COP - Earnings call transcript Q3 2017

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Operator

Welcome to the Third Quarter 2017 ConocoPhillips Earnings Conference Call. My name is Christine, and I will be your operator for today's call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded. the Communications. to turn Investor DeSanctis, now and Relations will call Ellen over VP, I

begin. may You

Ellen R. DeSanctis

Thanks, Christine, Wallette, to Officer Drilling Today's Finance, and and welcome and and presenters this call Commercial EVP will morning. Al participants Projects. Hirshberg, be of Chief Don our our our of all EVP Financial of Production, our

Our is shown presentation cautionary on today's statement deck. page two of

the forward-looking to could filings. make some our statements noted to estimates differ plans. will call in refer during slide We that this results and Actual due described and factors on today's also SEC periodic

We the some is our today's to also corresponding be can nearest of and this financial these call. comparisons facilitate measures Reconciliations across periods GAAP press on measure will in again refer in release to and help between website. found of to The morning's measures purpose peers. non-GAAP non-GAAP

I'm and meeting to Finally, up. And this your Q&A morning, that, questions to during we're to follow a to limit Don. going turn one going with over the

Donald E. Wallette, Jr.

Ellen, this one you, We've transformational side our start highlights a on operational and quarter. strategy. morning. and another was to with the decisions I'll company. our with third financial strategic chart strategy, the on and for accelerate the returns-focused key of Starting for slide left of our disciplined quarter impactful four good executed Thank number differentiated,

the we of San and our closed quarter, sales During assets. the Juan basin Panhandle

close that other several should We fourth sales progressing year. the early also quarter continued in or next

over billion bringing balance $XX the credit repurchased shares in year-end the to quarter, sales and date. received our XXXX. billion deliver year of quarter, We which billion rating We year, to In than asset representing X.X% debt, billion. during $X are the greater third our $X.X paid of another track reduction we repurchased outstanding expect under a billion. about takes the to on we during the debt target us quarter, we $X In a for debt shares $XX of billion be $XX upgrade our sheet for down balance to of to

another the buy Between back expected represent capital to shareholders XX% our flow to of of would the XXXX. operating to shares returned XX% expect cash share in We fourth equivalent billion buybacks, $X dividend quarter. our the and in of

the to quarter, extended year of balances financial $X.X our to slides. past built of billion basis, cash about momentum cash more excluding infusion. working $X.XX for to I'll out the maintain profit On accelerate column, in from our want $XXX I earnings use quarter few in adjusted Moving We cash operations profitable achieve by cash a a with impacted environment. and realizing this profitability $XXX to middle future in portion of a third share. neutrality cover detail flows results point of a pension obligations choice operating capital. this made we item cash that quarter funding we a were over flow $XX were successive million, second the or price an the generated a we've a to million

I $XXX consistent Excluding which billion, was is published CapEx the expectations our flow reduction On dividends pension exceeds sensitivities. CFO in mentioned. item, and year-to-date just operations $X.X cash and $XXX with cash by with from line despite basis, right a over the million our million

across covered XX% don't the year costs year to We neutrality. get were and a our breakeven now, our more dividends. require we flows market shown portfolio. operating we've As for than to Adjusted a lower our help pathway or CapEx year, lower cash as continue on cash have more to than price

last underlying a meeting of production day. Libya on for X.X excluding or dispositions, per-debt the was the results operational our allowed operational to release our we right. BOE XX% test at the share to lower our We completed the costs. quarter XXXX basis capital quarter Production loan last APLNG, grew at guarantee. on by We're a execute successfully to our scope lenders' targets. And of the million us all exceeding continue Adjusting adjusted Moving for year. final program compared third which to project financing

As detail, our cover or That's for initial $XXX more to guidance. reduction in XXXX of the a compared $X.X capital our we're Al to year will lowering million guidance billion. XX%

on reinforces creates remain recap, the outlook to committed and value. momentum. continuing transformation as prices improved that to again recently, returns-focused we've performance our disciplined, commodity quarter's delivering we to a company. for shareholder strategy build the And this made our while So We're priorities has

through to turn $XX by Compared realizations With you equity lower of Compared adjusted Hub improved WTI our MCF, higher improved around higher a disposition earnings, partly If to barrel by and price to over $XX impact results. an expenses and BOE. $X financial quarter, Henry the slide and about driven improvement with billion, realized walk dispositions. quarter commodity and five, per about slightly $X third quarter, of because prior the earnings average offset was exploration the adjusted year-ago I'll prices, depreciation earnings by the impacts. the averaging

financial adjusted quarter earnings on detail. website data the Third lower our segment The provides by right. on shown are supplemental additional

turn quarter. cash to six, the our flows during you slide If cover I'll

by pension million shown which in was U.S. I First, operations $X.X was green, our make as contribution decision cash fund. cash billion, the sources cash at to a looking our impacted mentioned, of from $XXX

will to opportunities increase forward. flexibility to we obligations. for payment also of long-term going across As acceleration look we sheet our cash position, strengthen balance represents serve and contributions an reduce volatility economic continue the This to flow reduce financial future which

billion. debt buybacks. billion through provided We shareholders quarter share ended the short-term distributed call. and to and investments. $X.X earnings sales, of and in the billion with of $X.X were was major used retire dividends The uses billion in other We to shown we $X.X cash last quarter red, asset during cash, which cash with of our generated line expectations source The $X during

covering on year-to-date flow first said, up running take to the left, turn company. cash I our focus you year-to-date If exceeded flows emphasize to we Starting free I'll more on disciplined the the illustrates as bars have This on operating slide capital spending distributions. slide with cash just flows of seven, dividend generation. to wrap than cash set and by investments the approach

second The of cash dispositions, bars shows repurchases. how debt set proceeds our share from and reduction pre-funding our

cash In in shown of addition time. converted to proceeds billion over will $X have proceeds be the Cenovus, of cash we billion roughly $XX here, to equity also which

