Beats estimates in 3Q, production guidance raised again
- 3Q23 adjusted EPS of US$2.16 beats consensus estimates
- Production increased 3% year-over-year to 1.8 million barrels of oil equivalent per day, driven by growth in Lower 48
- Completion of Surmont oil sands acquisition leads to hike in 4Q and full year production guidance
- Maintain BUY with slightly higher TP of US$140
Results above estimates. ConocoPhillips (COP) reported adjusted earnings of US$2.6bn or US$2.16 per share, beating consensus EPS estimate of US$2.11, on the back of another quarter of record production and high realised oil prices. 3Q23 earnings were up 18% compared to 2Q23 earnings of US$2.2bn. Total quarterly production reached 1,806 MBOED, up 3% from last year. Permian delivered 722 MBOED. Lower 48 production was 1,083 MBOED. Free cash flow rose to US$5.5bn, supported by USUS$5.4bn cash from operations. COP distributed US$2.6bn to shareholders, roughly at par with 2Q23 levels. This includes US$1.3bn in dividends and US$1.3bn share repurchases.
Production guidance raised again. Looking ahead, company plans to grow production through expansions like the Surmont oil sands project. COP completed the purchase of the remaining 50% interest in Surmont (Canadian oil sands project) in October for approximately US$2.7bn as well as future contingent payments of up to US$0.3bn. As a result, it once again raised full year production guidance to 1.82 mmboepd, as compared to 1.80-1.81 mmboepd earlier (2022 production: 1.74 mmboepd). 4Q23 production is expected to be 1.86-1.90 mmboepd. The company also announced first production ahead of schedule at upstream projects in Norway and China. COP also signed a 15-year throughput agreement for regasification in the Netherlands to further advance its global LNG strategy. We reiterate our BUY rating on ConocoPhillips with a target price of $140 (2.5x FY24 P/BV, 1 S.D. above mean), which offers decent upside from current levels. The company continues to demonstrate strong execution in its core businesses while maintaining capital and cost discipline.