ConocoPhillips Production Up 4%, Cuts Capex Again by $2B

ConocoPhillipsCharlie Passut – January 29, 2015 – NGIs Shale Daily

ConocoPhillips said its year-over-year (y/y) production from continuing operations, excluding Libya, grew 4% in 2014, fueled by growth from major projects, development programs and a 35% y/y increase in combined production from the Eagle Ford and Bakken shales.

But the Houston-based major said earnings were down for both 4Q2014 and the full-year 2014. It also slashed another $2 billion from its capital expenditures (capex) budget for 2015 — from $13.5 billion to $11.5 billion — citing the collapse in world crude oil prices. That followed a 20% cut in December (seeShale DailyDec. 8, 2014).

“We probably should expect — with some of the modest growth that we’re seeing in demand and the resiliency that we see in the unconventionals having an impact on the supply — we’re going to be in a more volatile world as we go ahead,” CEO Ryan Lance said in a 4Q2014 conference call Thursday. “We’re trying to build a company that has a solid base of legacy assets [and] low production decline, the things that you can underpin the dividend with over time…and then on top of that we’re moving to a lower cost to supply in the portfolio through the addition of the unconventional portfolio that we’re developing here in North America. That provides us with a lot of resilience and flexibility to the capital.

“We’ll see what the commodity price gives us. We’ll protect the dividend first, and then with what’s left in the cash flow we’ll fund a capital program that will set the growth that we see coming out of that.”

ConocoPhillips reported a 4Q2014 net loss of $39 million ($0.03/share), compared with 4Q2013 earnings of $2.5 billion ($2.00/share). Full-year 2014 earnings were $6.9 billion ($5.51/share), compared with full-year 2013 earnings of $9.2 billion ($7.38/share).

Production from continuing operations, excluding Libya, was 1.57 million boe/d in 4Q2014, an increase of 96,000 boe/d from the preceding fourth quarter. ConocoPhillips said that for the quarterly figure, “the net increase reflects 68,000 boe/d, or 5% growth, after adjusting for 28,000 boe/d from lower downtime and dispositions.

In the Lower 48, fourth quarter production increased by 44,000 boe/d compared to 4Q2013, to 541,000 boe/d, thanks in large part to growth in liquids-rich unconventional plays and an increase in drilling efficiencies. Liquids production grew 17% y/y, which included a 26% increase in crude oil production. The company also said its unconventional production grew by 37%.

“4Q2014 North American activity remained focused on drilling in the Niobrara and Permian Basin in the Lower 48, as well as the Duvernay and Montney [shales] in Canada,” the company said in a statement Thursday.

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