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ConocoPhillips earns $1.54B in 2009 Oil prices down, but natural gas prices up, production continues to drop, profits rise year over year in the fourth quarter Eric Lidji For Petroleum News
Lower oil prices in the first three quarters of 2009 meant lower year-end earnings in Alaska for ConocoPhillips, despite increased profits in the fourth quarter of the year.
ConocoPhillips earned $1.54 billion in Alaska last year, a 33 percent decline from the $2.31 billion the company earned in the state in 2008. Despite that drop, the largest oil producer in the state earned $536 million in Alaska in the fourth quarter of 2009, a 17.5 percent increase over the $456 million it earned here in the fourth quarter of 2008.
That year-over-year increase represents the dramatic change in oil prices between the end of 2008, when a global recession drove oil down to $25 a barrel, and the end of 2009.
The delivered price of Alaska North Slope crude oil is currently around $75 a barrel.
While ConocoPhillips saw significantly decreased profits in Alaska, the company actually lost money over the course of the year from its assets across the Lower 48, reporting a loss of $37 million in 2009, compared to profits of $2.673 billion in 2008.
However, reported earnings of $131 million in the fourth quarter of 2009 ended a run of four unprofitable quarters for ConocoPhillips from its assets across the Lower 48.
Companywide, ConocoPhillips reported adjusted earnings of $5.37 billion for 2009, a 67 percent drop from the $16.43 billion in adjusted earnings reported in 2008. In the fourth quarter of 2009, ConocoPhillips earned $1.73 billion, down from $1.91 billion in 2008.
Oil down, natural gas up While liquids prices fell considerably between 2008 and 2009, Alaska natural gas prices actually rose, and most commodity prices increased year over year for the fourth quarter.
ConocoPhillips reported an average delivered price for North Slope crude oil of $59.19 per barrel in 2009, down from an average of $99.23 over the course of 2008. However, prices increased year over year for the fourth quarter, with the company reporting an average price of $74.34 per barrel in 2009, up from $64.13 per barrel in 2008.
ConocoPhillips sold natural gas liquids for $60.46 on average in 2008, down from $94.29 in 2009. For the fourth quarter, liquids sold for $74.60 in 2009 and $64.23 in 2008.
While natural gas prices fell nationally in 2009, they rose in Alaska.
ConocoPhillips reported an average price of $6.25 per thousand cubic feet in Alaska in 2009, up 43 percent from $4.38 per mcf in 2008. The company saw prices of $5.22 for the final quarter of 2009 in Alaska, up from $4.90 per mcf in the fourth quarter of 2008.
In the Lower 48, ConocoPhillips reported an average price of $3.42 per mcf in 2009, down 56 percent from $7.71 per mcf in 2008. The company saw prices of $4.03 for the final quarter of 2009 in Alaska, down from $4.76 per mcf in the fourth quarter of 2008.
That split reflects the unique natural gas market in Alaska, where prices are set through long-term contracts based on indices, rather than on a spot market, as in the Lower 48.
Production declines continue While prices rose and fell with atypical extremity over the past year, production rates maintained their regular direction from recent years: slight but steady declines.
ConocoPhillips produced 235,000 barrels per day on average in Alaska last year, down 3.7 percent from the 244,000 bpd the company produced in the state in 2008. In the fourth quarter of 2009, ConocoPhillips produced 234,000 bpd, down 9.3 percent from the 258,000 bpd the company produced in Alaska during the final three months of 2008.
Natural gas liquids production in Alaska in 2009 held even at 17,000 bpd, despite a 10 percent drop year over year in the fourth quarter, to 18,000 bpd from 20,000 bpd in 2008.
ConocoPhillips produced 94 million cubic feet of natural gas per day in Alaska in 2009, down 3 percent from the 97 million cubic feet it produced in 2008. The company saw increased fourth-quarter production year over year, though, producing 95 million cubic feet per day here in the final three months of 2009, up 8 percent from the 88 million cubic feet in the fourth quarter of 2008.
ConocoPhillips saw significantly reduced sales from the Kenai Peninsula liquefied natural gas facility it owns with Marathon Oil. ConocoPhillips reported selling 59 million cubic feet per day in 2009, down 20 percent from the 74 million cubic feet per day sold in 2008.
That drop mainly reflects lower sales over the first half of the year, but ConocoPhillips also saw year-over-year declines in the fourth quarter, selling 64 million cubic feet per day from the facility in the last three months of 2009, compared to 74 million cubic feet over the same period in 2008.
In January 2009, Tokyo Electric Power and Tokyo Gas renewed supply contracts to buy Alaska LNG from ConocoPhillips for another two years. Without an extension from the federal government, the export license for the facility will expire in March 2011.
Filing comes amid scrutiny ConocoPhillips is not drilling any exploration wells in Alaska this year. The company has said this is a first for ConocoPhillips and its predecessors since 1965, before the discovery of the Prudhoe Bay oil field.
The company argues that Alaska’s Clear and Equitable Share, or ACES, the production tax code approved in November 2007, made Alaska uncompetitive for investment.
The state believes the bill balances increased tax revenue with increased tax credits for certain spending, like exploratory drilling. In its current session, the state Legislature is expected to consider changes to the tax code. Gov. Sean Parnell wants an increase to the tax credit program, but as of yet has not advocated changing the production tax rate.
While ConocoPhillips is not drilling exploration wells this winter, it still plans to drill in the Chukchi Sea in 2012 and to pursue recent finds in the National Petroleum Reserve-Alaska, although both projects depend on overcoming legal and permitting obstacles.
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