Beats expectations in 3Q22 on high energy prices
- 3Q22 adjusted EPS came in at US$3.60, beating consensus estimate of US$3.44
- Record high production in Lower 48 supported COP’s earnings
- Management raised FY22F operating cost and capital expenditure guidance
COP announced robust 3Q22 results; Lower 48 posted record high production. COP reported 3Q22 adjusted earnings of US$4.6bn or US$3.60 per share, decreased from last quarter EPS of US$3.91 due to lower average realized oil prices on a q-o-q basis (Brent price of US$100.85/bbl; WTI of US$91.56/bbl; Henry Hub of US$8.20/mmbtu). On a y-o-y basis however, EPS more than doubled due to higher oil prices and higher volumes from Permian acquisition. The company generated cash from operating activities (CFO) and Free Cash Flow (FCF) of US$7.2bn and US$4.7bn respectively; while reporting quarterly production of 1.75mmboepd. Lower 48 hit a record high production of over 1mmboepd; COP anticipates further growth in 4Q22.
In 3Q22, COP returned US$1.5bn to shareholders through ordinary dividend and variable return of cash (VROC). The company also repurchased US$2.8bn worth of shares, leaving net ending cash at US$10.7bn (increased 26% q-o-q). For FY22F, COP plans to return US$15bn of capital (c.50% of projected CFO), exceeding its annual commitment of 30%. The company raised its quarterly ordinary dividend by 11% to US$0.51 per share. It announced VROC of US$0.70 per share for 1Q23; and increased share repurchased authorization by US$20bn.
Management raised FY22F operating cost and capital expenditures amid inflationary pressures; partnered with QatarEnergy for NFS project. COP is maintaining its FY22F production guidance at 1.74 mmboepd; the company is expecting 4Q22 production to be at 1.74-1.80 mmboepd. However, COP is raising its FY22F adjusted operating cost and capital expenditures to US$7.7bn and US$8.1bn (from US$7.5bn and US$7.8bn) respectively taking into account the ongoing inflationary impact. In terms of growth, COP was recently awarded a stake in QatarEnergy’s North Field South (NFS) LNG expansion project. The company has established a 2030 methane emissions intensity target of c.0.15% of gas, consistent with its objective of joining Oil and Gas Methane Partnership (OGMP) 2.0.