispositions of 58,000 boe/d in 2017 and 429,000 boe/d in 2016, underlying production increased 16,000 boe/d due to the ramp up of several major projects and multiple development programs, which more than offset normal field decline and hurricane downtime, ConocoPhillips explained.

In the Lower 48, the firm operated 12 drilling rigs in the Eagle Ford, Bakken, and Delaware unconventional areas. Eagle Ford production was impacted by 15,000 boe/d from Hurricane Harvey but was fully restored by quarter end. In Alaska, the first well was spudded at 1H NEWS, which remains on track for first oil by yearend.

Project work progressed in Europe, with the Aasta Hansteen topsides sailaway completed. In Australia, the APLNG two-train lenders’ test was completed with performance exceeding target, resulting in the release of the final project financing loan guarantee, ConocoPhillips said. Turnarounds were completed at Prudhoe Bay in Alaska and Britannia in the UK. Production from Libya was 24,000 boe/d for the quarter.

ConocoPhillips’s fourth-quarter and full-year production is expected to be 1.195-1.235 million boe/d and 1.350-1.360 million boe/d, respectively, excluding Libya and reflecting expected impacts from the firm’s Barnett shale disposition.