ConocoPhillips reports fourth-quarter and full-year 2023 results, 123% preliminary reserve replacement ratio; announces 2024 guidance and planned return of capital of $9B; declares quarterly ordinary dividend and variable return of cash distribution
- None.
- None.
Insights
The reported earnings of ConocoPhillips indicate a decrease from the previous year, with a notable drop from $18.7 billion in 2022 to $11.0 billion in 2023. Despite this decline, the company achieved a 17% return on capital employed, which is a significant metric for investors as it provides insight into the efficiency with which the company is using its capital to generate profits. The cash-adjusted return on capital employed of 19% also suggests a strong performance when considering the liquidity position. However, the decrease in earnings and the 27% drop in the average realized price per BOE reflect the volatility in commodity prices and potential pressures on revenue streams.
ConocoPhillips' strategic acquisitions, such as the remaining 50% interest in Surmont and the progression of its global LNG strategy, indicate a proactive approach to portfolio enhancement. The focus on LNG expansion, particularly with the final investment decision at Port Arthur LNG, is aligned with the increasing global demand for cleaner energy sources. This could position the company favorably in the energy transition and potentially contribute to long-term value creation for shareholders.
The announcement of a $9 billion return of capital for 2024, including dividends and share repurchases, signals a commitment to shareholder returns. This level of capital return could be attractive to investors, especially in a lower price environment, as it demonstrates the company's confidence in its cash flow generation and financial stability.
ConocoPhillips' operational performance, with record production levels, is a positive indicator of the company's ability to scale up operations and capitalize on its assets. The mention of the increased production in the Lower 48, including key areas such as the Permian, Eagle Ford and Bakken, suggests that the company is well-positioned in some of the most prolific oil and gas regions in the United States. This is particularly relevant as these regions are expected to continue to be a focus for U.S. energy production and exports.
The company's emphasis on the Triple Mandate reflects a strategic approach to balancing the energy transition with financial performance. By focusing on operational emissions reduction, ConocoPhillips is addressing investor concerns regarding sustainability and environmental impact. The acceleration of GHG emissions-intensity reduction targets could enhance the company's reputation as a responsible energy producer and potentially provide a competitive edge in an industry under scrutiny for its environmental footprint.
The Gold Standard Pathway designation by the Oil and Gas Methane Partnership 2.0 and the company's emissions targets underscore its commitment to environmental stewardship. These efforts may resonate with ESG-focused investors and could influence the company's valuation as the market increasingly factors in sustainability practices.
From an investment perspective, the financials of ConocoPhillips warrant attention to the company's balance sheet strength, evidenced by the $6.9 billion in cash and short-term investments. This liquidity, alongside the robust cash flow generation, provides ConocoPhillips with the flexibility to navigate market fluctuations and invest in growth opportunities. The company's reserve replacement ratio of 123% is another key indicator of its ability to sustain production levels and reserves, which is critical for long-term viability in the energy sector.
Investors may also consider the potential impact of the company's capital expenditure guidance for 2024, set at $11.0 to $11.5 billion. This level of investment is indicative of ConocoPhillips' growth strategy and its commitment to advancing projects that could drive future profitability. However, it is essential to monitor how these investments translate into production efficiency and contribute to the bottom line in a fluctuating price environment.
The first-quarter 2024 production guidance suggests a stable outlook, with expectations for production to remain consistent with the fourth quarter of 2023. This stability is crucial for investors as it provides a predictable operational framework against which financial performance can be measured.
Full-year 2023 earnings were
“During 2023, ConocoPhillips continued to demonstrate strong financial and operational performance, executing on our returns-focused value proposition,” said Ryan Lance, chairman and chief executive officer. “We achieved record production, reached several key milestones across our global operations and returned
Full-year summary and recent announcements
-
Generated cash provided by operating activities of
$20.0 billion $21.3 billion -
Distributed
$11.0 billion $5.6 billion $5.4 billion -
Achieved
17% return on capital employed;19% cash-adjusted return on capital employed. -
Ended the year with cash and short-term investments of
$6.9 billion - Delivered record full-year total company and Lower 48 production of 1,826 thousand barrels of oil equivalent per day (MBOED) and 1,067 MBOED, respectively.
-
Acquired the remaining
50% interest in Surmont for approximately$2.7 billion $0.4 billion $0.3 billion - Made final investment decision (FID) on the Willow project.