So business in to well. run summary, continues the

to operations. me over let the Al Now to turn you color on it some give

Alan J. Hirshberg

overview our Operationally, updated quarter year, some for Texas. weather tough another we strong of including capital the a third quarter, rest challenges Thanks, brief operating had our outlook provide guidance. Don. of our I'll in highlights the despite here and

X.X our per allowed this day. to averaged reduction in per XX,XXX on performance X.X%. barrels global still million in this of As increase day. an us Don production mentioned, better XX,XXX day year, Despite the offset quarter per loss due portfolio represents barrel midpoint Harvey, excluding from barrels of a the by exceed to underlying Libya Year and Hurricane guidance production

Big operated two unconventional During six rigs the quarter, in in Eagle we Bakken assets, four the ran Basin. the in and in Three the Lower Delaware the Ford, XX XX

quarter This production Eagle the Hurricane included Bakken XX,XXX per was per unconventional of about day barrels from second XXXX the day of Ford, the with per was the XXX,XXX from XX,XXX flat Our day impact Big per to Harvey. and but Delaware. Three day XXX,XXX from

great project and nameplate Excluding Surmont The our a Alaska Europe, production major higher during now production have track XX our still Three quarter. running year-end. the third end executed across XH Meanwhile, this by oil Canada, is XX% well up projects. on Alaska, the we're with of continues first the finally, turnarounds of for full first gross Clair impact, under capacity. Bohai also Big left XXX% demonstrated the XXXX. end safely turnaround activities from significant of Australia, expected track We've daily XXXX NEWS shipped on X% barrels of port wells for would Aasta APLNG GMTX for been track Korea progress and a the The In sequentially. XXXX. completes cargos production on costs before making with portfolio, toward in first ramp also at unconventionals XXXX. budget. we this and spud through Norway of first day conventional at ran quarter. the late uptime. about the South Hansteen phase which In first X, are both In on oil by Work for project on for record In is in And achieved which XXX,XXX topsides continues we Ridge headed and to production

XX, We to second to update Now, provide We're XXXX time expect slide capital outlook. I'll our year. year moving billion. lowering XXXX spend $X.X our on now an guidance the for full this on

CapEx This less. our a from The for original XX% that's more expect to we reduction, our represents exceed underlying expect share now year, Despite we We budget. debt-adjusted X% capital continue do XX% guidance. production basis. a on and to production deliver growth, this to updated reduction guidance original

full full X.XXX On fourth we've day. X.XXX million million the per million the Below previous the is our and quarter X.XXX year day, quarter guidance between per barrels the range we barrels and can key guidance to year left list you fourth of and see tightened metrics. production side million capital, X.XXX slide, production to

closely remaining with are our tracking Our guidance. drivers

of a that's recap So quick the quarter.

well. said, As business running is Don

meeting on future an to continue our X. November providing update We our plans look forward at investor of and analyst to

I'll the now Q&A. turn So call to over

Operator

And Thank ahead. first you. question America. Bank our Please of go Leggate from Doug of is

Doug Leggate

to everyone. Excuse Oh, morning, hi. me, everybody. Good Hi, my throat. I clear needed

questions So many I'm not too forward-looking getting today, I'm on optimistic but answered -

Donald E. Wallette, Jr.

on. Come

Doug Leggate

one out a what tell Brent just can it I the forward-looking I we from strip all give the go may may. way the and about if so $XX now. one in quarter,

obviously are fairly levered that. guys You to

the is that changes portfolio little for brought the of the proceeds kind breakeven disposal bit beyond sustaining company. your the it a reinvesting cash between versus where choice in buyback the So program perhaps your and in narrative you about

weeks, you're by think debt-adjusted of know you what continued can into get a couple Conoco frame going does what a this growth world, us just for I growth? share to versus about $XX way per So in

Alan J. Hirshberg

title that you've for the as And written Doug, I the Analyst so week teed our it Well that, going like Meeting, next you of after it think answer almost we're slides one then, our predicted. of up for sounds perfectly. you've

Doug Leggate

Yes, it thought optimistic. go, a I'd sounds but give it anyway, I'd

parts real now a some this to quarterly exporting number. and minus So plus a Brent certain XX WTI really simple guess, of for again barrels more million one. is oil. question starting kind of It linkage, the My us thank X day Lower I week of so Brent see is U.S. real a that. close a than we're The to that seems between you to of pricing,

think you what relative that would is if you you it's seeing? you're Ford just leave Eagle Thank we help that with curious, maybe Do it think and the there. so, for I'm as how the could decisions impact go I'll So investment us you. sustainable, forward?

