ConocoPhillips Narrows Loss, Cuts Capex Again

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ConocoPhillips (NYSE: COP) reported third-quarter 2016 results before markets opened Thursday. The oil and gas production company posted an adjusted diluted net loss per share of $0.66 on revenues of $6.52 billion. In the same period a year ago, the company reported a net loss of $0.38 per share on revenues of $7.51 billion. Third-quarter results also compare to the Thomson Reuters consensus estimates for a net loss of $0.69 on revenues of $6.82 billion.

On a GAAP basis Conoco’s net loss totaled $214 million ($0.84 per share), including rig termination charges of $134 million in the Lower 48 and a $174 million charge against its Asia Pacific LNG business. Income tax benefits of $162 million in Europe, $48 million in the Lower 48 and $37 million in the corporate division partially offset charges.

Conoco cut its 2016 capital spending budget again, lowering its expected spending from $5.5 billion to $5.2 billion. Capex has been slashed nearly 33% from the original 2016 forecast of $7.7 billion. Capex totaled $916 million in the third quarter and $3.87 billion for the first nine months of the year. The company reported $10.1 billion in capital spending for 2015.

The company expects production to reach approximately 1.565 million barrels of oil equivalent per day, in line with 2015 production excluding production from Libya. Fourth-quarter production is forecast at 1.555 to 1.595 million barrels of oil equivalent per day. Third-quarter production averaged 1.557 million barrels and the year-to-date average is 1.56 million barrels of oil equivalent per day.

CEO and Chairman Ryan Lance said:

In the third quarter we achieved cash flow neutrality, with operating cash flow covering capital expenditures and the dividend. For the second quarter in a row, we are lowering 2016 guidance on our capital expenditures and adjusted operating costs, while increasing our 2016 production guidance. We’re hitting our key operational targets across the business and achieving important milestones … . We continued to progress our announced asset sales and recently retired $1.25 billion of debt. Our focus throughout the year has been to lower our breakeven price, improve the balance sheet, position the company to generate free cash flow and deliver differential performance as prices recover.

The company’s third-quarter average realized price per barrel of oil equivalent rose from $31.47 in the first quarter of 2016 to $43.21. The average for the year to date is $38.97 a barrel.

Conoco’s shares traded up about 0.3% in Thursday’s premarket, at $41.94 in a 52-week range of $31.05 to $57.24. The consensus 12-month price target on the stock was $51.91 before this report.