ConocoPhillips 3Q2017 earnings were up for a second consecutive quarter, even as production declined, according to the Houston-based independent, which said Thursday it has cut its 2017 capital expenditures (capex) budget by 10%.
"We continue to do more for less," said Executive Vice President (EVP) Alan Hirshberg, who handles production, drilling and projects. He spoke during a conference call with analysts. "Despite this capex reduction, we expect to exceed our original production guidance. This year, we now expect to deliver 3% underlying production growth, and that's 17% on a debt-adjusted share basis."
Production was 1.2 million boe/d in 3Q2017, down 23% compared with 3Q2016, due in large part to the effects of Hurricane Harvey, which slammed into the Texas Gulf Coast in late August.
"Despite a 15,000 b/d reduction in the quarter due to Hurricane Harvey, better performance from our global portfolio allowed us to offset this loss and still exceed the midpoint of guidance by 12,000 b/d," Hirshberg said. "Year-on-year, this represents an increase in underlying production of 1.4%."
During the quarter, ConocoPhillips ran 12 operated rigs in its Lower 48’s Big Three unconventional assets -- six in the Eagle Ford Shale, four in the Bakken Shale and two in the Permian Basin’s Delaware sub-basin.
Production out of the Eagle Ford was 123,000 b/d, with another 66,000 b/d from the Bakken and 22,000 b/d from the Delaware.
"That was about flat to the second quarter of 2017, but included the impact of Hurricane Harvey. Excluding this impact, production from the Big Three unconventionals would've been about 6% higher sequentially."
ConocoPhillips lowered its capex guidance by $500 million to $4.5 billion, a 5% reduction from its initial 2017 guidance. Capex was $1.1 billion in 3Q2017 and the company is forecasting another $1.3-1.4 billion budget in 4Q2017.
The lower number last quarter was due to "the Harvey affect," the company said. But the company has made good on its 2017 plans and has done "a really good job of driving efficiency," Hirshberg said.
"That's been a key part of our capital discipline. It's allowed us to lower our capital costs. We've been successful at resisting inflation to a large extent in the Lower 48, and our production performance has really come out on the high side in a number of different places, and those things we kind of added together to give that outperformance."
Last month, EVP Matt Fox said the company was taking its time to test and understand the geology of the Permian Basin, following the same approach it used to develop its position in the Eagle Ford Shale, but that merger and acquisition activity is "not a priority."
On the eve of 3Q2017, ConocoPhillips sold its legacy gas-rich Barnett Shale portfolio for $305 million. During the quarter, the producer, unable to find a buyer for its Kenai natural gas export facility in Alaska, said it planned to shutter operations until market conditions improve.
ConocoPhillips posted 3Q2017 earnings of $420 million (34 cents/share), compared with a loss of $1.04 billion (minus 84 cents) in 3Q2016. The company paid down $2.4 billion of debt during the quarter, bringing balance sheet debt to $21 billion, said CFO Don Wallette.