COP - Earnings call transcript Q3 2019

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Operator

Good morning and welcome to the ConocoPhillips Third Quarter 2019 Earnings Conference Call. My name is Senera and I'll be the operator for today's call. At this time all participants are in a listen only mode. Later we will conduct a question answer session. [Operator Instructions] Please note that this conference is being recorded.

the to turn now will call Ms. over I DeSanctis. Ellen Ellen, you begin. now may

Ellen DeSanctis

Wallette, to everyone will quarter Don Operating CFO Officer. Hello, our Senera. EVP our Matt be EVP Fox, and and by remarks Thanks Chief prepared welcome third and and Today's earnings delivered our call.

region us the Canada of Our Middle our presidents with East in Dominic President Bill Alaska, are and region, the also region They President Europe Bullock, Lower Hatfield, of the Asia-Pacific, and our region. three XX room Michael of are today. Macklon, the President our

our Page statement. X of today's presentation deck shows cautionary

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

today We be will on and measure corresponding in the found our also release can GAAP nearest website. refer to to and measures morning's financial reconciliations press this also some non-GAAP

only our today's we're given One and per or Investor final to to address questions ask over comment person is announcements. recent Don, release few call one before and turn that Analyst November to the limit a questions weeks earnings that I meeting going away

call with I'll Don. And that, to over the turn

Don Wallette

ended with billion basis. short-term our with operations XX-month of on costs and the returns year-to-date. Ellen, production performance, earnings cash Starting strong all. quarter prices. a Thanks, morning and begin $X quarter mitigate higher on with billion or trailing flow $X quarter investments. employed our was impacts to billion I'll just in $X.X $X.X We overall X. the Higher of the from good on realizations highlights volumes financial we a $X.X share. Slide on at and under with LNG free with cash and capital And left of continued Cash adjusted the XX% reduced in billion third return financial of realized a resulting billion, lower marker $X.XX the combined

produced quarter year the share will underlying operations oil a X.XX a on million the middle per XX% equivalent cover on quarter up barrels operationally the we day, rest ago column, up and to in moment. Matt Moving highlights the with of the in an compared basis. a X% of basis

earlier our dividend a we strategic which improved announced to reflects company's this quarterly as to capital month, strength, underlying as increase shareholders. to peer side returns the XX% the On our commitment leading well financial

In repurchased and billion the addition, $X million announced of shares our XXXX. $XXX in to buy shares we in quarter back plan of

shareholders. of sale quarter UK billion we've we which over announced In our our and business. closed the of agreements definitive both recently Australia to assets our for the the year-to-date, sale in E&P returned as proceeds and third West generated We of into the in $X.X CFO XX% entered September, in

with look for wrap investments $X.X Slide If I'll you a the our with turn billion. flows We to cash up began quarter. and the of short-term quarter X, at cash

was here. Moving that billion. impacting operations to items from of quarter were couple a right the in cash the from are There operations cash noted $X.X

self pension and acceleration plan, future $XXX with made that pension of is conjunction be top-up funded such we fully in UK to the an contributions. First, one-time as sufficient. the can it a viewed essentially sale now contribution million That

the received in received during of each the agreement associated PDVSA over as $X last the we've quarter second, And settlement we we quarter, third note settlement. million reached the billion $XXX do cash To-date, with year. the to quarter related

from $X.X disposition. spending million a of and the to Working billion buybacks, or balance a ending $X.X and shareholders we with the XX% flow of use was quarter in $X.X quarter. the the we And mentioned, share Capital through UK free proceeds quarter of capital in $X closing cash billion during resulting $X.X CFO billion was billion. as of cash cash billion $XXX in recognized distributed dividends of

quarter to performance. cash demonstrates discipline, So strong can again our trend is returning this ours financial of and operational the is compelling within value capital that returns, flow continued also generation but distinctive shareholders. also energy consistent, capital past not firmly our sustainable, It free We once competitive, proposition, one unwavering highly as see financial a and sector, the believe and market. you broader commitment to only across that

turn will I to that With over call Matt. the

Matt Fox

for overview the provide of highlights, the Thanks, year. our discuss I'll our a year-to-date brief remainder Don. operational and of outlook

we acquisition. third Western last North Slide Alaska, the Nuna the to portfolio, operational at resource we Kuparuk Slope turn milestones Starting discovered completed end to X. we the year. turnarounds Across our and and quarter advance the continue of Please safely in at the highlighted Prudhoe, closed

for to continue optimize also up the month Narwhal offset existing gearing Willow well provide winter planning. discoveries. and we Alpine from horizontal this earlier and into future our is progress another execution horizontal us spud Earlier season. and site to appraisal appraisal injection Narwhal also we The to year designed We're the project help producer We well an in of exploration, trend. the development the drill drilled

