ConocoPhillips (COP) Q1 2023 Earnings Call Transcript

ConocoPhillips (NYSE: COP) Q1 2023 Earnings Call dated May. 04, 2023

Corporate participants:

Phil Gresh — Vice-President, Investor Relations.

Ryan Lance — Chairman and Chief Executive Officer

Bill Bullock — Executive Vice-President and Chief Financial Officer

Andy O’Brien — Senior Vice-President of Global Operations

Dominic Macklon — EVP Strategy, Sustainability & Technology

Nick Olds — Executive Vice-President of Lower 48

Analysts:

Stephen Richardson — Evercore. — Analyst

Neil Mehta — Goldman Sachs. — Analyst

Roger Read — Wells Fargo — Analyst

Clay — Bank of America. — Analyst

Sam Margolin — Wolfe Research — Analyst

John Roy — JP Morgan. — Analyst

Ryan Todd — Piper Sandler — Analyst

Devin McDermott — Morgan Stanley. — Analyst

Josh Silverstein — UBS. — Analyst

Paul Cheng — Scotiabank. — Analyst

Scott Hanold — RBC Capital Markets — Analyst

Alister Sam — Citi — Analyst

Raphael Duway — Societe Generale. — Analyst

Neal Dingmann — Truist Securities — Analyst

Leo Mariani — Roth MKM. — Analyst

Presentation:

Operator

Welcome to the First Quarter 2023 ConocoPhillips Earnings Conference Call. My name is Michelle and I will be your operator for today’s call.

[Operator Instructions]

I will now turn the call over to Phil Gresh, Vice-President, Investor Relations. Sir, you may began.

Phil Gresh — Vice-President, Investor Relations.

Thank you, Michelle and welcome to everyone to our first-quarter 2023 earnings conference call. On the call today, are several members of the ConocoPhillips leadership team, including Ryan Lance, Chairman and CEO; Bill Bullock, our Executive Vice-President and Chief Financial Officer; Dominic, Executive Vice-President of Strategy, Sustainability and Technology; Nick Olds, Executive Vice-President of Lower 48; Andy O’Brien, Senior Vice-President of Global Operations and Tim Leach, advisor to the CEO.

Brian and. Bill will kick-off the call with opening remarks, after which the team will be available for your questions. A few quick reminders. First, along with today’s release, we’ve published supplemental financial materials and a slide presentation, which you can find on the Investor Relations website. Second, during this call, we will be making forward-looking statements based on current expectations, actual results may differ due to the factors noted in today’s release and in our periodic SEC filings. Finally, we will make reference to some non-GAAP financial measures. Reconciliations to the nearest corresponding GAAP measure can be found in today’s release and on our website.

With that, I will turn the call over to Ryan.

Ryan Lance — Chairman and Chief Executive Officer

Thanks, Phil, and thank you to everyone for joining our first-quarter 2023 earnings conference call. Since we just hosted our Analyst and Investor Meeting in New York a few weeks ago, we’re going to keep our prepared remarks fairly brief today. ConocoPhillips delivered a strong first-quarter result, setting a new production record for the company as well as in the Lower 48. Underlying production growth was 4% year-on-year, including 8% year-on-year growth in the lower 48. We are confident in our outlook for the rest of the year and we are increasing the midpoint of our full-year production guidance. We are keeping our full-year capital and operating guidance unchanged. Shifting to returns on enough capital. We continue to demonstrate our returns-focused value proposition in the first-quarter. Our return on capital employed once again, exceeded our goal of being top-quartile in the S&P 500. And as we highlighted at the recent Analyst and Investor Meeting, we remain confident in our ability to achieve this objective in a mid-cycle price environment over the course of our 10-year plan.

On return of capital, we are on-track to deliver on our plan to $11 billion for 2023, which represents greater than 50% of our projected CFO, and is highly competitive with peers. And we are able to achieve all of this while investing in our attractive mid and long-term opportunities. Our first-quarter was also quite busy from a strategic perspective. At Port Arthur LNG, we acquired 30% equity interest in the joint-venture upon final investment decision on Phase one. At Willow, we are pleased to receive a positive record of decision and began road construction. And at APLNG, we announced plans to become upstream operator following the closing of AIG’s transaction with Origin, and to purchase up to an additional 2.49% in the project. We also accelerated our 2013 greenhouse gas emissions intensity reduction target to 50% to 60% versus 2016 baseline, as we further advance our net zero operational emissions ambition.