-
Progressed global LNG strategy through expansion in
Qatar , FID at Port Arthur LNG, regasification agreements inthe Netherlands and offtake agreements inMexico . -
Reached first production at several subsea tiebacks in
Norway , Surmont Pad 267 inCanada and Bohai Phase 4B inChina . -
Commenced startup at the second phase of Montney’s central processing facility in
Canada . - Awarded Gold Standard Pathway designation by Oil and Gas Methane Partnership 2.0.
-
Accelerated the company’s GHG emissions-intensity reduction target through 2030 from 40
-50% to 50-60% , using a 2016 baseline.
Return of capital update
ConocoPhillips announced its 2024 planned return of capital to shareholders of
Fourth-quarter review
Production for the fourth quarter of 2023 was 1,902 MBOED, an increase of 144 MBOED from the same period a year ago. After adjusting for impacts from closed acquisitions and dispositions, fourth-quarter 2023 production increased 75 MBOED or
Lower 48 delivered production of 1,086 MBOED, including 750 MBOED from the Permian, 211 MBOED from the Eagle Ford and 110 MBOED from the Bakken. First production was achieved at several subsea tiebacks in
Earnings decreased from the fourth quarter of 2022 primarily due to lower prices, partially offset by increased volumes and benefits from special items including the reversal of a tax reserve. Adjusted earnings decreased due to lower prices, partially offset by higher volumes. The company’s total average realized price was
For the quarter, cash provided by operating activities was
Full-year review
Production for 2023 was 1,826 MBOED, an increase of 88 MBOED from the same period a year ago. After adjusting for impacts from closed acquisitions and dispositions, production increased 73 MBOED or
The company’s total average realized price during this period was
In 2023, cash provided by operating activities was
Reserves update
Preliminary 2023 year-end proved reserves are 6.8 billion barrels of oil equivalent (BBOE), with a total reserve replacement ratio of
Final information related to the company’s 2023 oil and gas reserves will be provided in ConocoPhillips’ Annual Report on the Form 10-K, to be filed with the SEC in February.
Outlook
The company’s 2024 total capital expenditure guidance is
The company’s 2024 production guidance is 1.91 to 1.95 million barrels of oil equivalent per day (MMBOED). First-quarter 2024 production is expected to be 1.88 to 1.92 MMBOED.
Guidance for 2024 includes adjusted operating cost of
ConocoPhillips will host a conference call today at noon Eastern time to discuss this announcement. To listen to the call and view related presentation materials and supplemental information, go to www.conocophillips.com/investor. A recording and transcript of the call will be posted afterward.
--- # # # ---
About ConocoPhillips
ConocoPhillips is one of the world’s leading exploration and production companies based on both production and reserves, with a globally diversified asset portfolio. Headquartered in
For more information, go to www.conocophillips.com.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This news release contains forward-looking statements as defined under the federal securities laws. Forward-looking statements relate to future events, plans and anticipated results of operations, business strategies, and other aspects of our operations or operating results. Words and phrases such as “ambition”, “anticipate," “estimate,” “believe,” “budget,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict," “seek,” “should,” “will,” “would,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and other similar words can be used to identify forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. Where, in any forward-looking statement, the company expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to be reasonable at the time such forward-looking statement is made. However, these statements are not guarantees of future performance and involve certain risks, uncertainties and other factors beyond our control. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in the forward-looking statements. Factors that could cause actual results or events to differ materially from what is presented include changes in commodity prices, including a prolonged decline in these prices relative to historical or future expected levels; global and regional changes in the demand, supply, prices, differentials or other market conditions affecting oil and gas, including changes resulting from any ongoing military conflict, including the conflicts in
Cautionary Note to U.S. Investors – The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves. We may use the term “resource” in this news release that the SEC’s guidelines prohibit us from including in filings with the SEC. U.S. investors are urged to consider closely the oil and gas disclosures in our Form 10-K and other reports and filings with the SEC. Copies are available from the SEC and from the ConocoPhillips website.