Canada, to delays plant of the quarter. XXXX. early that to pipeline, this we completed in in to Due third-party online Moving expect commissioning the gas be project we Montney now

the on planned. diluent in as alternative project for As quarter Surmont is fourth track our start-up

start X. condensate In sales on beginning blending for November are actively today we fact, transitioning Dilbit

for we capability at but by Big amount production of This Eagle of XX X equivalent third provide Lower XXX,XXX improve Ford And a require reduce netbacks. and only the diluent asset was a total and barrels not Vulcan the quarter blend per consistently day, will at XXX,XXX. Delaware our XX also flexibility XXX

for quarter, expect rate remainder remain growth a and on the Big indicated the XX%. year about we're full-year flat we target to production X achieve relatively we of of to As last

online that you'll Lower few X X about Ford in XX, more Lastly in pads the a the we have Eagle vintage and multi-well hear in pilot weeks. now

to were for the by safely over completed and in ramp reach submit turnarounds continued KBB closed invited we partner-operated UK transitioned expect to expansion disposition Moving project. Qatar, to In bid quarter the Field quarter. production Malaysia Norway we operatorship. the a year-end. successfully throughput through Europe, And at North full the then, third we've been up and In

In close announced we in finally year. the we addition, Australia assets by schedule online billion, progress which on in early our to continue West Barossa expect Phase II the first divestiture of August. Meanwhile, And Gumusut $X.X of to and in came remain FID for for we Australia, next quarter XXXX.

progress strong another across well execution had as portfolio. we've So, the significant of quarter as

Now X. for I'll year remainder the discuss of Slide outlook the the on

while focus enter the we of execution, As maintaining on discipline. XXXX, we're continuing our capital last quarter

billion, plan of supply million quarter. guidance positions operating full-year excluding at opportunistic cost that of $XXX low capital Our remains about discussed resource last we $X.X unchanged

On that the day the unchanged, expect except production mind, UK for full-year our the equivalent divestiture. quarter million side day. million With guidance updating X.XX full-year fourth the barrels and for million to of now X.XXX between per we between asset in X.X average X.XXX but guidance and also remains a million close barrels

track underlying So, we with in X% combined that to on and our results per program production growth remain XX% buyback full-year share. growth deliver production

November that we'll assets We'll decade-long the and of into in our returns. Finally, flow Houston. portfolio. free provide diverse Analyst we're plan course delivers looking forward and Investor And strong XX cash across our disciplined show deep a Meeting a to dive on

generate highlights shareholders. distinctive flow returns performance of strong free to cash strength to diversity ability our continued Our to the support our portfolio and

ConocoPhillips team remainder November. to our entire is our executing in we with look plan XXXX of and plans the successfully Our on longer sharing term forward focused you

Now we'll open the up quarter. questions on for

Operator

your Gresh ahead, JP line is Thank Instructions] from Morgan. Please you. comes go Phil [Operator question from And our first open.

Phil Gresh

Hi, Yes. morning. good

First on question as the said here, just you quarter.

quarter the fourth production it here As looks outlook just transaction. the be remarks, we adjustment look of closing your an ahead the prepared like for UK meant from guidance, to to was the

if we confirm might And that. other to there wanted Thanks. want any thinking pieces quarter? about to for are Just be the moving

Matt Fox

has just the it's quarter into that by and the UK really the increase we've XX of Yeah. because adjustment front-end third-party quarter just from slipped in to Phil. some Lower primarily than reflecting pipeline, because production in see, the this it first mostly usually UK. the Yeah, It's but to bit the loaded Change. in of And an really that's Qatar. the less fact Montney delay fourth had is the influenced an the a extent change third but start-up also we for