Donald E. Wallette, Jr.

I bit the part as our the largest is a this enough Brent. because production U.S. and you trades relationship. U.S. can that component Brent total, heavily our to little a you strong pretty Doug, exposed weighted is alluded When LLS LLS well our you what's had our similar have really an and marketed side large and Don. not much basis at Alaska of Probably on that on about and production that North WTI, that. Eagle look half Yes, portion we're so a is is of towards Slope, pretty Ford production know, comment to, not recognized to in is Brent of which

they that in there. they I So the going might I past, down impacts forward so same don't do break that we're not differentials maintained the the you would of relationships, expect widening have future. why in seeing those see the expect

year, in active quarters As demand export, second we've seeing going pretty domestically been I'd far year and but exports and as to now. themselves, back last this the strong say, first pretty we're in the

mentioned, we're And in or outside quarter, cargos country. WTI. third in so believe some to improve waterborne pretty inland I we're had within I we But the markets seeing U.S., relative to the I have think going Brent as exposed the going the and here country. any don't did We

Doug Leggate

no? if Don, is can or clear, marketed the capacity so XXX% envisage on being export up, be basis you a of Eagle to Ford Just obviously Brent

Donald E. Wallette, Jr.

I seeing arbitrage third the we in Today, awful an that I Well, advantage, know XXX% the the to that. see what would have exporting relative would the in cause lot. don't think were to quarter, we strength advantage and be didn't dynamic domestically.

something think is – be probably the go bit times mean, will be when I we had I XXX% but last if back you wouldn't there you country, and, expecting. that we a year, going see good outside

Doug Leggate

I'll guys. answers the see appreciate you I in Thank Okay. weeks. a you. couple

Ellen R. DeSanctis

Thanks, Doug.

Donald E. Wallette, Jr.

Okay.

Operator

Thank you.

from is question next Please Our Barclays. ahead. of Paul go Cheng

Paul Cheng

morning. Good guys. Hey,

Donald E. Wallette, Jr.

Paul. Hey,

Paul Cheng

position, must building now that a I in Don, I APLNG in you cash cash the flow we're presume believe and cushion a positive joint just for curious be venture.

stays do also from start here, the not payout but by the operation that? from if price the APLNG. dividend cash flow think million you I So contribution impacted cash when impact from not some the receive the in the mean, that $XXX the in your by pension distributing only will the cash Is quarter this partner way of to correct? that

Donald E. Wallette, Jr.

Brent we have, building cash, there cash have you're in $XX said somewhere I range. we've before, in Well, up do fact mean as the is do the that's in Paul, the we APLNG flow right, to net cash $XX breakeven

stay prices year, then to could well. quite for have yeah, where see a cash that expect we would building we next quarter year the we as distribution that venture. are from the of APLNG, fourth correspond they so, within And possible the and to if it's joint rest prices And been

Alan J. Hirshberg

Yes.

into with we're decision active next year that's about discussion be joint been payments the even they these we point. we'll build at an enough of that, we a timing. And no kind has want discussion out prices, going to excess on cash next this maintain So venture area But and that you're cash loan make cover now, right sure of But that year. absolutely taken in schedule to of at yet as in course right distribution building Paul.

Paul Cheng

jump billion I here, have that would of the would $X.X this suggest since revised the for CapEx $X.X you quarter that that billion. year, to now fourth And

by quarter. why You've billion a $X jump been XX%? effect we doing the be about What may see behind that that

Alan J. Hirshberg

Yes.

quarter. $X.X did this we So billion

Paul Cheng

requirement. – talk is also about consider you CapEx now $X.X also new And sustainable your billion what that, whether you really can is

Alan J. Hirshberg

to to two key forecasting some Harvey the XQ to the the the actual is this that CapEx XX. year But third didn't the in effect, just bit fourth that so Well, a that that's and exacerbated by get the the And in it quarter, and cover because there actually was billion in been due XQ Harvey in Lower a that's increase work on and spend, build to past billion we'll money still little phase because latter spent some we for down weeks. some And doing Lower as that $X.X drivers activity, quarter $X.X in question of were billion we more have weren't to project, was continues Bohai also $X.X number. and a that billion ramp. period $X.X through that you between But that for as to time. we're and have quarter overall we X increase, steady to fairly XX that on increases there in Bay in quarter quarter get

We programs to be both and expect drilling quarter to that to And going fourth also, Europe are spending up. be our we expect third in up, quarter. Alaska

key are the those pieces. so And

Paul Cheng

you. Thank

Operator

you. Thank

Phil from of ahead. is question Gresh go next Our JPMorgan. Please

Phil M. Gresh

good Yeah, morning.

the is spend. question. at level $X.X question CapEx, It's expected think about but maybe this a you feel billion think certainly a company grow I X% could mean, that like and been kind of on to choice, beginning you how anyone production year. how this obviously I to the has at rates of continue of first just accomplish little about don't do provide you follow-up CapEx of can at just then on types you whether these you a think able growth, Al, that color the that? this, of So

Alan J. Hirshberg

Yes.

