Analyzing ConocoPhillips’s Operational Performance

Second-quarter operational performance

For the second quarter, ConocoPhillips (COP) reported total production of 1,211 Mboepd (thousand barrels of oil equivalent per day), which is above the second-quarter production guidance range of 1,170–1,210 Mboepd. ConocoPhillips’s second-quarter production guidance and reported production didn’t include the production from Libya. Including Libya, the company’s second-quarter production was 1,249 Mboepd.

Analyzing ConocoPhillips’s Operational Performance

ConocoPhillips’s second-quarter production is ~15% lower compared to its production of 1,425 Mboepd in the second quarter of 2017. Sequentially, ConocoPhillips’s second-quarter production is lower by more than a percentage point compared to the first quarter.

What impacted the production?

ConocoPhillips’s second-quarter production was impacted by 272 Mboepd due to dispositions in 2017. In 2017, ConocoPhillips executed many big asset sales amounting to ~$16 billion to achieve financial flexibility. The asset sales included ConocoPhillips’s transformational Canadian assets divestitures of Foster Creek Christina Lake’s oil sands mining operations and gas assets located at western Canada Deep Basin to Cenovus (CVE) in the second quarter of 2017. ConocoPhillips also closed its San Juan assets and Barnett assets sales in the fourth quarter of 2017.

Excluding the impact of dispositions, ConocoPhillips’s second-quarter production is higher by 58 Mboepd or ~5% compared to the second quarter of 2017. The increase in ConocoPhillips’s second-quarter production came from increased production at unconventional assets in the United States.

The sequential decline in the company’s production in the second quarter could be attributed to the seasonal turnaround activity.

Production guidance

For the third quarter, ConocoPhillips expects total production of 1,215–1,255 Mboepd—a mid-point increase of ~3% compared its production in the third quarter of 2017.

For 2018, ConocoPhillips expects its fiscal production to be 1,225–1,255 Mboepd, which could result in ~7% growth compared to the disposition adjusted fiscal 2017 production. ConocoPhillips’s production guidance excludes Libya.

ConocoPhillips’s peers that are also focusing on US resource plays, especially the Permian Basin, for their 2018 production growth are Marathon Oil (MRO), Occidental Petroleum (OXY), Encana (ECA), and Devon Energy (DVN). They’re expecting overall production growth of ~12%, ~8%, ~18%, and ~1%, respectively, in 2018.