Phil Gresh

Okay, got the think distributions cash well, Don, one just the I and in are year-to-date to if flow, headwind And going and step we're up capital reverse obviously working as for in APLNG any I could on then then was there there it. get of decent that you've just fourth quarter, that correct? the dynamics had wondering a a transitory some

Don Wallette

be the Phil, the on even yeah, odd the to do we APLNG quarters and high be to expect Yeah, low. quarters distributions,

I quarter. We So $XX quarter. we'll in that $XXX number about would that grow fourth trend. in third to to had million distributed expect million the the continue

in about an payment of was increase still for about both million and payable I that's on on and receivable use had liftings to in timing. Norway sales consistent some last -- guided $XXX the and decrease what timings we normal million think to quarter there accounts accounts working year same in pretty Malaysia we in and a just $XXX due $XXX the APLNG. million capital, So with the saw On which time, I

a there. that not on following. So that have line there's suggest really a we're trend wouldn't we going lot I

Operator

Thank you.

ahead, from Lynch. is Bank Our your go Merrill open. from Leggate Doug next question comes of America line Please

Doug Leggate

again consider guys sense wondered exiting if might but thinking trying to LNG wonder, still the can just decision terms the to quarter, outlook, also I get guess today the one your if through to in you things add your walk quarter investing Part middle Matt, make stick us in exit a B involved you. out, why with slide you you and maybe I another morning, Thank still everybody. being Good in for included in of Barossa to of in I prepared I market of yet Qatar. you the to that. I could one and your

were a Thank or it Just a lag effect just was prices wondering international time. is improvement leave just on little any that seeing it I'm you're pricing? gas bit better if like this there. you. I'll

Matt Fox

portfolio. the decided exit of we we're assets there. that the a we ABUs not our as think but to the -- rest higher supply concluded monetize across and those about capital that the because actually projects should We competitive to Doug. redirect cost returning of We concerned the Thanks, project,

us a with was pretty of allocation that the capital straightforward the ABUs. for decision make it to So decision

expansion next and we think through year. We project those with as will a cost be rest competitive Qatar, continue are Qatar the -- go we and of interested the also year the will progress LNG very into of supply North discussions in still the to Field that and we

Operator

you. Thank

next Our question...

Ellen DeSanctis

Excuse to the questions. me, of Doug's Senera, second part we'll answer complete the

Don Wallette

question quarter. you third Doug, Yeah. a the had in realizations about LNG

lag the is just in way I it work. effect So to you're address that and contracts long-term pricing wanted the right, these

quarter, $X. down So it as example, from know but quarter in for Brent, the was the JCC you previous was up about pricing $X

the what effect So realizations. lag LNG just on is you're seeing

Ellen DeSanctis

take our Go ahead, next question. Senera, we'll

Operator

Thank about you. And I apologize that.

next is Neil Please Our Sachs. go from question from Mehta Goldman open. ahead, your line comes

Neil Mehta

Good morning, team.

us had you remind come run -- mechanics the do production around in a production, I Qatar, on you around was you did get half or restrictions have first again, Can question come caps any Matt, volumes you first up that weighted just extent The as Qatar. quarter? to the fourth heavy into against of does

Matt Fox

that there already the there had nature first production Lower year talked the about strong quarters. is the through we've gone as an three so -- Qatar to the produce The and of through we we we've performance very annual Qatar In loaded total in limits XX. can front-end Yeah.

Qatar, So our in strong been in been from a performance it's that's the year bit but that's pronounced back the place fourth And limit. first to meet that been three this so something that we of means choke because in has quarters. the beginning more quarter

Neil Mehta

Can through that in you're we the perspective out of you and and into seeing you the is us of X as play-by-play? how regions anything call each from Thanks, down into and the then XX. the volume would notable go a performance Lower what you're walk drilling terms quarter just fourth

Dominic Macklon

for quarter mean I I flat Eagle pretty it's QX I in on QX X Thanks, the course, will relatively QX, QX, we relatively of Dakota, in all in some growth December outlook North terms a X a flat our versus had QX bit Neil. of the into up the see into Bakken Big But in overall, guidance Yeah. probably weather Delaware. QX, pretty the may of flat think see we here. Big little Dominic is flat, strong impacts It's here good from in QX. Ford think

in November. we and growth to will about talking X Big in in We the see look continued XXXX that forward