last on really that plan production It's and a discipline. job do costs. capital year to large really we expected, allowed we and in reduced I outperformance successful mean, look of a call we've that spending last we our that growth big more see to and money the try base driving spend outperforming, the the as this done big spend resisting base. as as XX, quarterly than right XXXX, some the expect to really Phil, as lower better to performance the I been capital lot ourselves and you're on at is together able of to at really good this to out continue. our focus kind I projects, in were And the it, a at have looking last – back our inflation of do company part number laid I been in and the We've really travel we XXXX, around things the outperformance. different production have has I Lower has give time this for our to continued our think $XX it, on into those made high driving what's added that in a And of That's were a key said we to and organization think, comments of accomplished this billion money, we our a I understand side operationally we've us been quarter, out I I used extent places, as organization, amount efficiency. in on come that we what's of been part

think. running without you going I expect our year. can a weeks, is you in not show story It's our on But latest one-trick this that deal that. we'll this front to two think continue, calculations I So

Phil M. Gresh

Yes.

have is just key I basis. want to back Okay. the over a in quarters question, billion don't again, run one bigger XXXX. to front A the on go-forward tenets some you've that to for several slides buybacks past about a those that Very ensure but XX% to And clear. of more broadly. Analyst CFO Day, guess, the XXXX the $X second change Don. update real to XX% want of and between shareholder to talked you're been there I Obviously, be, This would of that today. no commitment the and not going were has

Donald E. Wallette, Jr.

be that couple a in laying No. Right, any weeks here of commitments. those for out Yeah, backtracking from you, Phil. we'll all absolutely no but

in So that you'll again see weeks. a few here

Phil M. Gresh

Okay. Thanks.

Operator

you. Thank

question Hanold RBC from Scott Please ahead. of next go is Our Capital.

Scott Hanold

on that color that bit in related cost question activity ask less little your on hurricane? a for. another Al, – down could that provide you just specifically I on seeing the If was service budget, quarter could what a Thanks. Are quarter. to part sequentially just spending capital color bit of was expectations? you related to a to change coming a And Was some little quite that? reduction

Alan J. Hirshberg

Sure.

more me resisting level, it a Let I talk ago, about talking a just as a mean little discipline, high this minute inflation part. was about but is there that. I at continued reflecting capital our is,

for I a Lower a talked the bit since had the tapping over little Lower ago a the has most halted the people brakes on think inflation part. its XX XX when tracks quarter that have really in the in that about, industry of

some to XX on And down earlier paying little our project were delay going slowdown so the little and rigs us that assumed in We've There had, in prepared little of aren't increases continuing we an the of bit major so, a across reduction. and I reduction Harvey of and thought has as in see we've is we a weren't in of been give projects budget, or in the seeing. mentioned that we Alaska, we But absence really savings. perform slowdown that and of activity is second some Harvey. Lower enough side and during a that there's been that of see to that well for we the doing one under-spending in And we mentioned Harvey you that's relative are then inflation is for year tiny to in work across piece would seen our my this where inflation we the assuming. continued also half, world. we the efficiency that has And bit GMTX, time have to had the also remarks,

Scott Hanold

Okay.

organic actually happening, So it, - it's stuff the So bulk right? of that's

Alan J. Hirshberg

side. seen also And is operated – should also reduction there's we've other right. one on thing some That's the I by there's others

we less little slowed would coming down the forecast, expecting from what some of from were our where partners in we them. a So from operating than plans AFEs as they've have a they're bit

Scott Hanold

Don. great this color. That's Okay. And one's maybe for

you a on how how ownership to You gave comments soon. on your path kind expiring Cenovus the that the go kind you look of monetize when here picture, at detail of of you some remarks more little ownership. big you prepared and want in and lock-up's the what it? down brief as Could you provide Obviously see

Donald E. Wallette, Jr.

that's right after equity a up November The was XX, to you equity pretty you $X soon. so This value little that. any currency, standstill, as at I least. believe. the is Sure, as bit be right market coming It free mentioned, The time expires really Scott, transactional market we'll know. around billion, now

we're time. not strategic natural owners, not we'll long-term owners, reducing over our so be So position

I that approach expect and We to patient. be you patient, our given we'll to should value afford so be think driven. can is be our financial position, going

Scott Hanold

Thanks. Okay. Appreciate that.

Operator

Thank you.

of Deutsche is ahead. next Todd Ryan Our from Bank. Please question go

Ryan Todd

one Maybe U.S. What's count averaged in into on know onshore? onshore. I we first rigs trajectory XX think current quarter. in should U.S. XXXX? about you how the And the that the the rig Thanks.

