uploads///COP Q Operating Costs

Understanding ConocoPhillips’s Adjusted Operating Costs

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Aug. 30 2017, Updated 9:07 a.m. ET

COP’s 2Q17 operating costs

ConocoPhillips’s (COP) operating costs (or total operating costs) fell ~12% to ~$1.54 billion in 2Q17, down from ~$1.76 billion in 2Q16. ConocoPhillips’s operating costs include production and related operating expenses, SG&A (selling, general, and administrative) expenses, exploration G&A (general and administrative) expenses, lease rentals, and geological and geophysical expenses.

In 2Q17, COP reported production and related operating expenses of ~$1.33 billion, which came in ~8% lower than its 2Q16 production and related operating expenses of ~$1.45 billion. These reductions along with lower SG&A expenses helped ConocoPhillips bring down its 2Q17 operating costs.

COP’s SG&A expenses fell to ~$134 million in 2Q17 from ~$167 million in 2Q16, representing a YoY (year-over-year) reduction of ~20%. By comparison, Murphy Oil (MUR) reported 2Q17 SG&A expenses of ~$57.3 million, representing a ~15% fall from 2Q16.

COP’s exploration G&A expenses, lease rentals, and geological and geophysical expenses fell to ~$76 million in 2Q17, down from ~$145 million in 2Q16.

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Adjusted operating costs per unit of production

For 2Q17, COP reported total production (USO) (UNG) of ~1437 Mboepd (thousand barrels of oil equivalent per day). When its 2Q17 operating costs are divided by its 2Q17 production, COP’s operating cost per unit of production for 2Q17 comes in ~$11.78 per boe (barrel of oil equivalent). In 1Q17, COP reported an operating cost per unit of production of ~$11.16 per boe.

COP’s 2017 adjusted operating costs guidance

According to ConocoPhillips’s 2Q17 earnings press release, COP lowered its fiscal 2017 adjusted operating cost guidance due to the Canadian, San Juan, and Barnett assets sales. COP now expects its fiscal 2017 adjusted operating costs to be ~$5.7 billion, which would be a reduction of ~$300 million from its original adjusted operating costs guidance of ~$6 billion.

COP’s new 2Q17 adjusted operating costs guidance is now ~11%, which is lower than its fiscal 2016 adjusted operating costs of ~$6.4 billion.

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