Operator

Thank you.

question comes Doug ISI. your next Our line from open. Terreson go Please ahead, is Evercore from

Doug Terreson

Hi, everybody.

implications and how and to North corporate sales divestitures in asset Australia So once the you obligations change my your Sea of close? retirement the total those on Western question those about is expect specifically

Don Wallette

give is completes that's that This retirement we in $X.X , around Don. guidance in that, but ARO year, think Doug. I about Yeah. obligations. Yeah, In asset then West the the you the billion say, of and published I next that $XXX be we've in, reduction to let's would quarter of assuming expect can UK first reduction some million. Australia ARO already

between combined that's balance. see about we'd our sales, of $X.X two reduction, the So major asset XX% billion a

Doug Terreson

Oh wow.

Okay.

that's you. Thank Okay, had. all I

Operator

Thank you.

ahead, is Read Fargo. Please next Roger your Wells Our question go comes from from line open.

Roger Read

may of we curious given look the in curious, an winter Good already Thanks. the set, there, kind months? I'm coming pretty for update is program was Yeah. what just about I that morning. just

Michael Hatfield

Yeah. now. We're our Hi, Michael. gearing is drilling This up for Roger. program winter

upcoming program point. be Narwhal this ever. Harpoon to There's at looking In drill in will our to the meeting nothing program really our share that at largest wells sharing of at winter November. this that at and further fact, forward Willow, we're and We'll details

Roger Read

right, Thanks. All there. it I'll leave

Operator

you. Thank

from Please Weil. from next ahead, your go Howard Our Scotia comes line is Paul question Cheng open.

Paul Cheng

blend API we Matt, Just of Hey Good targeting lesser with heard on is the that a What's the the and morning. condensate, higher window. I guys. you you're space, think are want the it that Montney, from the so the that to that when curious back pipeline condensate they push update used one because people bitumen. targeting have API on actually people the guys of

if lower that API is if standpoint, a So why mean will even from it good you're you I you that think that you guys market? from a have condensate get there,

Michael Hatfield

is Paul. Michael thanks again. Yes, This

and sell physically our pipeline about XX our the of liquids about our early on plant process condensate, mix waiting and half linked degrees. market, mix. product with next Montney asset. year. It's About the it's in in the it's not wide our We'll condensate that just gas up into fact half we're the revenue in is a Surmont two-thirds start fairly is and of of Our over of about probably third-party to condensate,

production see first that to start online time. we'll that so results bring this from And will at pad,

a market condensate. strong in and condensate Canada, market into products sold terms will the which So is other actually in all be of the pretty

Paul Cheng

what for sorry, I'm Michael, your is condensate? API And what did say the you

Michael Hatfield

in Yeah, XX the it's -- it's range, degree or plus minus. around

Paul Cheng

XX? seems Okay, that pretty low.

Okay, thank you.

Operator

you. Thank

question Paul Please next ahead, is Our from comes USA. Sankey go your from Mizuho Securities open. line

Paul Sankey

all. levels Hi, We about question the maintenance Matt. you. be the Thank you disposals made, will had that capital after ongoing

applied would deals deal think for do if Thank the I bit just And you be talk you made you're those wanted parameters basis little on there could add-ons, theme. that you similarly know using and parameters is ongoing one? are we assume I follow Could of opportunistic what on you. call a up the to $XXX spending the to the we a that on So from disposals. the about what impact million the an bigger them, M&A if

Matt Fox

Yeah capital. maintenance the sustaining to that Paul. capital number you're assume Okay. are... we Thanks, I The referring

