COP - Earnings call transcript Q3 2018

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Operator

Welcome to the Third Quarter 2018 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. and Hello, everybody, earnings third call. quarter welcome to our

CEO; Projects; of and today Wallette, Hirshberg, Chief Strategy our me are Exploration Production, Lance, Technology. Fox, Al Chairman Joining Drilling our of and of Ryan Financial Officer; our Matt Commercial Finance, and EVP EVP and and our our Don EVP

for the the year-to-date, have to information. then very Our all agenda to and third review slides included financial your key focus quarter, milestones call note operational usual from remainder year. are our They're for of in Ryan from the of and backup our some is straightforward. that for deck I today's our highlight today's areas of the want in

our So today after go is Q&A. directly remarks, plan Ryan's to to

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

corresponding to or also this filings future SEC. We some results could will refer that then, with make to due factors financial some non-GAAP call to forward-looking plans. we'll our finally, periodic Actual the And those comparisons and in during the described estimates refer measures the statements today, Reconciliations differ over slide Ryan. our on that's on I'll peers. the and to now, found turn to this can measure measures call with to release and the our periods across and also be facilitate to nearest in GAAP press non-GAAP morning's website. And

Ryan M. Lance

the achievements for the the everyone, and to year. Slide third welcome, and XXXX of our been nine exceptional Ellen, call. from months first ConocoPhillips. Thanks, has another X summarizes today's year quarter

we and out. execution. quarter prices means flow underpinning allocate We're up in in shareholder-friendly execution we And our all By by generation consistent staying discipline strong flow, we're laser-focused a not quarter Our and on is disciplined about predictable, in higher which is cash free free returns. flow value generate disciplined, then cash activity. way. ramping allocation chasing cash Discipline strong proposition

In commitment in pace and with the about increased since At our a representing strong month, in driven and across our value buyback results business confidence shareholders the buybacks the for X% the year. shareholder plans these of Our increase of strategic we authorization our sent announced we to Starting $XX program we CFO, left. this continued XX% our XX% XX% to target. for have This creation. billion, the we're our on quarter XX% began. That's target represents dividend the third combination this to the shares total the increased our dividend market a milestones same of elements has to throughout in XXXX on about return $X to July, buyback time, our billion. well year. a quarterly our the board in rate. The strong of excess that of signal to Earlier

Importantly of distributions and delivering means on all focusing capture. were all value organically. that funded priorities strategic aspects on distinctively, and We're these our

settlement agreement with August We a effort. fully the of in milestone we For in to a there's about lot this $X ICC interest example, PDVSA. had was of award announced a billion. our recover arbitration in that This proceedings major reached been

of settlement. we that This million quarter, $XXX recognized

are we collecting. So

$XXX Finally, and million our continue announced over months. few portfolio have the we optimize about additional to past of dispositions

was we're In on efforts $XXX from of third XXXX. per but quarter $X.XX ConocoPhillips million generated oil the was production perspective. operations keep our Brent interesting barrels third ongoing almost quarterly from costs. throughout adjusted weighted mix earnings. of share due $X.X billion relative improved a has consistently adjusted of our Brent performance the billion, in mitigate Stronger inflation The basis per also a of benefiting financial per we to generated X.X And the continuing $X.X over on time quarter, earnings some lid year. was risks or Our barrel prices help, to here's day. and equivalent and and last

So being lower XX% being volumes today prices then XX% as we lower. despite were and profitable we're as

we're always So absolute value, on per isn't not better. focused bigger That's share and why growth. growth volume

and in portfolio key have the low outperformance We've resilience $XX of to the for of boosted underlying driven and Our strength upside efforts Cash improved what from price less the is peer-leading without billion. than cycles. was was and that's our billion the our and we believe $X.X $X.X efficiency WTI. company to CapEx third prices investors sustaining capping quarter through operations significantly

more of billion $X Of almost cash Year-to-date our returned $X.X billion. CapEx which $X is this free billion by operations our generated dividend over flow, free flow, exceeded funded been billion. has to cash we than $X cash So owners. from and buybacks. This

investments We debt, also of cash our end on $X.X At the we CapEx the about in strong further liquidity. and short-term reduced billion of while keeping hand. check maintaining had and quarter,

sheet great balance is in Our shape.

XX months of The rating agencies responded was they noticed upgrades. target achieved reduction ahead debt Our have recent schedule. have and credit with

agencies. three single are of by We A-rated now the all

all Importantly snapshot. give returns, proposition is me since about let our value current you a

execution continue the they return have Our is performance of and is organization double operating to because the now improve. our and XX-month of capital in this business again digits is the capital XX% side year. those on cash employed on quarter consistent, and trailing returns delivered possible Strong done all over employed predictable return on should financial like

was basis. growth of Libya year-over-year excluding oil a (XX:XX) debt-adjusted That's an [X,XXX] and equivalent. (sic) production absolute million underlying X.XXX on X% barrels on basis XX% of share quarter Third per

on much a note. on expect Our strong disciplined plan XXXX we very to out track and close remains

our in GMT-X the annual were well with spud in conventional exploration Pacific up We recently in and and are Alaska expected our recently and quarter. turnarounds Asia running Louisiana, started operations projects Austin completed first sanctioned Alaska additional key in this smoothly. two startups safely Our Chalk. We Europe

good we're momentum XXXX. building So heading into

we'll plan. in December announce operational Now our XXXX

a roughly we're that from with there. not in surprises line think And be this to clear year's this indication acquisitions. capital straying so excluding our no our expect can capital You is strategies, I

we return-focused price launched believe proposition. At this for marks strategy value the our that We're anniversary the This is leadership is quarter right we domains. disciplined, cyclical consistency when This maintaining in discipline and year committed time, established through what second role business. of a executing of to our we fundamental.