I know everyone asked the question on Surmont. So let me address that right now. We acknowledge that we received our first right of first refusal notice and are certainly reviewing it carefully. Now, in conclusion, as we shared at our Analyst and Investor Meeting last month, our deep, durable and diversified asset-base is well-positioned to generate solid returns and cash-flow for decades to come. And as I’ve said then, we challenge any other E&P company to show you a plan with this kind of duration.

Now let me turn the call over to Bill to cover our first-quarter performance in more detail.

Bill Bullock — Executive Vice-President and Chief Financial Officer

Well, thanks, Ryan. In the first-quarter 2023, we generated $2.38 per share in adjusted earnings. First-quarter production was a record for the company at 1,790,000 barrels oil equivalent per day, driven by solid execution across the entire portfolio. The Eagle Ford stabilizer expansion in Qatargas 3 planned turnarounds were both successfully completed and Lower 48, production was also a record, averaging 1,36,000 barrels of oil equivalent a day, including 694,000 from the Permian, 227,000 from the Eagle Ford. 98,000 from the Balkan. And Lower 48 underlying production grew 8% year-on year, with new wells online and strong well performance relative to our expectations across our asset-base.

Now moving to cash flows. First-quarter CFO was $5.7 billion, excluding working capital, at an average WTI price of $76 per barrel. This included APLNG distributions of $764 million.

Our first-quarter capital expenditures were $2.9 billion, including $400 million for Port Arthur Phase I and $100 million in Lower 48 acquisitions. Regarding Port Arthur, as you will recall from our fourth-quarter call, we said, we plan to spend about $1.1 billion in 2023, so first-quarter spending was fairly front-end loaded, relative to the full-year.

In the first-quarter, we also received USD200 million in disposition proceeds. And regarding capital allocation, we returned $3.2 billion back to shareholders and this was via $1.7 billion in share buybacks and $1.5 billion in ordinary dividends and [Indecipherable] payments.

Turning to guidance, we forecast second-quarter production to be in a range of 1.77 million to 1.81 million-barrels of oil equivalent per day. This includes 10,000 to 15,000 of planned seasonal turnarounds. We have also increased the midpoint of our full-year production guidance by 10,000 barrels a day. Our new range is 1.78 million to 1.8 million-barrels of oil equivalent. Up from 1.7 million to 1.8 million previously.

For APLNG, we expect distributions of $350 million to $400 million in the second-quarter. And for the full-year, we expect APLNG distributions of $1.8 billion. All other guided items remain unchanged.

So to wrap-up, we had a strong first-quarter. We remain confident in our outlook, leading to our increase in-full year production guidance and we expect to return to $11 billion to our shareholders this year. And we’re well-positioned to deliver on our commitments throughout this year. So that concludes our prepared remarks and now, I’ll turn the call-back over to Phil.

Phil Gresh — Vice-President, Investor Relations.

Great. Thanks, Bill. So before we move to Q&A, just a quick reminder here that we are sticking to one question per caller this quarter, since we just hosted at the Analyst Day a few weeks ago and it’s obviously quite a busy earnings day for everybody. So with that, Michelle, let’s move to the Q&A.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session.

[Operator Instructions] Please standby while we compile the Q&A roster. The first question comes from Stephen Richardson with Evercore. Your line is open.

Stephen Richardson — Evercore. — Analyst

Great, thank you. Ryan, I was wondering if you could talk. I mean, on the return of capital. Obviously, outperforming 50% of cash-flow from ops and setting up really strongly versus the $11 billion target. I just wonder if you could address the environment is not straightforward. There’s a lot of volatility out there just from a shareholder’s perspective, how do you think about balancing the [indecipherable] buyback and just the general flexibility as people consider kind of the volatility in the commodity environment?

Ryan Lance — Chairman and Chief Executive Officer

Yeah, thanks Stephen. I think. Let’s start with just recognizing the volatility that’s currently in the market, but even with that as we look at the first-quarter average prices, we’re in the mid-70s WTI quarter-to-date in the second-quarter. They are in the high 70s, so that’s close enough to our planning framework that we set-out early in the year, that close enough to 80 and delivering the 22 beginner of cash for the year. So we’re not going to overreact to kind of what we’re seeing in the volatility right now. So we’re on-track and hopefully, you see that with the rock that we set for the third-quarter, on-track to deliver the $11 billion distributions that we set-out at the beginning of the year.