Alan J. Hirshberg

certainly things but program. us mean, expect course, I XX the disciplined I think week can a we'll see for very of front I XXXX Lower to running that say terribly after the XXXX Well for you can without cover next, from that

of kind not we levels that activity subtract here see opportunity rigs number we see anything I to and mentioned. general going have that same add think rig situations, And crazy there You're level we certain of but at that a in may going the two you pretty weeks. we're as at comfortable kind and have you're of or

Ryan Todd

months Alaska, the The And side, up a project Alaska region, planned ongoing bit well in by either the may what the as discovery XX in in radar area you've role have plus the point. the others growth next Alaska over on about couple I driving Can in and flown maybe Okay. under Willow region? could mentioned talk of play you mean on little that Thanks. what discoveries to as in maintaining activity volumes modest or you it then projects. the mostly have a times this kind

Alan J. Hirshberg

we news good all been to GMTX things projects in Alaska, from this going that everything NEWS have there XH well. Well, of are pipeline going a to that have on of well, lot CDX

Just take we for volumes an barrels we moment. FID CDX gross a a and XX,XXX now example day. for took plateau XX,XXX we're of projecting were When at a day barrels CDX, on

projects that we continue So we've to already exploration to have that us like this allowed wells extend in maintaining our Alaska said drill winter. production five to and plan

we plan state to that, the so starting leases for In were to year gross those late you of of picked wells of by west. And wildcats that acres of the last new that also those two seismic we for way permits Willow the up addition on wells and there, picked lines other what submitted hinting last three along that. the out that are year. some appraisal we're December opportunities are have up around to seismic at new our in XXX,XXX about we work Remember, and

see west, out today. a projects opportunity to that over FID the also to And we hope next. pipeline get on the And so we're nice line to we have of working additional GMTX but

Ryan Todd

Thanks, All Al. right.

Operator

Thank you.

ahead. Wolfe Our Research. Sankey next of Please question Paul go from is

Paul Sankey

afternoon. Good

upcoming the couple I'll more ones Meeting, a Given just of and you modeling specific ask Analyst questions.

follow-up. along talked for I modeling? Should billion, separate And flow then one-off, going as $X.X is going forward. you a be a or the that do into we efficiencies increased Secondly, the a about that lines, potential very to have payment? your $X.X the on First for Thanks. pension, cash consider lower, billion much push future long-term spending our we

Donald E. Wallette, Jr.

Paul, this is Don.

Paul Sankey

Hi, Don.

Donald E. Wallette, Jr.

that you the address pension question I'll had.

should unique opportunity fairly a discretionary we a substantial the this had that think I as pension make view to you to contribution fund.

reasons. lot that reasons, a a next these but of include doesn't your answer few significant variety our plan going doing our of companies days to I explained for forward contributions years. see You question,

Paul Sankey

Thanks.

Alan J. Hirshberg

in forward program obviously a have through the the and CapEx XX I be last of Don't weeks. the our couple on talking And at we levels we guess forget from XXXX here Lower year. about we'll rig in were low been CapEx, that ramping

get quarter so kind at we're that And quarter been over increasing that the today. to to spending of has levels

Paul Sankey

it. you a some on Got Australia, bit issues. little that? out gas there's talk press domestic Thanks. And been Could about

Alan J. Hirshberg

government next offer sure before restrict an about the net Yes, what facilitated that and XXXX. cargos contributor, the particularly that we've exports making calls that And decision to been will projects gas we price that taken government the go these that by have that market is spot agreed year, the everybody gas last they've the recently this in on the seen restrictions to seam have to similar Queensland the And offer the basis the export Island to on out would operators all at is domestic of is domestic a using planned market dom working in we'll press decided that LNG net-back equivalent decision has they've three not have we have Curtis coal in few any talked spot that where sales. we considering in east. you

an net prices. that LNG into us, would've We're us net-back gone achieve know gas gas from that. that's of you for we've of some XX to whatever And noise well less the in economic LNG, wouldn't best for just we our able than an selling we and know indifferent to were things the same could've of to example we're But do of the also is those that we where at had in we announced are the less to spot not gas today back. petajoules obviously, the seen have And gone domestic that than enough us agreed sell so sort press, backs some domestic business operators we that this of market in the bring the in been where marketplace. is spot course, cargos here There's so selling standpoint press net our gas spot that sales, latest because domestic just objectives. to about

on, that into added of the now being XXX will market are sale year. with we So north be gas that next petajoules APLNG selling domestic of

dom just APLNG to next We're latest XX% we'll Australia. eastern XXXX, be in is far shy. supplying So up And the XX%. of in almost already so sale, year, about what with gas done we've with this market just

Paul Sankey

know That's but net-back about not, this talk can is you how interesting. don't public you or comparability? the I calculate if

Alan J. Hirshberg

Well, it's I reasonably straightforward. mean

the are. our where to from in to costs have pieces are the big. You some course, And a is from get individual significant and transportation where distribution just market look liquefy know LNG, get to Australia – on you the what all customers. sales the the paying prices when you're costs, miss of piece same tailgate ship. to to there thing people sometimes gas There's they we're at our that's The producing to of so transportation significant

for all the so wellhead is about the just we And getting the to back equivalent to way think it. it's way net us the back

Operator

Thank you.

to Our Last Al, Scotia Blake go is thought commentary (USA), Scotia interesting. Blake Please quarter, to next Folks, that Fernandez you Howard of good Inc. back question Weil. I the provided. morning. Fernandez was Capital wanted capital from go I ahead. - it

kind globally. of begun witnessing? all? at is $X I'm the deflationary seeing to you going for seeing of XX that that to the in said trend that plateau I you Lower sounds to front. or $X XX, Lower international just deflation Or think has out. you were on It flatten still were change curious like are every were you that increase in you seeing inflation $X