Our of unhedged lower a prices. sustaining price less offer gives to we $XX distinct at investors advantage higher us than and prices exposure

can works formula we're free and of on it. know We That's through as into to flow our returns on to we remain the focused formula execution head to cycles. disciplined you the Now, shareholders count delivering and sticking cash generation strong superior for XXXX, us that it's a business.

the So turn over Q&A. call let to me

Operator

you. Thank

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

Philip M. Gresh

on question to capital morning, referenced number since ramp obviously for you're good and spending. you you're guess sounds to give willing that thanks up Hey, for not color I'll ask Ryan. XXXX I like that. looking the the a It

think, than in you I you higher a in we XXXX? roll-off expect some have, obviously increase, because XX Lower And do any ramping a we are activity You some it if projects here did quarter. But, say, where lot would now that have scenario not, from there before? price spending consider in do the fourth is

Ryan M. Lance

thanks. Phil, Yeah,

of Al that. we're I Wanted on that bit but we to a that equal. think at capital of see of staying the Al of to line As we some about today the to – important. kind moving about signal more all our bit I in I'll kind where you I give pretty chime can all think XXXX where expect are detail being kind to are there disciplined in said, a you let our committed be portfolio plan. little with some roughly And things a on provide we're color within But of parts headed.

Alan J. Hirshberg

Yes.

XXXX year, XXXX. don't have in to also changes how yet. versus do new it obviously Alaska that to but number Big in make all out. for acquisitions significant Really the consistent the we exact to attracting this you market going turn Lower with it's we've CapEx in a X the will to XXXX Ryan's pretty in haven't already higher we So We'll the announce We plan December that Phil, our hint XX. activity And our projects in where we strong year. do be given some been then capital set and at any have level

in We've Let Alaska. we our are in we've – and where mention the that year. starting we're about significant XXXX a really have got But Slope. $XXX increased next there major will deal up. CapEx or XXXX to and phase And capability numbers we we progressing those got to GMT-X Western all that be for finishing the we that spend of in CapEx minus is Montney of have are still assuming Barossa working but projects million in And me some up you addition, add when few roll-off our And also plus interest building adding Kuparuk also on it's there. North the that capability it's water increased that and at things. versus in close CapEx. more processing that appraisal

that you've also Bohai the Bayu-Undan $XXX roll-off, in-fill Ridge, and about Phase wells. Hansteen, X add that you So Aasta up got Clair million. When all it's

So those roughly offset each other.

what and we're that's activity was major a roughly describing we that roll-off XX so levels. offsetting is the our roughly where staying in how project plan Ryan get roll-on, And to are Lower similar

Philip M. Gresh

There's of Maybe would helpful. the these lot a been takeaway. issues? second just I the guess, as of here about of commitments how Conoco positioned you takeaway. very for be could That's is And frac Thanks. the Okay. you for Al Bakken on as then, well topics just elaborate NGLs day on talk question some

Donald E. Wallette, Jr.

Maybe Don. is this Phil, take that one. I'll

Lower there is with from to barrels good the about We're additional get can growth see starting and for everybody NGLs As Bakken well. a the any overall to basin certainly within that production in the not day processing seeing XXX,XXX year-over-year XX, Canadian far Bakken the Relative imports pretty constraints. pinched as competition in capacity takeaway capacity the as we're fractionation in the shape.

or not place be companies the expansion we the XXXX. in end So NGLs Bakken. have the the on And processing – up problems any anticipate of expect the gas work don't the side in seeing toward we that we're with midstream we that plans takeaway or to

Philip M. Gresh

much dynamics? Yeah, DAPL Any the Don, to I versus trying clear the on on those crude just put rail? how just was talking be understand the you on do more was to color I Bakken side. on

Donald E. Wallette, Jr.

going I'm generally three I but market Yeah, that to Phil. way we or get there. know Bakken don't kind I'd different happy think about the the pipelines, specific be that centers think into I of to

much But quarter how of the we directions. indication other to is refining go I sort one Cushing XX% constraints that's quarter, the local in would exposure the pricing; I estimate then through you Mid-Continent, of within pipe it good believe kind probably is commitments to and going the location. shifts And be third into the so Chicago the got flexibility to so a You've say we That Clearbrook. different our to market. there. have we sold the and Rockies currency that And say maybe area three seeing XX% And Patoka, then Cushing center each the access all to have lately Rockies. XX% not would an third about Mid-Con. we're type in the takeaway is of gives from

Philip M. Gresh

it Okay. over. Thanks. I'll turn

Operator

you. Thank

is ISI. Terreson from question go Please next Our ahead. Evercore of Doug

Doug Terreson

Good everybody. morning,

Ryan M. Lance

Good morning, Doug.

Donald E. Wallette, Jr.

Doug. morning, Good

Doug Terreson

is get On the quarter. years. and you four from $XXX million think guys the and over million And by PDVSA half you Venezuela, year-end remainder expected that Ryan payment mentioned in a $XXX another the I

think that guys any this schedule? how the you PDVSA doesn't correct those So the Is recourse it? thinking payments? if is, And two that those things? Venezuela, about question you second is in So are is my to there profile the right given have about on way for uncertainty pay cash

Ryan M. Lance

Doug. Yeah,

million that's so. this that we next we $XXX remaining been and recognized receive third part clarify million as point of $XXX month million He Don's the and Let year. the and And settlement the yeah, from a on $XXX should should or for can total million revenue in But, quarter in the me just get we $XXX part chime of between of then the too us. well. the in

Doug Terreson

Okay.