Use of Non-GAAP Financial Information – To supplement the presentation of the company’s financial results prepared in accordance with
The company believes that the non-GAAP measure adjusted earnings (both on an aggregate and a per-share basis), adjusted operating costs and adjusted corporate segment net loss are useful to investors to help facilitate comparisons of the company’s operating performance associated with the company’s core business operations across periods on a consistent basis and with the performance and cost structures of peer companies by excluding items that do not directly relate to the company’s core business operations. Adjusted earnings is defined as earnings removing the impact of special items. Adjusted EPS is a measure of the company’s diluted net earnings per share excluding special items. Adjusted operating costs is defined as the sum of production and operating expenses and selling, general and administrative expenses, adjusted to exclude expenses that do not directly relate to the company’s core business operations and are included as adjustments to arrive at adjusted earnings to the extent those adjustments impact operating costs. Beginning in 2024, the company will utilize a definition of adjusted operating costs that no longer includes exploration general and administrative expenses, geological and geophysical and lease rental and other expenses. The company believes this revised definition will serve as a more useful tool for comparison against the performance and cost structures of peer companies and will be more easily understood by the investment community. Adjusted corporate segment net loss is defined as corporate and other segment earnings adjusted for special items. The company further believes that the non-GAAP measure CFO is useful to investors to help understand changes in cash provided by operating activities excluding the timing effects associated with operating working capital changes across periods on a consistent basis and with the performance of peer companies. ROCE is a measure of the profitability of the company’s capital employed in its business operations compared with that of its peers. The company calculates ROCE as a ratio, the numerator of which is net income, and the denominator of which is average total equity plus average total debt. The net income is adjusted for after- tax interest expense, for the purposes of measuring efficiency of debt capital used in operations; net income is also adjusted for non-operational or special items impacts to allow for comparability in the long-term view across periods. The company believes ROCE is a good indicator of long-term company and management performance as it relates to capital efficiency, both absolute and relative to the company’s primary peer group. The basis of cash adjusted ROCE utilizes ROCE as defined above and further adjusts for cash and cash equivalents, restricted cash, and short-term investments as well as the after-tax interest income generated by these capital sources, as the company may retain these sources for other strategic purposes and not fully employ such capital for use in operations. As such, cash adjusted ROCE is useful for comparability across periods that may be cyclically impacted by significant cash-related transactions. The company believes that the above-mentioned non-GAAP measures, when viewed in combination with the company’s results prepared in accordance with GAAP, provides a more complete understanding of the factors and trends affecting the company’s business and performance. The company’s Board of Directors and management also use these non-GAAP measures to analyze the company’s operating performance across periods when overseeing and managing the company’s business.
Each of the non-GAAP measures included in this news release and the accompanying supplemental financial information has limitations as an analytical tool and should not be considered in isolation or as a substitute for an analysis of the company’s results calculated in accordance with GAAP. In addition, because not all companies use identical calculations, the company’s presentation of non-GAAP measures in this news release and the accompanying supplemental financial information may not be comparable to similarly titled measures disclosed by other companies, including companies in our industry. The company may also change the calculation of any of the non-GAAP measures included in this news release and the accompanying supplemental financial information from time to time in light of its then existing operations to include other adjustments that may impact its operations.
Reconciliations of each non-GAAP measure presented in this news release to the most directly comparable financial measure calculated in accordance with GAAP are included in the release.
Other Terms – This news release also contains the term pro forma underlying production. Pro forma underlying production reflects the impact of closed acquisitions and closed dispositions as of December 31, 2023. The impact of closed acquisitions and dispositions assumes a closing date of January 1, 2022. The company believes that underlying production is useful to investors to compare production reflecting the impact of closed acquisitions and dispositions on a consistent go-forward basis across periods and with peer companies. Return of capital is defined as the total of the ordinary dividend, share repurchases and variable return of cash (VROC).
Reserve replacement is defined by the company as a ratio representing the change in proved reserves, net of production, divided by current year production. The company believes that total reserve replacement is useful to investors to help understand how changes in proved reserves, net of production compare with the company’s current year production.
References in the release to earnings refer to net income.