Alan J. Hirshberg

out in little of third through corporation has the even were said, are deflationary in an not U.S., a there's internationally, time, offsetting so begun The so first saw we say And seismic out a other two strong deflationary deflation still those still the deflation the it's bit. offshore quarter we in as Yes. in We're the software. a half, gone expect We on Blake. seeing same versus percentages XXXX. flatten I rigs, year. we as a to offset. vessels, equipment, seeing costs, what be subsea flattened Hey, bit At each as are net international XXXX to support as in trend the as we've

see with deflation our in a said on of in minute to we the even Fernandez year. We we've seen And - Blake were down versus some this industry earlier the contracts bit, a continue seen another (USA), ago, in Scotia downticks Inc. a Capital U.S., is actually, U.S., year. Software where the area the flattening. slowing as where we I some

helpful. Thank you. That's Okay.

this this The kind perfectly bit I'm the but I'm detailed, need to moving some of you about trouble pieces. And that's of is to trying follow But if to of kind think second with guys sorry is on something the production. up question, after, XQ just having if a guidance getting little fine. I'm

of somewhat is net yet day a full to right there? negative. close increase pieces all then Barnett, kind barrels moving XX,XXX the so that addressing probably and a You've then but out contribution, quarter come offsetting And from Am a of Ford. the that's Juan Eagle of of obviously San Panhandle an the I

Alan J. Hirshberg

Inc. Yes, Those are Scotia right. Capital Fernandez (USA), that's Yes. moving appropriate Blake - all pieces.

Okay.

so thank need, of kind what covers that you. think I I

Alan J. Hirshberg

Yes.

XQ after those And so of underlying, our numbers see quarter adjust sales, when compare of you'll growth fourth year. of and about I look kind the number, look at and asset X% for think versus at midpoint the you you last

over about should year quarter get you quarter Inc. - Blake fourth XXXX, Capital year, Fernandez XXXX a (USA), Got Scotia it. So to number. X% fourth

Okay. Thank you.

Ellen R. DeSanctis

seen takes basis. a on midpoint chart (USA), Blake, if you to Fernandez that Inc. Blake appendix from in Capital there's it a Scotia same-store midpoint the - you sales haven't

Okay. Thank you, Ellen.

Ellen R. DeSanctis

You bet.

Operator

Thank you.

Neil ahead. from Please is Mehta of question Goldman go next Sachs. Our

Neil Mehta

team. Good morning,

think we I on know head The excluding first Libya, did in Libya. quarter. production the question here stick its I it had was about up but just often

I So the very on any and it sustainability a what's obviously region. volatile there thoughts what in you're of seeing curious out was

Alan J. Hirshberg

basis. you look we to quarter. a an barrels X,XXX back year what And net if averaged XX,XXX if because the for the sort of of year, on last current case Okay. That's is Yeah, all just look Libya in at and north did is. day currently Libya, production third our XX,XXX we're interesting from we you a rate

one on this some lifted basis, the and of three quarters increase. that that's up so six got lifted the we're active XX a Libya production. in current year XXX,XXX of in that's from over three Libya rigs first gross in We fact, helping third here the We've we to XX. just drive it's production workover quarter, in recently, So lifting we're another so cargos

our guess, bottom-line So it's in production. getting particularly number, significant to be year-over-year a more I

Neil Mehta

hyper evolving then that that obviously And the of been expectations terms sense. U.S. compliance takers curious recognizing on have a of makes very But of in for thinking some is market That lower-for-longer We been up you seen how and guys rebalancing? make clear plan follow where crude here. the has we are price and OPEC up have – Yes. growth guys are environment. you're moderated. price crude you terms the about do clean good and the But you products think

Alan J. Hirshberg

things also we large long same the up. cetera. things hard things we're also, of rigs, a than profile such et to in that wildcards think can that's not And just predict, ago the there's a production tighten on the the Kurdistan, going to going U.S. watching you it's Yes. talking like things with were were things et cetera, U.S. to you name a I give of rollover expecting list are mean, is quarter people latest with that's that numbers going I But tighten. about, seeing It in different there. also Libya

at or and of for tight keeping So four are focused where quarters results continue keeping structure, below in results to the on weeks we Analyst at things on we're company good prices really Day in we our out now. disciplined there counting good you've five financial you'll But few where that us us, very on can prices. the right where we not last seen give get to anything here us see for a just happening our

Neil Mehta

the on quarter. good Congrats

Ellen R. DeSanctis

Thanks, Neil.

Alan J. Hirshberg

Thanks.

Operator

you. Thank

Wells from go Our next question Read is Fargo. Roger Please ahead. of

Roger D. Read

and Thanks, morning. Yes. good

Donald E. Wallette, Jr.

morning. Good

Roger D. Read

here it's the Since morning Time Central Zone. still in

the let's with bit stick to trying look Just a little not much too talk back. forward,

the a sort have base we that to can amount? material levels, LNG you competitive in in mean seems typical of forward? run APLNG by projects a and Does $XX other at that think lower as was $XX of assumption breakeven kind curious and these range. I words, those go can mentioned then I XXX%, You if I it get though, to running the it. breakeven's APLNG in more exceed

Alan J. Hirshberg

achieving kind think on Well the performance for of talking been that breakevens we've about based we a I while the I now. mean, have been are

not performance news, XXX% into really. and the numbers, is so baked So our that's

Roger D. Read

as So gets? as - I'm answer just good it No, you to don't have that.