Now we’re comfortable with that we have the balance sheet to support it if prices turned out a little bit — a little bit lower as well, so we take a structural change and we certainly don’t view this volatility we’re seeing right now as a structural change in the marketplace. In terms of the mix and the balance. We said we do about 50% shares, we lean-in a little bit in the first-quarter on the shares, but through the year, we expect to be about fifty-fifty between RV rock and the shares to deliver the $11 billion of returns back to the shareholder. Hopefully, you see that with the third-quarter is setting of the V rock at $0.60 a share. That should give you comfort that we’re on-track to deliver that.

Stephen Richardson — Evercore. — Analyst

Thank you so much, Ryan.

Phil Gresh — Vice-President, Investor Relations.

Thanks, Steve. Next question.

Operator

The next question comes from Neil Mehta with Goldman Sachs. Your line is open.

Neil Mehta — Goldman Sachs. — Analyst

Yes, thank you so much and congrats on a really good Lower 48 quarter in particular. Ryan, I think you sort of cut this question off, but I’d love you to comment to the extent you can on Surmont recognizing it’s an active situation. And as you think about that asset, first of all, it seems from the Analyst Day, that is a core position for you guys and just any thoughts on whether it makes sense to be a bigger part of the portfolio to the extent you can comment at all?

Ryan Lance — Chairman and Chief Executive Officer

Yes, Neil. Thanks. No I can let Andy, maybe make a few comments about the asset which would be kind of reiterating what we said at the Analyst Meeting. But yes, we’re in receipt of the notice from the transaction between Total and Suncor. We have — we have a right on the Surmont asset, which we know really well, because we own 50% and operate it. So we’re in, we’re in the process of taking a pretty serious look at that, I can maybe have Andy reiterate some of our thoughts about the asset that we described in the analysts meeting.

Andy O’Brien — Senior Vice-President of Global Operations

Good morning, Neil. Yes, as we said in the Analyst Meeting, we do, we do like seven as a nice sort of long-life, low capital intensity asset for us. As we — as we covered in the analyst meeting, now that, that low capital intensity is an important part of our portfolio. And just to sort of reiterate that sort of the maintenance capital on Surmont, I’m just I’m referring now to our 50% share of Surmont, it has been in the $20 million to $30 million a year range for the last four-five years and you’ll recall, I mentioned that we’re — we’re drilling our first new pads since 2016. That pad, for example, it will be in the $40 million to $50 million. So it’s a it’s a very low capital intensity asset for us with that, sort of basically flat production profile. And as you know, sort of pretty much all of our other driver information we disclosed in terms of our production data, our bitumen realizations, our operating costs, that’s all-out there, you can form your own view on the asset, but it’s — it’s an asset that is a core asset in our portfolio. So probably just stop there.

Neil Mehta — Goldman Sachs. — Analyst

Great color. Thanks guys.

Phil Gresh — Vice-President, Investor Relations.

Thank you Neil. Next question.

Operator

The next question comes from Roger Read with Wells Fargo. Your line is open.

Roger Read — Wells Fargo — Analyst

Yes thanks, good morning. I guess I’d like to follow-up on Port Arthur LNG Obviously, the Phase one was covered, there is always a possibility of greater expansion in LN. it just what would be the. things we would watch coming up in terms of the second phase?

Bill Bullock — Executive Vice-President and Chief Financial Officer

Yes, sure, Roger. This is Bill. As we talked about at the Analyst and Investor Meeting, we’re currently really satisfied with 30% for Phase one and our 5 million ton equity offtake and we’re prioritizing market development over any additional off-take and equity right now. We really think we’ve got sufficient capital allocation to Port Arthur, and we’re looking for ways to optimize our current investments, our plate’s pretty full and we don’t need — see a need to allocate significant additional capital in the near-term. And so there needs to be some pretty unique reasons to make it attractive.

Roger Read — Wells Fargo — Analyst

All right. Clear enough. I’ll stick to the one. Thanks.

Phil Gresh — Vice-President, Investor Relations.

Thank you, Roger.

Operator

The next question comes from Doug Leggate with Bank of America. Your line is open.