Ryan M. Lance

that maybe amount have we $X I'll get provisions elaborate back paid Then, ConocoPhillips. we And until that after of billion some payments to the go a quarterly full and bit. they full to on we miss a monthly start Don let or if little the a is assets

Donald E. Wallette, Jr.

that a facts Doug. Yeah, maybe more around into down drill to just few

the And of to of oil of as payments million On settlement or refer that enforcement million, We that. element the collection And called part has from X mentioned, of commodities them And payments our $XXX and early million was of been most comprised really. Ryan of some of award. had marketing you'll ICC have as we seized the to a part barrels that oil $XXX $XXX – two that that our go. recall initial we value components for billion probably agreement million of as that actions. $X as around was it inventories about crude we've lifted. That so still was been notional the

cash were last October. two And the first was first the other component week week of payments due million The actually. September, $XXX cash the that PDVSA provided of of payment each.

second in due payment November. is The

payment so takes the up go or And believe, million that next during we'll then, that million mentioned around Ryan full of for, the into then XX $XXX sums to $XX recover quarter schedule total XXXX. that we $X long a the And it's we quarterly anticipate collect it a as however I billion. quarters

Doug Terreson

Okay.

priorities it's since your mentioned area? you you XXXX surplus then spending Brent I the when debt build cash going not much, which would think and Ryan financial increase funds this was becomes, I Okay. performance on around Meaning, think above going balance of performance been forward that reduction for the if quarter if continues What repurchases? you third or And is Then – the the for in the some $XXX. to performance sheet, best to the is the mostly are also obviously strong what And be allow of then or question second that share thinking complete. programs are parameters plans forward? implied rising

Ryan M. Lance

we're level holding activity to We activity kind through We've kind of level. like constant of Yeah. Thanks, a cycle. Doug. execute the said of our

buybacks address the We'll at we're in think But bit watch constant executing. net should little we're to time, where that fall so a in say, we'll the December. the with that does as flow market ability sheet. detail more now I see to of that's we're you'll that cash and the feel balance that we cash the we going. this – kind that's And you do we say that's of debt our generate And rise do with also heading we the what bit. see averaging see probably And what, comfortable level how expect see on generate point right a I'd But that that. in –

Doug Terreson

lot. Thanks Great. a

Ellen R. DeSanctis

Thanks, Doug.

Operator

you. Thank

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

Paul Y. Cheng

Hey, guys. Good morning.

Ryan M. Lance

Good morning, Paul.

Paul Y. Cheng

it variable any production Al. Surmont cost price to maybe Al, have below guys you cash I must close this not given don't for there? know, the is if in shut-in that be pretty your

Alan J. Hirshberg

Yeah.

talked in be We some or our terms also maximize round-off cash the last had we But shut-in we in outage. the netbacks have really our and some had the numbers. talked about by But the are Syncrude that there. – in was the the trying in do – by quarter call quarter. of curtailments back in production have to volumes just it will we driven terms right the production of small of on I curtailed fourth production that third about driven that

Paul Y. Cheng

– any deal, intention Surmont the new production? to related have guys well the a you Do to sign

Donald E. Wallette, Jr.

of good on, going we right Surmont have rail now. Paul, blend a on bit yeah,

on we've rail like trade was XX% and I think sold the something into then the center. numbers. pipe it of third rail, little more going rough than are between had a the the split the coming bit kind quarter U.S., to maybe in And These maybe maybe of evenly pipe. pretty Edmonton amount to U.S., XX%

Paul Y. Cheng

given And, could there's worse get have some to you fear get better? Don, you any before increase far situation do intention that that

Donald E. Wallette, Jr.

that is in I rise And XX% XX% see No, And the the – increment going U.S. almost in rail. in fourth yeah, all That's mentioned, quarter. going what, right. that's going quarter, on fourth we're the above the quarter. exactly to even third to to

expanding we capacity. rail our So are

Paul Y. Cheng

these contract those on based long-term minimum spot? are And are Okay. volume or all

Donald E. Wallette, Jr.

onerous. are term as five-year hear are before No, these these rails don't contracts. that not insisting. the they're you and as long got We got that the terms I contracts in know about – the got deals

us so bridge next intention years. few over pipeline So major the to to is a the expansion,

Paul Y. Cheng

or the up you're right. then showing And realization somewhere your price up showing else? All that rate in benefit you're already

Ryan M. Lance

it Paul. Say again,

Donald E. Wallette, Jr.

it Paul. understand I didn't

Paul Y. Cheng

looking mean, benefit, what given No, is if discount much that than the would I rate to cost the the imply. less you're at value

that price. assume minor get you once the I So down it you value

And it be comparing price if the that you it much so your realization sell Edmonton, there, to higher. would

volume, is there we that benefit someplace I in So for? that than guess that realization those my is you're the look question simply should will see or on if you you the up report higher just price else showing is

Donald E. Wallette, Jr.

our far will by pipe realizations to at Currently to does it then more or followed up by in the highest from show in in No, going generally realizations Gulf and vary going into Because teens, low high the it's it's quarter rail next. give least the the is – not cost say rail. arrangements the is it the to that is the and teens. Cushing one in under Coast to

Paul Y. Cheng

me. there's capability the shift by because just early in free to you more in active not guys the to final on be A do that of export Ryan, And Permian, trying be whether Where from Gulf bottleneck sufficient into bottleneck Okay. some the that you up XXXX. the the stand to industry we the as were one going we're Coast country may capability. export debate? the accelerate in the trying middle concern for

Ryan M. Lance

specifically. more gets Yeah, the Permian chime industry thinking same lot the yeah, most we'll more and can comment eliminated how a on Don is well, pipe exporting I the crude. about I'll from Gulf let let at as Don looking been bottleneck as to moves Paul. thing in has in that see be But, we're Coast, we the

Donald E. Wallette, Jr.

