What Were ConocoPhillips’s 3Q16 Cash Flows and Capital Expenditures?



Operating cash flows

In 3Q16, ConocoPhillips (COP) reported an operating cash flow of ~$1.3 billion, which was ~34% lower than its operating cash flow of ~$1.9 billion in 3Q15. On a year-over-year basis, lower operating revenues as a result of lower production and lower realized prices for crude oil (USO), natural gas liquids and natural gas (UNG) production affected ConocoPhillips’s operating cash flows negatively in 3Q16.

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Capital expenditures

In 3Q16, ConocoPhillips’s capital expenditure has fallen on a year-over-year and sequential basis. In 3Q16, COP spent ~$916 million in capital expenditure, which was ~53% lower than the $2.2 billion in 3Q15. Sequentially, ConocoPhillips’s capital expenditure has fallen ~19% from ~$1.1 billion in 2Q16.

In October 2016, ConocoPhillips reduced its 2016 capital expenditure guidance by $300 million to ~$5.2 billion, which is ~49% lower than what COP spent in 2015. Year-to-date, COP has spent ~$3.9 billion in capital expenditure.

Why COP reported higher free cash flow in 3Q16

In 3Q16, steep reductions in capital expenditures helped COP to report higher free cash flow on a year-over-year and sequential basis. In 3Q16, ConocoPhillips reported ~189% higher free cash flow compared to 2Q16. Year-to-date, ConocoPhillips reported total free cash flow of about -$910 million.

COP peers Pioneer Natural Resources (PXD), Occidental Petroleum (OXY), California Resources (CRC), and Range Resources (RRC) reported -$7 million, $4 million, $82 million, and -$71.8 million, respectively, in free cash flows in 3Q16.

Free cash flow helps a company to enhance shareholder value and can be used to pay dividends, buy back stock, or repay debt. Free cash flow is calculated by subtracting capex from operating cash flow.


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