| ConocoPhillips | ||||||||||||||||||||||||||||||||||||||||||
| Table 1: Reconciliation of earnings to adjusted earnings | ||||||||||||||||||||||||||||||||||||||||||
| $ Millions, Except as Indicated | ||||||||||||||||||||||||||||||||||||||||||
4Q23 |
4Q22 |
2023 FY |
2022 FY |
|||||||||||||||||||||||||||||||||||||||
| Pre- tax |
Income Tax |
After- tax |
Per share of common stock (dollars) |
Pre- tax |
Income Tax |
After- tax |
Per share of common stock (dollars) |
Pre- tax |
Income Tax |
After- tax |
Per share of common stock (dollars) |
Pre- tax |
Income Tax |
After- tax |
Per share of common stock (dollars) |
|||||||||||||||||||||||||||
| Earnings | $ |
3,007 |
|
$ |
2.52 |
|
$ |
3,249 |
|
$ |
2.61 |
|
$ |
10,957 |
|
$ |
9.06 |
|
$ |
18,680 |
|
$ |
14.57 |
|
||||||||||||||||||
| Adjustments: | ||||||||||||||||||||||||||||||||||||||||||
| (Gain) loss on asset sales¹ | — |
— |
|
|
— |
|
|
— |
|
(21 |
) |
5 |
|
|
(16 |
) |
|
(0.01 |
) |
(94 |
) |
(6 |
) |
|
(100 |
) |
|
(0.08 |
) |
(968 |
) |
200 |
|
|
(768 |
) |
|
(0.59 |
) |
|||
| Tax adjustments | — |
(203 |
) |
|
(203 |
) |
|
(0.17 |
) |
— |
|
(23 |
) |
|
(23 |
) |
|
(0.02 |
) |
— |
|
(347 |
) |
|
(347 |
) |
|
(0.30 |
) |
— |
|
(531 |
) |
|
(531 |
) |
|
(0.42 |
) |
|||
| (Gain) loss on CVE shares | — |
— |
|
|
— |
|
|
— |
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
— |
|
|
— |
|
|
— |
|
(251 |
) |
— |
|
|
(251 |
) |
|
(0.19 |
) |
|||
| Gain on debt extinguishment and exchange fees | — |
— |
|
|
— |
|
|
— |
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
— |
|
|
— |
|
|
— |
|
(44 |
) |
52 |
|
|
8 |
|
|
— |
|
|||
| Transaction and restructuring expenses | — |
— |
|
|
— |
|
|
— |
|
— |
|
— |
|
|
— |
|
|
— |
|
— |
|
— |
|
|
— |
|
|
— |
|
28 |
|
(8 |
) |
|
20 |
|
|
0.01 |
|
|||
| (Gain) loss on FX derivative | 73 |
(15 |
) |
|
58 |
|
|
0.05 |
|
— |
|
— |
|
|
— |
|
|
— |
|
132 |
|
(27 |
) |
|
105 |
|
|
0.09 |
|
10 |
|
(2 |
) |
|
8 |
|
|
— |
|
|||
| Pending claims and settlements | — |
— |
|
|
— |
|
|
— |
|
87 |
|
(21 |
) |
|
66 |
|
|
0.05 |
|
— |
|
— |
|
|
— |
|
|
— |
|
67 |
|
8 |
|
|
75 |
|
|
0.06 |
|
|||
| Exploration Expenses | — |
— |
|
|
— |
|
|
— |
|
129 |
|
(30 |
) |
|
99 |
|
|
0.08 |
|
— |
|
— |
|
|
— |
|
|
— |
|
129 |
|
(30 |
) |
|
99 |
|
|
0.08 |
|
|||
| Adjusted earnings / (loss) | $ |
2,862 |
|
$ |
2.40 |
|
$ |
3,375 |
|
$ |
2.71 |
|
$ |
10,615 |
|
$ |
8.77 |
|
$ |
17,340 |
|
$ |
13.52 |
|
||||||||||||||||||
| 1Includes 3Q23 divestiture of Lower 48 equity investment. | ||||||||||||||||||||||||||||||||||||||||||
| The income tax effects of the special items are primarily calculated based on the statutory rate of the jurisdiction in which the discrete item resides. | ||||||||||||||||||||||||||||||||||||||||||
| ConocoPhillips | |||||
| Table 2: Reconciliation of net cash provided by operating activities to cash from operations | |||||
| $ Millions, Except as Indicated | |||||
4Q23 |
2023 FY |
||||
| Net Cash Provided by Operating Activities | 5,263 |
|
19,965 |
|
|
| Adjustments: | |||||
| Net operating working capital changes | (231 |
) |
(1,382 |
) |
|
| Cash from operations | 5,494 |
|
21,347 |
|
|
| ConocoPhillips | |||||||||||
| Table 3: Return on capital employed (ROCE) and cash adjusted ROCE | |||||||||||
| $ Millions, Except as Indicated | |||||||||||
| ROCE | CASH ADJUSTED ROCE | ||||||||||
| Numerator | 2023 FY | 2022 FY | 2023 FY | 2022 FY | |||||||
| Net Income (loss) | 10,957 |
|
18,680 |
|
10,957 |
|
18,680 |
|
|||
| Adjustment to exclude special items | (342 |
) |
(1,340 |
) |
(342 |
) |
(1,340 |
) |
|||
| After-tax interest expense | 616 |
|
641 |
|
616 |
|
641 |
|
|||
| After-tax interest income | — |
|
— |
|
(324 |
) |
(152 |
) |
|||
| ROCE Earnings | 11,231 |
|
17,981 |
|
10,907 |
|
17,829 |
|
|||
| Denominator | |||||||||||
| Average total equity¹ | 47,925 |
|
48,801 |
|