And require plans Houston pace. think along proceeding place at expand Paul, in Ingleside we to capability. are There both good in think Corpus those a going and are the the is plans export Yeah, we Gulf to expansion. Coast

Just ConocoPhillips, over some give million numbers XX something to we've you the sold docks probably on barrels year. this around

lot quarter, from depending to the month-to-month strong. barrels that a other Eagle quarter-to-quarter exports XX,XXX $X barrels all average But XX% about be on terms, Permian, we reasons whether or the arbs Eagle of on the would those transportation not for in average Eagle Gulf Ford our why Currently, are our open don't that's the to going So, – represents or the we're not. that's year or lease. the sales. helped day netback Ford. vary from third so a realizations about waterborne of (XX:XX) our have have so Ford realizations. plus WTI That's to one our about And In it

day. So, wave really Ingleside the of more performance about Gulf. August, Corpus just there. Right into XXX,XXX industry about industry, barrels But recently from area exported about of you're coming a day And barrels capacity. export the we good a generally an think production Permian has and the capability asking XXX,XXX they the now, in

So, XX% of right capability. their now,

If barrels day we you a estimate at a move surplus up day, a Houston. capacity of in XXX,XXX to the August about so barrels export exports And of capacity lot million Houston. were Houston, X.X of Port

and to late buoys has day and like that export plans Corpus active going capacity million things a dredging XXXX, barrels XXXX. Now, grow adding that to X over are by

production. is of obviously a depend So, of the to lot I Permian think on going this pace

to Corpus in built Just planned looking Permian pipes are at being schedules, out to first. the new Gulf of toward like go Coast, going the those looks it the probably pipeline the

then see the once the we'll Port go a probably Houston, then come the Corpus bottleneck. Permian initially. pipes the that bit And in channel on of to at little the from But alleviate of should so ship bottleneck

at look these we probably than late back in But when particularly be there's that and Corpus, talking probably probably – about years. in some to at up, probably we're going think, of rather it bottlenecks tightness, yeah, months, pipes in we months terms start-up. as So, XXXX

going we be don't problem. a So to think this significant is

are We to I important actively years. our our that think and Now export going over confirm we capability discussing be capacity. been regard. that's mentioned I that next will expanding in the few have

Operator

you. Thank

Leggate Doug from of Lynch. of is ahead. question Bank Merrill go next Please America Our

Doug Leggate

start guys may? – I I everybody. you Thanks. it your it quarter. impairment And new? P&L something me through the or fairly is it's asinine the Good the question, on the cost-cutting If – going still on? you're third and a nonrecurring rolling with frame Can housekeeping could in for getting you in initiatives still really just if I Are on. with some done what charges that morning, or Thanks is is charges restructuring noticed legacy

Ryan M. Lance

chuckling to go Al's ahead. ourselves We're got, yeah, Doug.

Alan J. Hirshberg

Well, Yeah, still we've hit and since that no, had We that I mean, the the a original OpEx to done volumes the planning XX,XXX we've target, we're the never guidance we're I can – barrels our talk despite our done. we're billion. increased day to higher that. not start of year, about $X.X

our effectiveness our increased to reorganization our XX had fill. and focus Houston us the and there our about is this unit But And prices shaving done so, we've been productivity We of including we've that sort costs we we of cost. have a that back barrel one example up. center our staffing operating we've year, didn't on that by things about continue a organization Houston by open $X.XX as kinds organizational of reduce off allowed to recently doing jobs XX% oil come an of in has as in even Lower had the

severance And are so alone that expect have allow by with that to XX decrease us that $X.XX our Lower barrel costs associated a some effort will about G&A But year. cost we that. we next

not away so it. So higher it's quit that. Even we're focusing are to prices that's and continuing work that's what associated to continuing so can for We're with. us, on we work on back

Doug Leggate

the appreciate I answer.

OpEx? always again asinine of a clear, to an billion, that be part The transportations that. and bit transport, to $X.X includes right, Just not

Alan J. Hirshberg

kind controllable our call transportation. costs. we It of includes what it's Yeah,

got transportation, other including and has it in costs. it costs So G&A also it's lifting

Doug Leggate

there on as So so the Alaska well that's piece not? like or TAPS and in

Alan J. Hirshberg

there that, in the Yeah. TAPS? What well. That's was as

Doug Leggate

in That's well. there as Yes.

to it – pretty obviously, you. one. My Thank discipline. capital Ryan great. Okay, the set as quick you relates have is really It's high follow-up bar relatively hopefully guys a

is mentioned, the is, on coming momentum to stuff a stuff question production. You've competing helping My you got out Al there these there's off of which also through project still the you get that on of been as balance tailwind as rolls of for. online have appear lot things spending guys lot that obviously the the a

you For about Qatar LNG well ramp-up example, already. the talked that as Barossa as in

kind do I'm you XXXX? what plan environment us curious longer-term happens today sustaining where see of give the on So as the And think could to just the I'd capital maybe given beyond refresh that you a appreciate inflationary you if capital well.

So basically what's two Thanks. parts to assuming like some of and that; the leave sustaining it capital you've the today's longer-term won I'll CapEx, in environment? those there. projects

Ryan M. Lance

facility pretty I good But Yeah, in flow. more we're in that. pretty Matt to that And Territories. thanks, competing LNG – in you're right, have Doug. Darwin, to to be can coming the capital, successful very can need Qatar he's close I'd in for hopefully we're sustaining cash – generate North our make we projects have the then sure and backfill trying Northern we'll to will free exploration in ultimately, we we're maybe Field Yeah, going say, we Alaska. chime discoveries expansion on some we disciplined and in

December So in in to coming off and we portfolio. on as that plate. with steady keep pilot are in within can Al the said, going about discipline. scope mentioned continue keep the the what that and But We've in how But have XX a the that make we'll ultimately here portfolio projects capital, exploration the we there. – to earlier, detail things our Chalk. the then thinking let as well. we to the as have our Austin capital and Montney. we'll Lower some we're – we've Matt and plan forward I our adjustments that won't – we're results in got on lose But all the term long sustaining in side. Specific And doing got and that see capital XXXX to we're look we're rolling won't starting we account we to stacking in for unconventionals. coming in We portfolio spacing a what about that. at in how on And we talk we're more we continue the thinking the some and that going make in discipline chime sure about describe more manage We'll the

Matthew J. Fox

might Yeah, would you happen And would Doug, capital actually me maintaining price. see increases year over sustaining to on time. we the I sustaining remember, we Meeting I last a was asked lower at said think focused sustaining about what Analyst capital what that question in you the were similar but

what anticipate we billion $X.X We'd move So moving was last billion. capital that to about the year is next talked sustaining so. XXXX expect that we'd $X.X and ahead to or through year

a the sustaining capital that's amount barrel. of the So same the below not about in But increase in sustaining price increasing. production. $XX price is increase as The sustaining is still well

capital sustaining not as in and So but any production some sustaining at price over time modest is getting the in increasing, as seeing we're we're we increases increase anticipate all.