Alan J. Hirshberg

I our on I'd capital operating continue impression. side our the upstream to sustaining costs to no, going of drive the wouldn't that work on actually have costs leave Yeah, But of we that. a down and to lot say project. hate

one and improve but the on you what built so a into the does for And been things we throughput. asked that XX% really we've plans. a expect something you. it. of was I to significant you venture have It's doing change about, while plans that That's push It joint to to continue trying comment just now, just is down your effect. dramatic our pushes shouldn't and from the breakeven some, extra

Roger D. Read

I all with know imagine. was would volume a the more know, better I I little structure, No, you drilling typically, activity, cost unit just,

Alan J. Hirshberg

Yes.

Roger D. Read

OpEx talking give – any terms on on presume about earlier the sort know I the number, but of give of a since front, you part the how And seeing the is us any inflation guidance side portfolio you you were non-operated can your side? are well? of when as OpEx the of you inflation/deflation function I cost what the OpEx in of was more question, Follow-up cost CapEx that

Alan J. Hirshberg

mention OpEx numbers. Yes, so me on of side, just some the let

quarter number Our focus sales we morning third on built into XX% that on, we this XX%, down versus obviously down XXXX. the are the that. that published OpEx And adjusted same is asset quarter that in just is there OpEx

we're and doing right the couple so percent but midpoint It's we're original accomplishing guidance, midpoint our budget X% confusion look from higher a budget range, you sales originally we're X% that asset volume, store same a based on X%. was at volume all If on that the to with sales out and our basis X% increase. take that, basically X%

all transportation, still extra et cetera able And so that comes our the with eat barrels been meet and basically those guidance. OpEx, we've to extra

our we're we're not doing So as in certainly the into forward OpEx there, I corporation. look what on work done

XXXX and world, we versus benefit around focus is improvement that the side, continue it We to little on there. I From of so us have the the story expect see what CapEx, was about bit inflation on talking to far. it's a that XXXX I similar to to lot will the a pretty additional in

Roger D. Read

a you Great. Okay. see And we'll in a about half. week and

Alan J. Hirshberg

Okay.

Ellen R. DeSanctis

Roger. Thanks,

Operator

you. Thank

Jason go of from Please Jefferies. is question Gammel ahead. next Our

Jason Gammel

more Don, on debt contribution. of much. let's could attractive further pension the also obligation. some very and Thanks I repayment follow talk relative say, level funding can If you made about that to the up maybe payment the what than, discretionary maybe just accelerating address

Donald E. Wallette, Jr.

Yes, Jason.

good cash it think I to put portion what the a we way this looking, So looked a is, large we're is at work. was of really that balance way to our

incrementally had of the believe. with that. it to other of respect question your and pension compared that we doing there. we're in much then cash in balance is retirement was type investments advantaged it's level it And I on reducing an the longer-term return from that what higher-yield moving can the to sheet essentially to invest the so funding economics investments, We So arbitrage next best around to return had, bond short-term and opportunity fund low plan, the

had the I bring before from to liability this contribution billion with XXXX. pension So funding believe would I since we've qualified this that to The the $X.X spin of to company $X.X funding down level billion, be it plan, be, that correctly, if over before that the down it our for fund little level And and about was contribution, U.S. a remember be about in of U.S. this to will highest billion. will up would $X right the bring XX%. that around

Jason Gammel

weeks, Eagle of hesitate premium clear. take further about Great. almost this optimally. question, follow-up to Very actually in we'll that another Ford had they ask your writedown hear a their but in sure lot couple about And talked a I given acreage I'm pretty today a did at and how down operator would than produce Ford significantly spaced what big the position Eagle

there. at was the position I level you operators maybe hoping So what from some high other of just a could distinguishes very it your address

Alan J. Hirshberg

operator's our reservoir the the to Eagle comment different clearly can't there details the it in I very We've very obviously the any plans Yes, areas. development the of on in but results, to so specific characteristics, Ford. of tailored been us. apply doesn't other We're deliberate

in sweet a running room. know we're You lot that the right We've spot. got of

Analyst we deck last You that that Day, of tells Ellen year's it's remember showed last year's map - XX me page at that showed

Ellen R. DeSanctis

We material. can you last show year's

Alan J. Hirshberg

Yeah, running there. room showed we have how much

that. So really we anything like or no have concerns

pretty came to us a and to back continues make Harvey even right full and hurricane and Ford beating Eagle from up outperform quickly proud production. Our took back

Jason Gammel

that. appreciate I Yes.

just distinguish the of that. it's operators. think some you Appreciate useful from I to other

Alan J. Hirshberg

Yes.

Operator

you. Thank

question of ahead. Simmons. Please next Baber go Guy is Our from

Guy Baber

Thank good on where to that major taking that projects gave your it base like the maybe production then a the so from up? did as date the getting have Surmont, outperformance ramped max speak Malikai portfolio. for where maybe on to that job up? are looks the up? highlighting question. KBB has gas on the fully And color we But of been ramp to performance rates, you now. then you some ramping Al, You side, you closer is specifically, that's well, right the Can year

Alan J. Hirshberg

the we'll fully ramped or we'll Surmont, early full rate. of basically year, year be at end next On our be Sure.