Clay — Bank of America. — Analyst

Hey, good morning guys. This is actually Clay on for Doug. So, thanks for taking the question. My question is a follow-up on Surmont. Our understanding is that Suncor could receive certain tax benefits as part of their — as part of their deal. And I’m wondering if those tax benefits would be available to you if you exercise your right of first refusal? And I’m asking the question because I think George would look more like an asset deal, while it is just more of a corporate deal.

Ryan Lance — Chairman and Chief Executive Officer

Well, as you said Clay, we are currently reviewing the proposal that we got and the terms and conditions, it’s a bit early to comment on tax pools.

Clay — Bank of America. — Analyst

Okay, I’ll leave it there, thanks.

Operator

The next question comes from Sam Margolin with Wolfe Research. Your line is open.

Sam Margolin — Wolfe Research — Analyst

Hello, thanks for taking the question. The capital efficiency looks like it’s going-in the right direction with the production guidance and the capital plan in-line. At the Analyst Day, you made some comments where you thought it was at least possible that you could start to see inflation ease if not, if not reverse. And the question is, just as you think about this production results, is that an outcome of maybe an opportunity to press activity a little bit as costs are easing or is this a more of a well results driven outcome? Thank you.

Dominic Macklon — EVP Strategy, Sustainability & Technology

Yes, thanks. It’s Dominic here, just to talk to inflation a little bit first. I think overall, capital inflation for the company, we still expect to be in the mid single-digits year-over-year. So we certainly see that leveling-off. As we mentioned before, we’ve certainly seen deflationary trends and still tubulars all price-related commodities such as fuel and chemicals beyond that. On the rig frac and other services, they’ve certainly leveled off. We may be trending towards some reductions, we have seen rig counts peak and begin to decline. That’s led by the gas basins. So our teams are very focused on costs and they are working, working with our many service providers on that — that we still expect around the mid single-digits at this stage on inflation. Having said that, we certainly see capital efficiency coming through. I think, was really on an execution front. So we’ve had a strong start, particularly in the lower 48, our full-year production guidance as we’ve said, is up at the midpoint. We do expect low-to-mid-single-digit growth for the year and that’s pretty consistent with the long-term 45% CAGR we presented at our Investor Meeting. And yet we’re holding our capital range the same, with $11 billion at the midpoint, so. We’re definitely seeing some execution efficiency. We’re pleased about that. Nick, you may want to talk a little bit more about the lower 48 on that?

Nick Olds — Executive Vice-President of Lower 48

So thanks Dom. Yes, Sam, just take you back to the Analyst call, when we talked about drilling and completion efficiency. If you recall, we had from 2019, 2022, we had a 50% improvement in drilling, 60% improvement in completion that stages per day. We continue to see that in Q1, very promising results. And that’s the use of technology like simul frac, e-frac, we’re testing out some remote frac as well, where we keep a a frac spread on pad one and then we add frac pad two, pad three, pads four, so very promising results there. As well as on the drilling front, we continue to use data analytics and rig automation. But all that’s coming together to really promising. That did lead to some accelerated places on production of wells in Q1, driving some of the overperformance.

Sam Margolin — Wolfe Research — Analyst

Thank you so much.

Phil Gresh — Vice-President, Investor Relations.

Thanks Sam. Next question.

Operator

The next question comes from John Roy with JP Morgan. Your line is open.

John Roy — JP Morgan. — Analyst

Hi, thanks for taking my question. So my question is just on WILLOW, are there any updates there too how the lawsuits are progressing and are you any closer to a resolution there and getting to FID then, when we last saw you a few weeks ago at the AIM?

Andy O’Brien — Senior Vice-President of Global Operations

Hey, John, this is Andy. Yes, there’s really not too much new to comment on over the last few weeks. So the only incremental news we’ve had all being positive. The 9th Circuit Court of Appeals denied motions attempting to stop our construction work. So we’ve been — we’ve been progressing with the winter season and we’ve we’ve had gravel extraction and road construction underway. It’s pretty much going as we expected it would. So as you have in the last two-three weeks, not much, not much more to add than we talked about at the Analyst and Investor Day.

John Roy — JP Morgan. — Analyst

Thank you.

Phil Gresh — Vice-President, Investor Relations.

Next question.

Operator

The next question comes from Ryan Todd with Piper Sandler. Your line is I’ve been pitched.