Doug Leggate

been this be on So, your last CapEx any on on that Matt, there inflation. billion? just clear, call the year up you for $X.X to ticked impacts inflationary Has

Donald E. Wallette, Jr.

on level higher if a sustaining talk of key up thing having a you not is XXXX that. Yeah. Like Matt the cost said, XX%, effects driving go going inflation your that's your No, that's But It's XX%. to up like. about Doug, just production I production. can goes really

Matthew J. Fox

and in reflecting like Canada on. the it's so things acquisitions so Yeah,

inflation-driven. not So really it's – it's not

Doug Leggate

lot Got guys. it. right. Thanks All a

Matthew J. Fox

Yeah. sorry. Alaska,

Operator

Thank you.

of Our next is question Alastair from ahead. go Please Citi. Syme

Alastair R. Syme

from first this Matt, bit might that. question little a on follow Thanks.

certainly pushed curve, of on piece in shale updated point? your is the through people so look sense that the observation your interested cost you've cost cost supply I'm lower a the saying assuming get are market up As inventory shale still summer, the on this in the that? at a you some that You expanding is at being

Matthew J. Fox

in early been about actually the year our year, our seen No, that work possessions and from associated is supply the – unconventional talk next we'll have curve resource still existing with and updating the what increase later we more can in land cost of have that. decrease in a be finished we and an supply with But maybe it. we

So we resource cost the the the are in reduction reverse. in increase seeing supply an of or either quite a not

Alastair R. Syme

Okay. or Eagle or... is across Matt spread And specifically is Ford is that – it the the sorry, shale that portfolio

Matthew J. Fox

It's spread changes whole across so designs efficiencies the shale in as recovery completion portfolio the reflecting on. and a and and increasing basically

across it's portfolio. whole the So

Alastair R. Syme

My on follow-up just scenario sounds analysis. It your like.

you You the on the you of analysis still anything It sounds unrelenting factors see? of the side shale. and sort How's Is look believe global demand like at up? supply. shaping demand in all scenario there

Matthew J. Fox

now I supply mean mean of relatively unconventionals. now in so a that's we're side right would for in I the – be on yeah, high demand happening. that place the the scenarios. just we're unrelenting our still scenario And

in got place increasing probabilities see change. out. we every seen but any where We year we go we've really haven't it significant time. any seen And scenario a we're change year of look out monitoring the so and those supply in matching reassess So and try as we we process haven't really, playing a this through those how on demand scenarios

Alastair R. Syme

so Great. Matt. Thanks much. Thanks,

Operator

you. Thank

of go is question Bob next Brackett Bernstein ahead. Research. Please from Our

Robert Alan Brackett

specifically? arbitration. arbitrations, I other the thinking what Could you about follow-up I'm had PDVSA a with talk ongoing Venezuela on for the that means

Donald E. Wallette, Jr.

is Bob. Yeah, This Don.

expropriation. biggest we by which for related So The two the Venezuela claim is to ICSID arbitration, Republic the arbitrations far of have a against other Venezuela. is

I and think, we're this that's XXXX. that announced And be we of in previously, been will made of public that results fourth the we've we the to quarter in since damage had told that expected being year. that quarter year, slid, first now of results indicated be those next informed the award

and that is related other an or potential The not offshore award oil development, a smaller project, to Corocoro, was ICC arbitration. heavy an a that's called award

actions these So, interest arbitration all to different in each relate there's how other. sure I'm

what address comes we what with extent is came to ICSID, if we've higher would up similar looking for – expect, a is dual wouldn't this what an this that which up the said award, ICC for with that, offset. they there be spring So, issues example, we would then then recovery be the past

just So, Venezuela one would have might result what ICSID offset determine through compensation additional to the from other. final go us. owe we'll to the And

Robert Alan Brackett

already the offset ICC claimed higher So, of you'd you're ICSID saying if was that award? against sort the number that

Donald E. Wallette, Jr.

extent the same to the addressed they Yeah, that issues.

where address. – be yeah, awards. that be case, between a probably for significant there's wouldn't of a ICC it dealing with Now, components a But, amount there different the potential the they're that instances potential there's In overlapping. overlap didn't will

Robert Alan Brackett

very Thank clear. Yeah. you That's much.

Ellen R. DeSanctis

Thanks, Rob.

Operator

you. Thank

of question Our Please Société Herrlin is from ahead. next John go Générale.

John P. Herrlin

Getting plus Thanks. basis short-cycle, back on to to fair sustaining, going long-cycle? CapEx question, plus the the you're XX% that say Yeah. to be a XX% still mix rest

Matthew J. Fox

bit less Well, billion. it's two-thirds $X.X at I is, year, sustaining the don't This sustaining. in roughly know ratio be two-thirds, $X.X billion that than mean, what it's but will a I range. the

John P. Herrlin

Matt. Thanks, Okay.

Matthew J. Fox

And stay we to would expect John. similar, that

John P. Herrlin

Thanks. Okay.

