Increasing investment
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ConocoPhillips announces plan for heightened capital expenditure for Alaska
Alan Bailey Petroleum News
ConocoPhillips anticipates upping its capital expenditure in Alaska to around $1.2 billion in 2018, the company has announced. This figure, amounting to about 20 percent of the company’s planned worldwide expenditure, compares with an expected capital expenditure level of $900 million, excluding acquisition costs, in 2018. The increase in expenditure reflects the development of Greater Mooses Tooth 2; higher activity levels and higher working interests in existing fields; and further exploration activity on the North Slope, the company says.
The reference to higher working interests in Alaska refers to the acquisition of Anadarko Petroleum’s interests in lease holdings in the western North Slope, and the acquisition of BP’s interests in the Kuparuk River field - the company’s increased working interests in these fields will increase the company’s share of field capital expenditure. The capital expenditure projection assumes that the Kuparuk River field acquisition will complete by the end of this year.
ConocoPhillips expects its worldwide capital expenditure in 2019 to be about $6.1 billion, around the same level as in 2018. So, the announced boost to Alaska expenditure represents an increased share of the company’s worldwide expenditure, a factor that presumably reflects the company’s confidence in its Alaska ventures.
Focus on Willow ConocoPhillips says that its projected expenditure on Alaska exploration in 2019 will particularly focus on the further appraisal of the company’s Willow discovery in the northeastern National Petroleum Reserve-Alaska. The company plans to drill four to six appraisal wells in the prospect this winter.
According to an investor presentation on the capital budget, the company also anticipates further appraisal of oil discoveries in the Narwhal trend on the east side of the Colville River, the prospective trend that includes the Pikka discovery in the Nanushuk formation that Oil Search plans to develop. However, ConocoPhillips has previously announced the it planned to drill into the Putu prospect in the Narwhal trend in November of this year - there is no word yet on the status of that drilling project.
The investor presentation says that ConocoPhillips estimates that it now has somewhere in the range of 500 million to 1.1 billion barrels of discovered oil resource in its new North Slope finds, but that 75 percent of its exploration prospect portfolio in the region remains undrilled.
Assuming low oil prices For some time ConocoPhillips has been following a strategy of basing its business planning on an assumption of relatively low oil prices, with higher prices becoming a bonus for the company. The investor presentation says that the company is assuming a West Texas Intermediate price of below $40 per barrel. At $40 per barrel, the company’s cash flow would exceed the level of sustaining capital investment and dividend payments, the company says. More than 90 percent of the company’s planned 2019 capital investment is directed at projects involving a cost of supply of oil below that $40 level. About 55 percent of the projects involve unconventional oil in the Lower 48 and Canada, with most of the remainder, including projects in Alaska, involving conventional oil.
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