Ryan Todd — Piper Sandler — Analyst

Hey, thanks. Ryan, maybe one for you. Following-up on the Analyst Day, but what impact, if any, does — you increased your view of the mid cycle oil price from 50 to 60, what impact, if any, does that have on the way in which you think about the business. I mean, you’re still focused on low-cost of supply assets well below this price. Does the view that oil prices would be structurally higher over-time have any impact on the way you think about managing the business over the long-term, your balance sheet, allocation of capital or or anything else?

Ryan Lance — Chairman and Chief Executive Officer

Thanks, Ryan. In terms of how we’re running the Company day-to day and the allocation of Capital that we put in each year, it really doesn’t. We’re only investing in things that have a constant supply, less than $40 WTI in the portfolio. So what a mid cycle price changes, our Chief Economist Officer, our commercial team, we go through a process every year, where we take a current view of the macro and long-range view of what we think is happening and as we’ve gone through a lot of turmoil in the business, the pressure invision in Ukraine, just the lack of investment going into the business these days, we step-back and get our own bottoms-up, which we do every year, but important this year, we did our own bottoms-up work, trying to understand where we think the mid cycle price is moving to and was it staying at kind of that $50 level. Our assessment of the price required to generate that incremental barrel to meet that incremental demand, our assessment, put it at around $60 today. And so — so the implications of that are really just how much how much cash-flow, we think we’re going to be generating as we interrogate the portfolio, as we invest in the growth and development of the company and we put capital into the company. The way it manifests itself is just how much cash-flow we can deliver at that kind of mid cycle price, which is obviously a little bit more than what we would deliver at a lower-price. So it goes to sort of how we think about cash on the balance sheet and how we think about the debt that we’re have, how we think about distributions and how much capacity there is to distribute a bunch of cash, which our commitment’s about 30% and when we get above mid cycle price in our case, like we are today, obviously, we’re generating a lot more cash and we’re turning a lot more cash to the shareholder. Now something in excess of 50% today. But that’s driven by the lower reinvestment rate that we have in the company and our commitment to invest only in the lowest-cost supply things we have in the portfolio.

Ryan Todd — Piper Sandler — Analyst

Thanks for that.

Phil Gresh — Vice-President, Investor Relations.

Thank you. Operator, next question.

Operator

The next question comes from Devin McDermott with Morgan Stanley. Your line is open.

Devin McDermott — Morgan Stanley. — Analyst

Hey, thanks for taking my question. So I wanted to go back to the lower 48, it was helpful detail before and some of the efficiencies that you’re seeing there. I think one of the other drivers of the strength and production that you called out in the prepared remarks was well performance beating your expectations. Can you talk a little bit more explicitly about what you’re seeing there and if there’s any development changes that you’ve made driving that uplift?

Nick Olds — Executive Vice-President of Lower 48

Yes, Devin, this is Nick, you’re right. Strong well performance was definitely a contributing factor for Q1. If I take you back to the Q4 call, I had mentioned that our well performance was meeting or exceeding type curve expectations. And we continue to see that trend into Q1. So that’s very encouraging. No overall development changes, we’re just seeing very promising results across all assets. It’s just not the Permian as well. and as I mentioned earlier, the completion and drilling efficiency has allowed us to accelerate some wells earlier into Q1. And so we’re seeing that production come into play.

And then on the Eagle Ford stabilization plant that we’ve upgraded, the team just did a remarkable job in sheltering the amount of downtime in Q1, we had less DT, but overall, very strong quarter.

Devin McDermott — Morgan Stanley. — Analyst

Thank you.

Phil Gresh — Vice-President, Investor Relations.

Thanks, Devin. The next question comes from Josh Silverstein with UBS. Your line is open.

Josh Silverstein — UBS. — Analyst

Hey, thanks guys. Just some questions around potential LNG opportunities in the future. You mentioned at the Analyst Day that you have options around Port Arthur Phase 2, 3 and 4 and even Costa Azul as well. Can you just give some more details around the options? Does it need to be at a 30% like you did in Phase 1 at Port Arthur or could it be 10% or some other agreement there, could be before after FID as well?

And then just along the same lines, because there are already some infrastructure in the ground for Phase 1, will the capital outlay for Phase 2 or 3 be less because of that? Thanks.