With so seeing when be the gas water going mode? and will we're the the testing price Montney, you're beyond in place

Alan J. Hirshberg

Yeah.

fiber-optic the in talked that XX-well the drilling We're spacing So, in X fact, well already the really pad past system. pilot. has and stacking proprietary Montney, X a diagnostic now XX. now well putting the put number been about we're in we that of drilled, our in right And that's right we in

handling systems; from there all made and on support lot liquids to of processing additional a flow lines, map appraisal water phase collect out also production and gas the to future comes help plants, mode both appraisal the currently We've on so there. construction development commitments progress. data in is the the entire side opportunity next to the this our of that extra in using But the acreage underway of we're the that. all that is also So, takeaway

So, you'll see to next come online that year. all starting

John P. Herrlin

Latter half, Al?

Alan J. Hirshberg

in Yeah, half the of Yeah. next it be will year. back

John P. Herrlin

(XX:XX) Thanks. Okay.

John P. Herrlin

to little me or one of a us Barnett year, a is Still you're the to do out ballpark? going like much come sense things can Last for on how give you dispositions.

Matthew J. Fox

million, the $XXX $XXX announced We and around Barnett, Yeah. at Sunrise million. the the

Yeah, So at action to come billion be be. the it we those that be that average $X to on to could over continue portfolio still sure dispositions of in on would looking strong the it of recently. the and at are the time. – will And expect be we lumpy, billion can indicated a taking over But that announced strategy in time looking nature. of to make lumpy is the aspect that we we've could we as is as we ones $X past portfolio what in that the but are sort sort

John P. Herrlin

Thanks, Matt.

Operator

you. Thank

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

Roger D. Read

Good Thanks. Yeah. morning.

Ryan M. Lance

morning. Good

Donald E. Wallette, Jr.

morning. Good

Roger D. Read

the keep let's with bit. guess theme here for I Canada a

you're to think Would on that's be development for we that another anticipate Kitimat. we should big it a dependent the got project of – announced Montney we as So, would lot gas go? LNG doing able should where Or ultimately about exit route?

Alan J. Hirshberg

Yeah.

current Our going yeah. traditional on doing going south, gas that Montney to Kitimat. coming work we're export more far to so routes not is and It's

Roger D. Read

maybe pipeline or then routes other locally? identified alternatives that your for what's And

Alan J. Hirshberg

pipelines to There right pipeline about really ones mode our to of near of the which a to that But, pipelines bit talking meet capacity Yeah. our on reasonably some We're talking take and are full period of a getting have new full plans time, we're built. we'll being over quite come time. of over in past which acreage, are now. not

Roger D. Read

base then we one of through Okay. of just earlier you spending, production efficiency of projects. of in that or then shift forth, the expectations; to a equivalent deliver whether terms million to with the another the so well straight-up and seeing Thanks. growth back about that's you're wise? And kind growth, and gains should is projects change productivity question is lengths lateral as But the expect think CapEx walked yet completed rate to to going the be from growth versus ability kind coming the we production the of new $XXX just in

Alan J. Hirshberg

us had we're Day we'll another continuing data do that with Analyst year. – this gives certainly to like to laid of – driven some we higher a in that than XX% production Well, it. is seen we of CAGR more and makes keep a XX% out outperformance course, this But, harder worth indicated year our that that has of the what referenced. should better the by largely that quarter's And be expect that growing been it also you level of we've you've you

expect – continue that breakthrough not to without right have along you that these what kind new comes this maintaining that you seen keep CAGR we've yet of large we XX% improvements some I'm wouldn't now, would same So to have year. that with allows you

we'll quarter. complete the to of our that more so we number increased drilling, and of new increase us end that continuing increased production, of wells on the we on we which of with road CapEx more to that's so, our side talked improve one get time. the more than we this has CapEx and this one signs – out about drilled got plan. year I But it more don't technology to any year. see – the does the last wells but online And we're That's rigs, ideas our same wells over more things to increased year plays at on that how things the was that efficient has led this see on the continuing had in

So that what talking for with production the we're next plan year. we of on all that the volumes working that's we'll December expect. of be And the you and about around CapEx details is part in

Roger D. Read

Great. Thank you.

Operator

Thank you.

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

Neil Mehta

very appreciate to ask opportunity I much. the Thanks question here.

given And curious our of relative in into Lower relative And for of certainly early in year-over-year, was of which to terms XX surprise any the your model. the X are a XX% on then, how thoughts numbers of thought views going own year to were surprising. So, levels any sort next expectations. terms tracking growth basins I up the activity. Big your those

Alan J. Hirshberg

Yeah.

just So Paul was onto some of the about. things I talking was

barrels – day year. from day X XXX,XXX barrels is the quarter the quarter, last the third XXX,XXX at oil look with Big of for up equivalent same a you that's per the If over at

the that's of about out of you're Harvey points should that I XX% growth that referencing. effect. XX So by kind a that is start saying

for year really to XXX,XXX the quarter once due barrels proper about support same in around at. been the that XX% Ford. And the X that's growth The to of day it's Eagle to for going number terms this barrels a you we – at same the is third talked down That's we're year-over-year last Harvey, was with a really year third XX% this But that about has to from once XX% look Big have of idea consistent get quarter led year-over-year year-to-year growth The Eagle XX,XXX a Harvey. the So, was XX%. Ford's up Harvey adjust Ford lower what the about versus a more day year-over-year really, we're since last – day the by in XX%, that of XX% more quarter kind you in levels continues barrels capital Eagle even a lost third adjust effect. that to increase. year, quarter we XX,XXX quarter last quarter, first we've

we this year. So, some I that benefit extra think have gotten

with doing Some Vintage than wells the from even – been I of this because talked But better what we drilling. is completions we the wells; past, better expected. we've X more outperformance more about online it's also than had efficient more our in

out analyst doesn't time. I And The way. in that so, number continue for that meeting expect what the kind we can that talked to next produces. see work we run over numbers as plan CAGR don't But lay math that and the of our a about similar we rigs year, of XX% we'll generate

this that of kind call outperformance but on a on some performance is by OBO, the bit Lower last the spending in not operated going to due the talked spending. had. even about on XX, XXXX that a of little the others, huge outperformance last is of quarter mentioned some we've increased to Big I of on volume piece, X get course, in production. OBO higher increased XX. about from of X part plus the is not You're call, And with the we as the that Lower That's

Neil Mehta

seems is consolidation? organic PXX about got still like were the of role Qatar, just Conoco's that follow-up with obviously talking about helpful, nice the runway you what's that but Or Alaska think you opportunities? how Al. you in a message is here organic and Big prosecute around you – the do The the and the Willow case It X, most those opportunity is and That's set team's M&A?

