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Why ConocoPhillips’s Production Fell in Fiscal 2017

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Top five upstream oil and gas producers

This series focuses on the top five upstream oil and gas producers based on their fiscal 2017 numbers. In our analysis, we have used the components of three key energy sector ETFs: the Energy Select Sector SPDR ETF (XLE), the SPDR S&P Oil & Gas Explore & Production ETF (XOP), and the iShares U.S. Oil & Gas Exploration & Production ETF (IEO).

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ConocoPhillips’ 2017 production

ConocoPhillips (COP) reported production of 1,377,000 barrels of oil equivalent per day (Mboed) in fiscal 2017, down 12% compared to fiscal 2016 production of 1,569 Mboed.

The decrease in production was because of its Canada asset sale to Cenovus (CVE). In May 2017, COP completed the sale of its 50% non-operated interest in the Foster Creek Christina Lake oil sands partnership, along with the majority of its Western Canada Deep Basin gas assets. COP’s production from Canada was 165 Mboed in 2017, compared to 300 Mboed in 2016.

Crude oil as a percentage of COP’s total production

In 2017, COP’s crude oil production as a percentage of total production rose despite lower year-over-year production volumes. This rise was because the company sold its gas-heavy assets, including the Canada transaction, San Juan Basin assets, and Barnett transaction. COP management commented during the 4Q17 earnings conference, “We had a very significant portfolio reset in 2017. We substantially reduced our exposure to North American gas and oil sands, with dispositions that generated about $16 billion of proceeds.”

See ConocoPhillips’s Production Mix Strategy for 2017–2018 to learn more.

COP’s fiscal 2017 oil volumes were 599 mbbls/d (thousand barrels per day), compared to 598 mbbls/d in fiscal 2016. Crude oil made up 43.5% of COP’s total production in 2017. Liquids (crude oil plus natural gas liquids) made up ~51.6% of the total production.

COP’s 2018 production expectations

For fiscal 2018, COP has provided a production guidance range of 1,195 Mboed–1,235 Mboed (excluding Libya), or 1,215 Mboed at the midpoint. The lower production reflects impacts from COP’s San Juan Basin, Barnett, and Panhandle asset dispositions.

In its 4Q17 earnings release, COP management noted, “We entered 2018 with strong operational and financial momentum. While the outlook for commodity prices has improved, our operating plan remains unchanged.” The company noted that its operational and financial plan for 2018 is “designed to generate top-tier growth in free cash flow and production per debt-adjusted share.”

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