Paul Sankey

Yeah exactly, I sustaining said. have is should what

Matt Fox

No, of interchangeable. the same. that's that here. that's billion Yeah. sort and so around It's But continues $X.X

it in In we through weeks. some when few talk continues about the a decade fact, next

below front, takes acquisition -- and stays the what with is on million to M&A sustaining year some that the around no $XXX a growth is this it's the spend -- There's really significant in focused or change puts really you barrel. The capital. $XX we're on and well the price, referred on unconventionals So, keeps but the which it and there billion there. acquisitions $X.X

adding part the closed Alaska positions. were that's those at for the in XX operated now Nuna coexisting acreage positions the trend Lower So adding our in most royalty within

in up in smaller that Some nothing from entrance calling Muerta there then quarter additions respect. the the in to and play Montney Vaca new this into and the in Argentina continue there's

decision those of of sort they as all we're basically focused when thinking our in investments yes, are of capital cost -- are on we the But supply. we it's the criteria, about

price to that the and see context additions. just philosophically talk November, cost of we about again, have of acquisition in So be in we'll the -- more about about sources the able plus with And in resource being of something think development all supply how corporate we other competitive aggregate asset or to that's event acquisitions.

Operator

Thank you.

Our Wai next from is ahead, question open. from Jeanine Barclays. go comes Please your line

Jeanine Wai

Hi. hello. Good everyone. afternoon, Hi,

some do a you and think spent I and on In upside that is we've budget at year conversations guess you with partner there see early it's noticed And we're because full of what BP you recent question could because any the anything there? almost from this getting you be changing Alaska, have have of terms exiting, also news, an perspective maybe and that in new already? had operating I qualifies now Alaska all

Michael Hatfield

Yes, Jeanine. This is Michael, again.

Hilcorp So from early to sorry transition stages. still -- it's from with the BP Hilcorp,

still we're Hilcorp rejuvenating the these in increased lifting they've Alaska fields. in and track does fields. have pending activity record costs, that They've with successful mature other development transaction, a of close So production reduced increased

so expect operating focus see a investments. we renewed reduction on and to And in a costs

so come value Exxon of plans asset. Prudhoe capital with with any ConocoPhillips to while we'll we in work closely approval this continue and BP, require operator as and the of very work Hilcorp to today the Hilcorp, for Exxon legacy as Now they maximize Bay closely and the

at So this to we excited Bay. transaction, for opportunity Prudhoe see more value we're unlock

Jeanine Wai

you much. just tuned. saying And Thank Okay. very stay we'll

Operator

you. Thank

your go is Bob Brackett open. Our from next comes question from Please Research. line Bernstein ahead,

Bob Brackett

the in the North longer-term policy If Act Can and of Slope? about about we tax you context of up talk fair it initiative. put ballot and flow Another share question. related ebb perhaps on the Alaska that think the

Michael Hatfield

that is initiative a exploration Slope Alaskan the this North very the of that long-term brought we This citizens believe renaissance its closely. monitoring see say the is the best Michael, I'd not to citizens. interest the Thanks, Yeah. already and again. are Bob. in to the situation citizens. state We Alaskan It's benefit will has

into in additional add to changes the and have look XXXX, have you since could revenue went occurred effect If and incremental significant state. production and that that at several SB XX projects discoveries positive the ConocoPhillips others announced

employment, investments citizens. so Alaskan we and that for good it's those the believe the economy good Alaskan for good is for And continuing it's

long-term, informed has and and past it's this of of And impact of voters and of long-term so successfully of that's on have the come the -- sort the negative in up production noting citizens for initiative revenue, benefits feel and initiatives consequences would like we've see. the of the sort jobs, that both we over so the also that now worth the benefits those

do quite engagement with beneficial much benefits regime with monitoring case expect, the there mutually and our do a currently we that is we our in up a citizens make have about fact, stakeholders to we're we're and to have. of feel that history closely long we and so of under something in We continuing the fiscal the public. now it's gearing relationship short, So very radar on the the

Bob Brackett

Great. that. Thanks for

Operator

Thank you.

