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Why ConocoPhillips Expects Lower Production in 4Q17

Nicholas Chapman - Author

Nov. 20 2020, Updated 3:56 p.m. ET

ConocoPhillips’s 4Q17 production guidance

For 4Q17, ConocoPhillips (COP) expects total production (USO) (UNG) in the range of 1,195–1,235 Mboepd (thousand barrels of oil equivalent per day). ConocoPhillips’s 4Q17 production guidance excludes production from Libya.

On a year-over-year basis, the midpoint of ConocoPhillips’s 4Q17 production guidance range is ~23% lower than its 4Q16 production of 1,587 Mboepd. However, sequentially, ConocoPhillips’s 4Q17 production guidance is ~1% higher than its 3Q17 production of 1,202 Mboepd.

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Why ConocoPhillips expects lower production in 4Q17

In 2017, ConocoPhillips executed many big asset sales amounting to ~$16 billion to achieve financial flexibility. These asset sales included its transformational Canadian asset divestitures of Foster Creek Christina Lake (FCCL) oil sands mining operations and gas assets located in the Western Canadian Deep Basin to Cenovus (CVE) in 2Q17.

COP expected production of 280 Mboepd from these Canadian assets in 2017. The assets had produced 265 Mboepd in 2016. COP also closed the sales of its San Juan and Barnett assets in 4Q17. COP was expecting production of 120 Mboepd from these assets in 2017. All these transactions caused COP to reduce its 4Q17 production guidance.

ConocoPhillips’s 2017 production guidance

In its 3Q17 earnings press release, COP reduced its 2017 production (USO) (UNG) guidance range to 1,350–1,360 Mboepd from its previous guidance range of 1,340–1,370 Mboepd. This narrowed production guidance range was the result of the company’s Barnett asset divestitures in 3Q17. ConocoPhillips’s 2017 production guidance excludes Libya.

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ConocoPhillips’s 2018 production guidance

For 2018, ConocoPhillips expects its production (BOIL) (SCO) to be in the range of 1,180–1,220 Mboepd, a rise of ~5% compared to its disposition-adjusted 2018 estimated production. ConocoPhillips’s 2018 production guidance excludes Libya.

Peer comparison

COP’s peer Southwestern Energy (SWN) expects a compound annual production growth rate of 3%–5% for 2017 and 2018 along with $1 billion in capital spending.

Next, let’s take a look at ConocoPhillips’ cash flow and capital expenditure guidance.


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