ConocoPhillips, one of the world's leading exploration and production (E&P) companies, has demonstrated its resilience and adaptability in the dynamic energy landscape. With operations spanning 13 countries, the company's diverse portfolio of assets, strategic initiatives, and disciplined capital allocation have positioned it as a reliable performer, delivering consistent returns to its shareholders.
At the heart of ConocoPhillips' success is its commitment to its "Triple Mandate" - responsibly meeting energy transition pathway demand, delivering competitive returns on and of capital, and focusing on achieving its net-zero operational emissions ambition. This strategic framework, combined with the company's foundational principles of balance sheet strength, peer-leading distributions, disciplined investments, and responsible ESG performance, has enabled ConocoPhillips to navigate the industry's challenges and capitalize on emerging opportunities.
Financials
In the fiscal year 2023, ConocoPhillips reported annual net income of $10,957 million, annual revenue of $56,055 million, annual operating cash flow of $19,965 million, and annual free cash flow of $8,717 million. These robust financial results underscore the company's ability to generate substantial cash flows and return capital to shareholders, even in the face of volatile commodity prices.
Business Overview
The company's diversified geographic footprint and product mix have been instrumental in its success. ConocoPhillips' operations are spread across the United States, Norway, Canada, Australia, China, Malaysia, Qatar, and Libya, providing exposure to a wide range of market dynamics and mitigating concentration risks. Additionally, the company's portfolio includes a balanced mix of crude oil, bitumen, natural gas, LNG, and NGLs, allowing it to capitalize on shifting demand patterns and optimize its revenue streams.
Recent Developments
In the first quarter of 2024, ConocoPhillips reported total production of 1,902 MBOED, a 6% increase compared to the same period in the previous year. This growth was driven by new wells coming online in the Lower 48, Alaska, Australia, Canada, China, Libya, and Norway, as well as the company's acquisition of additional working interest in the Surmont asset in Canada. Adjusting for the impact of closed acquisitions and dispositions, the company's first-quarter 2024 production increased by 2% year-over-year.
Segment Performance
The Lower 48 segment, which includes operations in the U.S. Lower 48 states and the Gulf of Mexico, contributed 60% of the company's consolidated liquids production and 73% of its consolidated natural gas production. The segment's net income decreased by $471 million in the first quarter of 2024, primarily due to lower realized natural gas and NGL prices, lower commercial performance and timing, higher production and operating expenses, and higher DD&A expenses.
In the Alaska segment, net income decreased by $70 million in the first quarter of 2024, primarily due to higher DD&A expenses, higher production and operating expenses, and higher exploration expenses, partially offset by the absence of first-quarter 2023 dry hole expenses.
The Canada segment, which includes the Surmont oil sands development and the Montney unconventional play, saw a significant increase in net income of $174 million in the first quarter of 2024. This was driven by higher sales volumes related to the Surmont acquisition and higher realized bitumen prices, partially offset by higher production and operating expenses and higher DD&A expenses.
The Europe, Middle East and North Africa segment, which includes operations in the Norwegian sector of the North Sea and the Norwegian Sea, Qatar, Libya, and the U.K., reported a decrease in net income of $61 million in the first quarter of 2024. This was primarily due to lower realized natural gas prices and lower foreign exchange gains, partially offset by higher sales volumes.
The Asia Pacific segment, which has operations in China, Malaysia, Australia, and commercial operations in China, Singapore, and Japan, saw a decrease in net income of $10 million in the first quarter of 2024. This was primarily driven by lower earnings from equity affiliates due to lower LNG sales prices, partially offset by a $76 million tax benefit associated with a deepwater investment tax incentive for Malaysia Blocks J and G.
Outlook
Looking ahead, ConocoPhillips has maintained its full-year 2024 production guidance of 1.91 million to 1.95 million barrels of oil equivalent per day, which represents 2% to 4% underlying growth. For the second quarter of 2024, the company expects production to be in the range of 1.91 million to 1.95 million barrels per day equivalent, also reflecting a similar 2% to 4% year-over-year underlying growth.
The company's capital expenditure guidance for 2024 remains unchanged at $11 billion to $11.5 billion, with a greater weight in the first half of the year due to equity contributions at the Port Arthur LNG project. ConocoPhillips also expects $1.3 billion in APLNG distributions for the full year 2024, with $300 million expected in the second quarter.
Liquidity
Financially, ConocoPhillips remains in a strong position, with $6.3 billion in cash, cash equivalents, restricted cash, and short-term investments, as well as $1.1 billion in longer-term liquid investments as of the end of the first quarter of 2024. The company's debt balance stood at $18.4 billion, with a current portion of $1.1 billion. ConocoPhillips' credit ratings from Fitch, S&P, and Moody's are "A", "A-", and "A2", respectively, all with stable outlooks.
In terms of shareholder returns, ConocoPhillips remains committed to its three-tier return of capital framework, which includes a growing ordinary dividend, a discretionary variable return of cash (VROC) payment, and through-cycle share repurchases. In the first quarter of 2024, the company distributed $2.2 billion to shareholders, including $1.3 billion in share repurchases and $0.9 billion in ordinary dividends and VROC payments.
Conclusion
Overall, ConocoPhillips' diversified portfolio, strategic initiatives, and disciplined financial management have positioned the company as a reliable and resilient player in the energy industry. With its focus on responsibly meeting energy demand, delivering competitive returns, and achieving its net-zero operational emissions ambition, ConocoPhillips is well-equipped to navigate the evolving energy landscape and continue generating value for its shareholders.