Ryan M. Lance

the that lot, our when the some we what got M&A Montney, every back course kind North kind pay We're were in Slope, brackets the on each we what year, price little did over Louisiana with And of company And that's the with about front opportunity the executing foot respect couple improve of that Well, the have we're We're pretty kind only we Kuparuk. in for extra me opportunity do did doing the which year persistent. last probably of that bit. And to patient. organic some opportunities. work, that been of Austin asset-level now, the the we how of Neil, bit a of the Western of we its is look set. buckets out. opportunity think portfolio. particular we've first And three the to we buying, year with agreement piece development area. I in trying good control to think close little two a We're this, we saying happy, years in afforded of getting those again. in, And we're of over to as and we've get an of And case, think on right tired up but you the Chalk. year acreage of did we We'll quite part a adds; Alaska

with watch we the and through down-cycle M&A going We're companies always at and the And go it going them, the right that's companies that know opportunity still patient. And look this bigger And tough an think to are we to company some they're business of frothy and or it substituted, now. kind occurs. on believe that we constant We all, But when what them it and like. pretty to deals because you're at referring we a a large another hurdle in to we're persistent. we'll probably have cycles. is needs look be needs for of competitive basis. I current be the large Now, supply small prices, on

Neil Mehta

Thanks, Ryan.

Operator

you. Thank

next Please of ahead. question Devin Morgan Our is from Stanley. McDermott go

Devin J. McDermott

question. the Good for morning. Thanks taking

Ryan M. Lance

morning. Good

Devin J. McDermott

a the the more what What XXXX Last plans. locally activity rig about see I XX more wondering, to Lower follow-up activity Ford. term, to was on begin had the I of realizations for to need you're planning the through as just would to out longer reallocate even there? you you're talked to going just Delaware? investment Eagle in and shifting And Delaware you a or quarter, quick the seeing

Alan J. Hirshberg

Yeah.

lay on execute the did the about that the did Permian that rig a about the on also in on call. the Eagle one from of conventional we talked we talked down Ford Delaware rig we So, that call. to And we last shift last

us we plan Delaware. moving will about. expect don't So our done back have for see that those things talked to the in I rig a we that don't be I XXXX. that

we, most in great settled a be and will have Ford, think with advantageous to all the capacity the see issues I it hurry opportunities out. Permian the we Eagle really, getting that the have And takeaway do that. once flexibility in we the that to we're not we in do

the like it's don't move our about to And And that expect so, our I take future. in the call think anytime when flexibility deciding we to I talked in and last going immediate just back. time on we'll be use

Devin J. McDermott

Makes we sense. you structure, cost thinking next there or profile overall about higher given bump a on given really And we the had is free philosophy about, it. longer-term? think that growth right I the as even How I flow one a what the dividend saw have question level the level? was dividend second guys view cadence years sustainable low few you should strong around the growth the cash And a now, over recently. of Got

Donald E. Wallette, Jr.

the move our upcoming and of board, with kind to review for set the our we years. to a how the company wanted with we plans fourth dividend. better in Devin, the cadence strategy It – quarter plans fits Well,

a going forward. cadence for So, like us it feels better quarter, fourth

the consistent I to be think ought on to think as increases basis. think and on about and count predictable, you ought an I you it dividend, reliable, annual

be And of couple a so done the predictor to describe we've what I past tried going forward. over think should we've what good increases fairly

Devin J. McDermott

sense. Makes it leave there. much. Thanks I'll so

Ellen R. DeSanctis

Thanks, Devin.

Operator

you. Thank

of Fernandez Company. Blake ahead. & from is Please question go next Simmons Our

Blake Fernandez

Hey, Thanks for folks. question. morning. the Good

Ryan M. Lance

Good morning.

Blake Fernandez

exposed really there, no viewed we lingering have guess, address just out grenades there to become overly late are I've need more to hand as that sharing but I of confirm imminently. Production never wanted as contracts Conoco I and topical there,

Alan J. Hirshberg

Yeah.

me cover one. that Let

say out list or that our PSCs, look next years our disclosed of XX-plus expire And sheets. in been they've three XX-plus in If we've all the fact got years previously so. you in

So, of Bayu-Undan long field next big China, there. of for is so the that there's term this course, a set really no which was net XXXX we're plant. but not negotiated it to September a going that volume be there's day, about too that expire timeframe. We talking the XXXX, time barrels recently, Darwin news a in Panyu, year. the X,XXX extension, in long out about to that year. in We've not out in us, Then, That's nearest ago, one-year But to one expires a been gas supplies item. originally

production be that as have queue yet. there the XX-plus we But by date, three a on haven't with low time been about for Production a an going quite to for extension zero – you to a applied time to years So, the bit in ends. I'd there low we are And production say the but the you down we have all-in-all, from expiration. the answer license. they're the where production that non-event we've relatively That an next same all suspected. in for are But, those now out to us get we recently And so have Corridor basically, kind XXXX. recently to It the don't ConocoPhillips by expiry XXXX. low. But the will it Indonesian that be time for. something is the license applied in would government Indonesia, just get goes then, be for either they're it's we them, of in dialog we approximating PSC which or the expires for

Blake Fernandez

I Thank appreciate you, Al. that.

may I can I how on should that kind has kind think and should think the that's on how that it's down The the the moving discuss forward? rate, One, of of each been you then second – where question, because And just I we question, about of going be any tax thoughts moving secondly, forward? in the of adjusted guess modeling-oriented, about more this growing, but U.S. just was really quarter. a specifically, but over-lift tax Don we more rate two-fold. quarter, suspect progressively that

Donald E. Wallette, Jr.

under-lift Yeah, second quarter. far a in that Most as well Blake, position year-to-date, on on in a was an yeah, it's Alaska forward, bit from we're about over-lift it's I pretty would barrels as XX,XXX in as the little on day. the of year. quarter, far Alaska. balanced, And the the the And going under-lifted as actually coming say

quarter, you about fourth give the as really think under-lift. a I I an reason over-lift can't can't you So, anybody of any or guidance. an why would project think

concerned, expectation we're evenly today our be sales matched. would pretty So, as and production far that as is

late the far we're as not Of the course, liftings, on change can over-lifted year in cargo in an year. as position but things

Blake Fernandez

Okay.