And a had KBB gas availability by and toward are lined years right and that of have several has significant that. we Malikai, getting an until hit won't long from our next infrastructure been we're the which XXXX. of has non-owned still issues, pretty time, slowly party third side ramping story, been and because the there in we've odd limited So some for end kind year, for have been down. had maintenance plateau

been into we've weeks of to us grow MLNG. a fourth are what recent from And the it allocated a volumes KBB in seeing allows rate bit from KBB and as quarter be into volumes higher we part higher basically so to expect actually,

versus in that effect. that of because XXXX see And so I think KBB year-over-year, for rates higher XXXX again we'll

Guy Baber

call some That's with about into Yes. on going side, a partial thinking higher out there with XX I'm XQ, activity specifically my you And CapEx capital And Are specific next is variables you Lower highlighted driver there. helpful. contribute to would the into spending any then follow-up bit associated there of lower might higher function a basis. guys that offsets the a year? CapEx going get projects if on that's forward and of cycle can. major just you capture continuing Or to if fall any other to is or where deflation year longer a spend more you year be over to noteworthy Surmont, efficient project set going off maybe is

Alan J. Hirshberg

parts moving of there, to answer lot a question. there's that Yes,

so detailed a segment at perspective. plots going how capital pieces give Meeting where we are add the And perspective show a and all fairly up from volume we to Analyst you those both have charts a some two in weeks and you that production

to best I answer that's that, charts. way the is to to probably think So those point

Guy Baber

Thank you. enough. Fair

Ellen R. DeSanctis

Thanks, Guy.

Operator

Thank you.

of Our Molchanov next question Pavel from go Raymond is James. Please ahead.

Pavel S. Molchanov

Thanks for taking my question.

Just two quick kind of housekeeping items.

fixed-price what spot can what's your in we market? Asia of being are spot APLNG watch LNG picking sold the you in remind up, prices exports As portion versus

Donald E. Wallette, Jr.

From domestic Don. contracted to is this of contracts customers and China not market under in XXX% the that's Well, long-term to Japan. from is the dedicated APLNG, gas APLNG

the market. to can and customers spot those obligation particular right reduce the any of XX% much available capacity as for that so to XX% as by a year, Now have up their make in

Pavel S. Molchanov

Libya. it. on Got then And

Alan J. Hirshberg

domestic those we've downward in the about, this that I government available spot making that, that what's taken to customers XXXX have in can add for that's our made been these in gas. with tolerance fact, cargos and quantity available about XXXX, as discussion

Pavel S. Molchanov

then And on you're so up Understood. BPD. Right. to XX,XXX Libya,

to that were pre-XXXX would number levels, how being pre-revolution, back higher much get all If get normalized you equal? else to

Alan J. Hirshberg

net, XX,XXX rate ever Yes, were that's back define again, in we at. there if of you kind the were go normal to we can you when if the range XX,XXX back,

Pavel S. Molchanov

it. Okay. Perfect. Appreciate

Operator

And final Thank Heikkinen. go from you. Hall our Please question ahead. Michael of is

Michael Anthony Hall

terms do mine the quickly from on A very during lot contribution averaged Surmont? you Thanks up but much. of quarter addressed, I on following from in been of question, that that, have what Surmont third the guess prior have

Alan J. Hirshberg

volumes? terms the In of

Michael Anthony Hall

Correct.

Alan J. Hirshberg

XQ Yes, was number XX,XXX Surmont. the a barrels day for

Michael Anthony Hall

out maintenance as that? year it. about capital up, the kind how of of after Surmont's about could should we we coming ramped Okay. Canada think And levels provide effectively for think If you

Alan J. Hirshberg

about mean? CapEx, you the You're thinking maintenance

Michael Anthony Hall

Correct, yeah.

Alan J. Hirshberg

pretty to we'll We're are pretty you a level. some show spend at a the with to low Meeting a to sustaining we've so in a technology Analyst kind I that up. have need of on down it's to things, it's low margin we've going adds kind got low of and planned show improve CapEx weeks dollar, to our but particularly is that I've there couple Yeah, the of sure to number that work you doing the how improvement with level. we that down point handy, gotten a now, but projects mean other Not been some

a done improve et market Surmont still allow weeks. there is margins us given our couple to and there side, in some the current we'll bit a work be at little to conditions So that to cetera., on talk about diluent there,

Michael Anthony Hall

one Okay. I about that is about Great. spending recurring? not there think capital kind anything fourth spending like or as And of levels, as off I we time then guess quarter within should think one that level

Alan J. Hirshberg

one-off No. those kind or like dry any in expecting a I'm of any big quarter. fourth things lumpy type the lumps, hole stuff. of I not think of expense any can't

Michael Anthony Hall

Okay. helpful. much. Thanks so That's

Ellen R. DeSanctis

much. Thanks, Michael, you very thank Christine, and

out. today. seeing We to in close everybody would look couple you for If weeks. time a your this Thanks forward

Operator

and you gentlemen. ladies This thank participating. Thank you. you concludes conference. And today's Thank for

You may now disconnect.

ConocoPhillips (COP) 26 Oct 172017 Q3 Earnings call transcript