Ryan Lance — Chairman and Chief Executive Officer

Yes. So yes, I think we laid this out pretty well at our Analyst Meeting. So at Port Arthur, we’ve got options on both equity and offtake for future phases, those can be executed either four for equity offtake or both as they present themselves through time. We also have some options on the West Coast of Mexico at Energia Costa Azul on Phase two. And so those are long-dated options that we continue to look at.

Talked a bit about Phase 2 earlier in the call. And so there’s going to be some pretty unique opportunities on that because we think about that right now. Now, as we think about future phases, we have structured our investment in Phase 1, such that we benefit from the economies of scale for future phases on our Phase 1 investment. So future phases actually benefit Phase 1.

Josh Silverstein — UBS. — Analyst

Great, thanks guys.

Phil Gresh — Vice-President, Investor Relations.

Thanks, Josh.

Operator

The next question comes from Paul Cheng with Scotiabank. Your line is open.

Paul Cheng — Scotiabank. — Analyst

Thank you. Good morning, gentlemen. Maybe this is for Nick. In the — in the [indecipherable] you are talking about 2023 the shale oil production of one million barrels a day and in the first-quarter, you’re already there. That means that for the rest of the year, the lower 48 shale oil and [Indecipherable] together will be pretty strapped, for that number is somewhat conservative now.

Nick Olds — Executive Vice-President of Lower 48

Yeah, Paul, this is Nick, you’re right. I mean, we had a very strong performance in Q1 as we just described. As you look at the future quarters of this year, we got some larger pads projects, longer horizontal wells and kind of put that in context, we’ve got 80% of our 2023 Permian wells are two miles or greater and we got a fairly large portion of that on the three miles, but you’re going to see kind of small variation, but overall, that’s going to be relatively flat, but I’ll leave you with this pause. Our plant will deliver at least mid-single-digits for Lower 48.

Paul Cheng — Scotiabank. — Analyst

Right. Thanks a lot.

Operator

The next question comes from Scott Hanold with RBC Capital Markets, your line is open.

Scott Hanold — RBC Capital Markets — Analyst

Hey thanks. I just wondering if you could provide some updated commentary, if you have any, on Venezuela? About a month ago, there were some talks about kind of easing oil sanctions there and you all have a potential big asset. Or at least value that, at one point in time, we’re looking to extract. Is there any update on that or is there any kind of color you can talk about like the progress and remind us of the value there?

Nick Olds — Executive Vice-President of Lower 48

Yeah, Scott, yeah, we’re right in the middle of all those conversations as you might imagine, including the most recent conversations around the Citgo refining assets. We’re in the queue, we’re right in the middle of anything that would happen there. We \have a, as a reminder ICC judgment of $2 billion, we’ve collected about $700 million on that judgment to-date. So we have an outstanding — what they owe us on that, particular judgment, where appeal process with exit, which is the other tribunal and that’s an $8 billion potential award coming now, there is some overlap between the two. So you can’t necessarily add the two together, but I guess the point is, there is a lot of money and we’re hard at trying to get some resolution of that.

The recent news out of how the judge and the US government around Citgo is certainly helpful in that regard. It looks like despite the sanctions that are on the Venezuelans and on US companies for doing work in Venezuela. There is a little bit of — there is some light developing at the end of that tunnel, and we’re right in the middle of it all.

Scott Hanold — RBC Capital Markets — Analyst

All right. Good to hear. Thanks.

Phil Gresh — Vice-President, Investor Relations.

Thanks, Scott.

Operator

The next question comes from Alister Sam with Citi. Your line is now open.

Alister Sam — Citi — Analyst

Hello, everybody. On your remarks at the beginning on the lower 48, you mentioned about infrastructure build and I was really just interested to try and understand across the lower 48, but I guess especially in the Permian, what’s the sort of ratio of capital that’s going into infrastructure versus[phonetic] drilling? I guess — I guess it changes over the life of the asset. So just kind of intrigued at what sort of point of asset-life are we in terms of that ratio?

Ryan Lance — Chairman and Chief Executive Officer

Yes, I’m not sure of the exact ratio maybe Nick might have some numbers, but I think most of what we’re doing is large pad development with not single-well facilities but central facilities, supporting those large pads. I don’t know what the split between drilling and infrastructure spend is, I can let Nick have a comment, but I don’t think it’s much different than what we’ve been doing for the past few years.