47,925 |
|
48,801 |
|
|||
| Average total debt² | 17,470 |
|
17,742 |
|
17,470 |
|
17,742 |
|
|||
| Average total cash³ | — |
|
— |
|
(8,444 |
) |
(8,589 |
) |
|||
| Average capital employed | 65,395 |
|
66,543 |
|
56,951 |
|
57,953 |
|
|||
| ROCE (percent) | 17 |
% |
27 |
% |
19 |
% |
31 |
% |
|||
| ¹Average total equity is the average of beginning total equity and ending total equity by quarter. | |||||||||||
| ²Average total debt is the average of beginning long-term debt and short-term debt and ending long-term debt and short-term debt by quarter. | |||||||||||
| ³Average total cash is the average of beginning cash, cash equivalents, restricted cash and short-term investments and ending cash, cash equivalents, restricted cash and short-term investments by quarter. | |||||||||||
| ConocoPhillips | |||||||||
| Table 4: Reconciliation of reported production to pro forma underlying production | |||||||||
| MBOED, except as indicated | |||||||||
4Q23 |
4Q22 |
2023 FY | 2022 FY | ||||||
| Total Reported ConocoPhillips Production | 1,902 |
1,758 |
|
1,826 |
|
1,738 |
|
||
| Closed Dispositions¹ | — |
(4 |
) |
(1 |
) |
(21 |
) |
||
| Closed Acquisitions² | 2 |
75 |
|
50 |
|
80 |
|
||
| Total Pro Forma Underlying Production | 1,904 |
1,829 |
|
1,875 |
|
1,797 |
|
||
| Estimated Uplift from 2 to 3 stream conversion³ | — |
— |
|
— |
|
5 |
|
||
| ¹Includes production related to the 2022 Indonesia disposition and various Lower 48 dispositions. | |||||||||
| ²Includes production related to the acquisition of an additional |
|||||||||
| ³Estimated production impacts from the conversion of |
|||||||||
| ConocoPhillips | |||
| Table 5: Reconciliation of production and operating expenses to adjusted operating costs | |||
| $ Millions, Except as Indicated | |||
| 2023 FY | 2024 FY Guidance |
||
| Production and Operating Expenses | 7,693 |
8,300 - 8,400 |
|
| Selling, general and administrative (G&A) expenses | 705 |
600 - 700 |
|
| Operating Costs | 8,398 |
8,900 - 9,100 |
|
| Adjustments to exclude special items: | |||
| None | — |
— |
|
| Adjusted operating costs | 8,398 |
8,900 - 9,100 |
|
| *Beginning with 2024 guidance, this measure no longer includes Exploration G&A, G&G, and lease rentals in the calculation of Operating Costs. Total exploration G&A, G&G, and lease rentals for full-year 2023 were |
|||
| ConocoPhillips | |||
| Table 6: Reconciliation of adjusted corporate segment net loss | |||
| $ Millions, Except as Indicated | |||
| 2023 FY | 2024 FY Guidance |
||
| Corporate and Other Earnings | (821) |
(1,000) - (1,100) |
|
| Adjustments to exclude special items: | |||
| (Gain) loss on FX derivative | 132 |
— |
|
| Income tax on special items | (27) |
— |
|
| Adjusted corporate segment net loss | (716) |
(1,000) - (1,100) |
|
| ConocoPhillips | ||
| Table 7: Calculation of reserve replacement ratio | ||
| MMBOE, except as indicated | ||
| End of 2022 | 6,599 |
|
| End of 2023 | 6,758 |
|
| Change in reserves | 159 |
|
| Production¹ | 678 |
|
| Change in reserves excluding production¹ | 837 |
|
| 2023 preliminary reserve replacement ratio | 123 |
% |
| ¹Production includes fuel gas. | ||
View source version on businesswire.com: https://www.businesswire.com/news/home/20240206009940/en/
Dennis Nuss (media)
281-293-1149
dennis.nuss@conocophillips.com
Investor Relations
281-293-5000
investor.relations@conocophillips.com
Source: ConocoPhillips
FAQ
What were ConocoPhillips' (COP) fourth-quarter 2023 earnings per share?
How much did ConocoPhillips (COP) distribute to shareholders in full-year 2023?
What was the company's return on capital employed?
What was the total average realized price for ConocoPhillips (COP) in 2023?
What is ConocoPhillips' (COP) 2024 planned return of capital to shareholders?
What is the expected first-quarter 2024 production for ConocoPhillips (COP)?
