Weaker oil and gas prices dragged down second quarter net income for ConocoPhillips Co. but the USA producer nonetheless plans to sustain record production through the rest of 2023.
The Texas state-based company pocketed $2.232 billion in net earnings for the April-June quarter, apparently with no impact from extraordinary or non-recurring items, according to its filing with the Securities and Exchange Commission (SEC). That was down by $688 million against the prior three-month period.
As with its multinational peers, the slump in the second quarter becomes steeper when compared to April-June 2022. USA-based rivals Chevron Corp. fell $5.707 billion year on year to $6.008 billion, Exxon Mobil Corp. shed $9.97 billion to $7.88 billion and Occidental Petroleum Corp. slumped $2.895 billion to $860 million.
The trend reflects an apparent normalization in fossil fuel prices, which hit record highs following Russia’s invasion of Ukraine February 2022. International petroleum benchmark Brent peaked last year in the month of June at $122.71 a barrel on a monthly average. But June 2023 was the weakest month for Brent in the last 13 months at an average of $74.84 per barrel, according to data from the USA Energy Information Administration (EIA). The West Texas Intermediate (WTI), another global standard for crude spot pricing, also peaked June in the year 2022 at $114.84 per barrel before plummeting to a 13-month low of $70.25 June 2023, based on the EIA bulletin.
The international natural gas benchmark Henry Hub plunged from last year’s peak of $8.81 per British thermal unit (Btu) in the month of August to $2.18 per Btu June 2023. The Louisiana state-based distribution center changed only by cents on a monthly average during the second quarter of 2023, according to the same database.
Annual average prices for the North Sea-based Brent and the WTI in 2022 were the highest since 2014, according to the EIA data. That of the Henry Hub was the highest since 2009, the EIA figures show.
ConocoPhillips’ total average realized price in the second quarter of 2023 dropped to $54.5 per barrel of oil equivalent (boe) from $88.57 in the 2022 second quarter, according to the SEC disclosure.
The weaker prices offset higher output, which also resulted in higher operating expenses. ConocoPhillips achieved its biggest ever production during the 2023 second quarter at 1.805 million boe per day (MMboepd). That was driven by the Lower 48 (the USA states excluding Alaska and Hawaii), with this region also recording its highest output during the quarter at 1.063 MMboepd. Besides the USA contributing wells were in Australia, Canada, China, Libya, Malaysia, Norway and Qatar.
ConocoPhillips, which also does business in exploration, generated $9.257 billion in cash from operating activities in the second quarter of 2023. It had $5.735 billion in cash and cash equivalents as of the end of the quarter. Short-term debt stood at $879 million.
ConocoPhillips declared $0.51 in ordinary dividend plus $0.6 in variable return of cash (VROC) per common share for the second quarter, compared to the company’s net profit of $1.84 per common stock. “We returned $1.3 billion to shareholders through share repurchases and $1.4 billion through our ordinary dividend and a VROC”, it said in the filing, maintaining full-year shareholder returns at $11 billion.
“We re-invested $2.9 billion into the business in the form of capital expenditures and investments during the second quarter of 2023, with over half of the expenditures related to flexible, short-cycle unconventional plays in the Lower 48 segment, where our production has access to both domestic and export markets”, ConocoPhillips added.
It plans to spend up to $11.2 billion in operating capital for the full year, up from $10.2 billion invested into operations last year.
“Third-quarter 2023 production is expected to be 1.78 to 1.82 million barrels of oil equivalent per day”, ConocoPhillips said. “Full-year production is now expected to be 1.80 to 1.81 MMBOED, as compared to prior guidance of 1.78 to 1.80 MMBOED.”
Chair and chief executive Ryan Lance said in a statement, “Looking ahead, we remain constructive on the second half of the year as well as the long-term outlook for the sector”.
“By continuing to enhance our deep, durable and diversified asset base, we are well positioned to generate competitive cash flow and returns for decades”, Lance added.
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