ConocoPhillips reduces 2016 capex, aims to return more cash to shareholders
ConocoPhillips on Thursday reported a wider-than-expected quarterly loss as the company lowered its planned capital expenditures for the year but increased its production forecast for 2016. During its conference call, executives also laid out a plan to increase payouts to shareholders as prices recover. The share price was were down marginally on Thursday. For the second quarter, ConocoPhillips reported a loss of 86 cents per share, or $1.1 billion. Earnings adjusted for certain expenses showed a net loss of 79 cents. Analysts expected a loss of 61 cents a share, according to Thomson Reuters. The report marks the fifth-straight quarterly profit loss for the Houston-based company amid a protracted price rout. ConocoPhillips reported a loss of 15 cents per share, or $179 million, in the year ago period.

Ryan Lance, CEO of ConocoPhillips Inc. Chris Goodney | Bloomberg | Getty Images

The world's largest independent exploration and production company further lowered its capital expenditure plan for 2016 to $5.5 billion from a previously stated $5.7 million. It had lowered its guidance in each of the last two quarters.

Still, the company increased its full-year production guidance to 1.540 million to 1.570 million barrels of oil equivalent per day. "The price environment remains challenging, but our business is running well and we continue to beat our production, capital expenditures and operating-cost targets," ConocoPhillips CEO Ryan Lance said in a statement. In a note, Wells Fargo said the reduced capital and operating expenses and higher-than-expected operating cash flow — $1.23 billion versus Wells' projection for $1.14 billion — compensated for the earnings miss. "Through a disciplined capex approach and the reduction of operating costs, [ConocoPhillips] provides near-term stability while preserving future growth opportunities," Wells wrote.

More shareholder payouts coming

The company said Thursday it would try to achieve "annual real dividend growth," meaning the payout would have more purchasing power in light of inflation. But ConocoPhillips does not plan to raise the absolute level of the dividend from 25 cents a share.

"We're not going to be trying to increase the dividend annually to get to the place we were before we cut the dividend," Lance said.

Instead, Lance said ConocoPhillips would seek to return 20 to 30 percent of free cash flow to investors through occasional share buybacks. He said executives would determine when it would make those payouts based on the price of oil and the value of its shares.

"As prices recover, the dividend payout we have today doesn't represent enough return to shareholders in a recovering price scenario," Lance said. The first round of buybacks would be aimed at offsetting any share dilution related to ConocoPhillips' employee-based stock ownership plan, Lance explained. The company would also prioritize the payouts over investing in its portfolio, but could do both under the right circumstances, he added.

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