Conoco Losses Grow on Lower Prices

ConocoPhillips made a Q3 2016 net loss of $1.0bn, a marginal improvement on $1.1bn for the same period last year, it said October 27. Excluding special items, the US major's adjusted earnings were a net loss of $0.8bn, which was a lot worse than the $0.5bn lost in 2015, owing to lower prices and worse exchange rates.

Special items for the current quarter included a tax functional currency change at its APLNG project in Australia where the second liquefaction train started up; restructuring costs across the portfolio, the termination of a rig contract for a Gulf of Mexico deepwater drillship and a deferred tax benefit from a change in UK tax law. APLNG is the third liquefaction plant onshore on Curtis Island, Queensland, Australia that uses coalbed methane as feedstock, and none of the facilities or infrastructure are shared among the three operators.

Conoco's APLNG plant

(Credit: ConocoPhillips)

Production was up 4% after allowing for disposals and downtime, and the company now expects full-year production of around 1.57mn barrels of oil equivalent/day.

“Our underlying business performance is delivering strong momentum as we head into 2017,” said CEO Ryan Lance. “In the third quarter we achieved cash flow neutrality, with operating cash flow covering capital expenditures and the dividend.”

He said asset sales were continuing and in October it paid down $1.25bn of debt. "Our focus throughout the year has been to lower our breakeven price, improve the balance sheet, position the company to generate free cash flow," he said.

It is further lowering 2016 capital expenditures guidance from $5.5bn to $5.2bn and shifting capital from major projects to US Lower 48 unconventionals. Operating costs were down 18% and full-year adjusted operating cost guidance has fallen from $6.8bn to $6.6bn. Guidance on both opex and capex was also lowered in Q2 this year.

The company’s total realised price was $29.78/boe compared with $32.87/boe which was only partly offset by higher natural gas liquids and bitumen prices. 

William Powell