Nick Olds — Executive Vice-President of Lower 48

Yes, Alex, it’s very limited. As far as on the infrastructure spend, most of your expenditures is on drilling and completion in the Permian, as an example.

Alister Sam — Citi — Analyst

Okay, thank you very much.

Phil Gresh — Vice-President, Investor Relations.

Thanks, Alistair.

Operator

The next question comes from Raphael Duway[phonetic] with Societe Generale. Your line is open.

Raphael Duway — Societe Generale. — Analyst

Hello, thank you for taking my question. I just have one question about the working capital deterioration in 1Q. I was wondering if you could tell us how much of it is due to some Norwegian cash tax catch-up and what is it to expect for the rest of the year?

Bill Bullock — Executive Vice-President and Chief Financial Officer

Yes, sure, happy to talk about working capital. So if, if you look at working capital for Q1, you can see that in the supplementary documents we put out on our website, Q1 was about $100 million use of working capital. For Q2, we would expect that to be just over $1 billion. And as you rightly noted, that’s associated with Norwegian tax payments, which is normal for operators here in Norway, we accrued those in 2022, they’re payable in the second-quarter of 2023.

And then looking for the rest of the year, assuming we don’t see FX rates move materially for the remainder year, we’d expect — we wouldn’t really expect any material working capital movements across Q3 or Q4. So hope that helps for kind of full-year view?

Raphael Duway — Societe Generale. — Analyst

Thank you.

Phil Gresh — Vice-President, Investor Relations.

Thank you.

Operator

The next question comes from Neal Dingmann with Truist Securities, your line is open.

Neal Dingmann — Truist Securities — Analyst

Good morning. My question is on shareholder return planned specifically. What do you view sort of in broad terms is an optimal quarterly payout given, I guess, now even more volatile the commodity market continues to be, and looking at your most recent I guess, the payout is a bit over over 100%.

Bill Bullock — Executive Vice-President and Chief Financial Officer

Yes, well. I think Neal, you have to kind of go back to how we set the VROC in the first-quarter, that was actually set-in the third-quarter of last year at a $100 price environment. So we probably had a ratable, a little bit higher distribution in the first-quarter and then it gets more ratable as we go through the second, third and fourth-quarter as we deliver the $11 billion that we’ve targeted for this year and that’s evidenced by how we set the VROC third-quarter at $0.60, $0.60 a share.

Neal Dingmann — Truist Securities — Analyst

Thank you.

Phil Gresh — Vice-President, Investor Relations.

Thank you, Neal.

Operator

Our last question comes from Leo Mariani with Roth MKM. Your line is open.

Leo Mariani — Roth MKM. — Analyst

Obviously, strong results out of COP today and you enumerated a couple of reasons for the first-quarter production beat, sounds like some wells came on early and well results continue to be very strong, but just wanted to dive in a little bit on the maintenance side. I know you guys kind of talking about 35,000 BOE per day of maintenance in the quarter, did that actually come to fruition, maybe, that number was a little bit different. And then can you talk about maintenance for the rest of the year as you had 10,000 to 15,000 expected in 2Q but any expectations for 3Q or 4Q?

Dominic Macklon — EVP Strategy, Sustainability & Technology

Yes, thanks. It’s Dominic here. So you’re right. We did anticipate about 35,000 barrels a day of turnaround maintenance impact in the first-quarter, that actually came in at 25,000, so 10,000 lower. That was partly because of the efficiency that Nick talked about at the lower 48. The Eagle Ford Sugarloaf stabilize expansion went really well and the team did a great job sheltering some of that. Then there was a little bit of timing there on Qatar turnarounds as well.

So we had 25 — 25,000 barrels a day impact in the first-quarter. We still expect a full-year average impact from our turnarounds of about 15,000 barrels a day equivalent. Bill said second-quarter, I think as you mentioned, you expect to be 10,000 to 15,000. And there will also be some standard sort of seasonal downtime in the second and third-quarter, we typically see in Norway in Alaska and APLNG. But all that’s reflected in our new guidance, 1.78 million to 1.8 million-barrels a day for the full-year.

Leo Mariani — Roth MKM. — Analyst

Okay. Thank you.

Phil Gresh — Vice-President, Investor Relations.

Thank you all for being here today. We appreciate it.

Operator

[Operator Closing Remarks]