Our your next question comes Pickering from ahead, Jeoffrey Lambujon open. Please go from Holt. is line Tudor

Jeoffrey Lambujon

budget, on potential remainder may question Good stopped just there just of about and given the just unchanged this some capital year, been closed. the morning. spend downside UK would have is that thinking My for have allocation

the year? the instead CapEx where looking might So for to unspent be color remainder allocated on for any of that just

Matt Fox

go rate been $X.X Yeah. billion of it's there that's disposition, sort the million in about associated exploration This the causes to primarily phasing completions, because of so a from run year timing but and rate billion Xth and of Jeoffrey, Matt, that going general Part $X.X refracs changes it is with quarter, drop run of $XXX billion has just to UK in the this quarter. also just $X.X that planned to modest those and far

Operator

Thank you.

from comes Michael Heikkinen Hall question ahead, next Energy. go Please line is open. from Our your

Michael Hall

to production look you provide I -- Canada turnarounds? an maybe morning. guys Good on you. sorry, can Alaska time. back to up Alaska I the exit Thank what guess like going rate or appreciate after the

Matt Fox

point. around We're producing XXX,XXX at Yeah. a this barrels to day the XXX,XXX

Michael Hall

remind And That's the me those on then Great. the operations you gas you? on and is plant, that Canadian just what capacity net helpful. to can to

Michael Hatfield

XXX Yeah, the about million capacity is feet cubic a day.

the that have here one we of can designed is we build the plant benefits and we've of that many. One design

clone we So production as able times levels this in this up multiple of stairsteps plant and we'll to over. we're mode ramp appraisal different be to

Operator

you. Thank

Pavel comes line James Raymond your Our next go Please from question from is Please ahead, open. Molchanov

Pavel Molchanov

Thanks for taking the question.

LNG European gas in First, quick XXXX mentioned as depressed record, as your one, -- I why just lower September the far the was even. can number the quarter? remember on in the benefiting about pricing, quarter so by than pricing, gas in you Sea a it gas lag was in lowest I'm curious North effect

Don Wallette

Brent That's Hey But WTI the the Pavel. during market differently. now quarter saw the the in and fourth. Europe. is This quarter International in in is third Henry there quite and of AECO, it's continues the the course, and in here different it weakness Hub, were Europe, Don. Yeah, is demand markers, the increased a in US supply to all third of Gas in of LNG, just and down from or the that's third course, quarter. was factor we why there in realizations priced

Pavel Molchanov

did of little your simply you consider I as part Understood. follow-up Australia if including West a sale exit My of the Australia may. Okay. transaction In to APLNG thematic, more altogether? same

Matt Fox

this lifecycle. an Matt, of nature the on is exit Pavel. No, entirety. of cash didn't the in the focused consider of flow And in that and characteristics we this asset, ABUs the its Australia And was stage

Operator

you. Thank

go We have of America Leggate Merrill a is question Please ahead, from line from your Bank Doug open. Lynch.

Doug Leggate

I I question already. one know my ask

I mistake. if another can a like. one, that's you ask think I

Matt Fox

Feel free Doug.

Doug Leggate

but had one down. embarrassed, Well, line other I written feel I I another you I have guys didn't up from question. actually quite

costs. anything costs. are running cost operator will doing much And because guessing this but is both something better they've gratitude bit this that's me of low But extend just in well pretty I'm I'll year bit and Thanks. the you a for lot next as there expecting wondering on -- giving share? any the on the couple come if weeks, into cash well I'm Just that, to a a week, read address operating up -- you guidance, I'm DD&A's will you but a second from light the your been shot. we but that costs comments But can guess I should my

Don Wallette

question. your operating costs the for to thanks Doug, the No continue hold second line.

In fact, that quarter. third production, about that. in and a think wouldn't quarter, I costs into of down our or X% from were previous SG&A whole and so the -- lot I operating read

of it Some thing was we had turnaround and we -- we activity second think cost settlement settled. quarter had in a I higher the a bit that of the because litigation

So we see flat this operating costs essentially for remaining year.

not we trying But next production and talk to month. a mean, time. very continue be operating how about that on we operating so going at we cost guidance And efficient forward adjusting see keep I more this to we're outlook the can aggressive full-year structure.

Operator

to at And I back Ellen. turn would the to you. like further call this questions. no Thank time have we

Ellen DeSanctis

a weeks. today. Thank you, look ConocoPhillips. listeners to your you interest time few you our in in Senera. forward Thank Appreciate We seeing to and

Operator

you, and this concludes you Thank conference. participating. for gentlemen, today's Thank ladies

now may You disconnect.

ConocoPhillips (COP) 29 Oct 192019 Q3 Earnings call transcript