Donald E. Wallette, Jr.

on gone the tax effective our And rate effective X noted has that points. tax rate, down you

basis an or on I think on a lower, was it maybe so, adjusted reported bit XX% and XX% little a basis.

affiliate their tax third at which the higher in tax jurisdictions pre-tax low we higher our in and our than clear that we I in think did have tax equity affiliates jurisdictions level the quarter. the during income did

kind it within that my of brought expectations. So is down. of range XX% really the

driven most expect was there. settlement. I the jurisdiction it and reported Venezuela that quarters, of our being at lower the as XX% mix so the mix, XX% think adjusted a mainly when to generally, not we by be to in our look surprise kind as production And really that ETR, than far

tax brought So reported so $XXX ETR that special to has so it, as a down to million that very consequences or since that low that we item, and XX%.

Blake Fernandez

appreciate much. very Helpful. Thank you it. I

Ellen R. DeSanctis

Thanks, Blake.

Operator

you. Thank

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

Scott Hanold

Thanks.

this Al. think question's for I

in obviously stated You Ford. good Eagle you've the some results

what, in XXX,XXX I probably, barrels think you're basin. a producing net day that around

grow do that get your if is I'm is mistaken you to more think And mode Where What guys continue could is it or As capacity you point be to a is for you. an what look forward, of you going to? quite a not out? a are all-time to at ways which there sustenance And think? you record, there? this there do

Alan J. Hirshberg

Yeah.

Scott. right, You're

signed barrels a a capacity third Ford. because had we additional XXX,XXX Ford this the the And this we and projected in about day. capacity up for the made quarter, think was had the Eagle are takeaway Eagle there day the barrels year to a of faster third-party recently XXX,XXX Eagle call stabilization the than we've I court we grown We Ford in have readily In at has previous I shift But to Delaware. sign had earlier. all originally on mentioned others given that available up

because that found money grow by we so, much spend And others. was having we to continue it without infrastructure can on overbuilt to

continue of year. – we the still I'm period sight. to It's us time. to on we we're not number, there next The but there's for flattening happen an run like talked were steady. out where looking mode predict the room that's to for not kind quite Eagle spot not grow. more hold and exact Bakken we going is have So, to to of certainly in the more for room to in grow is some us – going It's going not not something about in the to flat Ford

Scott Hanold

look now? sort all And for the you one about question think are changed ownership. but Okay. you know the frame right can way that? thoughts? of Understood. What how I you at patient Anything you are in things, Thanks. that Cenovus And on on current us

Donald E. Wallette, Jr.

that Scott, felt like it but before, was nothing value new. expectation a about said undervalued. Well, have quarter, every on there's We Cenovus. I We've we this think, we do really talk

it's price today, Looking more even think the undervalued. at we

afford things some is Cenovus takeaway But reward headwinds the eventually opportunity to there. the be the will right think the patient. fortunately, doing on we our and We balances So, issues Obviously, cash track. our think transportation liquidity us up we've with we position, market right them. the think got they're

Scott Hanold

it. Understood. Thanks. Appreciate

Ellen R. DeSanctis

respect Thanks, time. We'll our now, you we Scott. don't And so Christine, this people's take last Ellen. mind, question if is

Operator

you. Thank

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

Pavel S. Molchanov

the about With to the spot LNG for Quick as pricing vis-à-vis response structured your four-year just Brent how, market? slope the agreement what has close versus been is reminder, in in. Thanks squeezing in one LNG Australia. off-take a And highs, the me in Brent?

Donald E. Wallette, Jr.

the one, Good know provide to pricing. take try, don't we you Pavel. I'll try and slopes that on exact information but

go all furthest LNG Australia the that is our to think contracts, and elsewhere, of we'll Brent-linked. confirm that are I

so not to into And that. going details get of the we're

to our you have down some the demand, much LNG customers contracts. are Generally in is or our commitments as are so have Australia, in go as XX%. contracts. particular China year largest their their Brent-linked forward. in vary know, speaking, flexibility Japan. any buyers at and any in may quite strong, they're full both up far the They're looking year, long-term so as by As in XX% that in China, we taking we they commitment buyers how they one are Again, take commitments

we spot prices So far what pleased commitment that received the year. into long-term take, market the we've the off-takers spot this sell so and pretty with do been we've don't

Alan J. Hirshberg

pricing quarters. – about been spot the I Don Yeah. two averaging about quarter And we've a pleased that few can add, last Pavel, been those we've we've said, cargoes we've getting cargoes. like the of had on been with quite

Pavel S. Molchanov

the of that is LNG percentage what volume? And

Alan J. Hirshberg

it's after less three than the quarter, third so We in had XX cargoes quarters, year-to-date XX XX%.

Pavel S. Molchanov

Clear Appreciate enough. guys. it, Okay.

Ellen R. DeSanctis

all the and Christine. call you, everybody, day. and back us the any reach thanks, By Pavel, questions rest Thanks, thank for have of the enjoy you and to joining Thank today. if means, you

Operator

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

may You disconnect. now

ConocoPhillips (COP) 25 Oct 182018 Q3 Earnings call transcript