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Vol. 16, No. 18 Week of May 01, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

$549M for CPAI as high prices in 1Q help offset production decline

With higher commodity prices offsetting continued production declines, ConocoPhillips earned $549 million in Alaska in the first quarter of the year, up 6 percent from 2010.

Companywide, ConocoPhillips earned $3.02 billion in the first quarter, up from $2.1 billion in the first quarter of 2010. In the Lower 48, the company earned $314 million during the first quarter, up from $240 million earned during the same period last year.

The Houston major produced 214,000 barrels of liquids per day in Alaska during the quarter, down 13 percent from 247,000 bpd produced in the first quarter of 2010, and 67 million cubic feet per day of gas, down from 94 million cubic feet per day last year.

The company said maintenance, including a four-day shutdown of the trans-Alaska oil pipeline in January because of a leak at Pump Station 1, contributed to those declines.

ConocoPhillips produced 150,000 bpd of liquids in the Lower 48 during the first quarter of the year, slightly less than the 156,000 bpd produced during the same period last year. The company produced 1.5 billion cubic feet of natural gas in the Lower 48 during the first quarter, down from 1.8 billion cubic feet produced during the same period last year.

$95.56 for Alaska oil

ConocoPhillips reported an average sales price of $95.56 per barrel for its Alaska oil in the first quarter, up from $77.25 per barrel during the same period last year. Natural gas prices, however, fell to $3.93 per thousand cubic feet from $4.33 year-over-year. (BP reported an average sales price of $103.22 per barrel for its Alaska oil in the first quarter, up from $79.14 in 2010, but does not break out other quarterly financial data for Alaska.)

The first quarter figures come after the regular session of the Alaska Legislature was adjourned without passing a revision to the production tax system proposed by Gov. Sean Parnell. The Legislature is now in special session, but a production tax change is not on the list of bills being considered.

“Alaska’s got a very progressive tax regime now and it’s getting to be a relatively high tax cost area for us,” Jeff Sheets, chief financial officer for ConocoPhillips, told analysts during a conference call on April 27. “We think there would be opportunity for increased investment in Alaska that is adversely impacted by the tax regime up there. So we’ll continue to work with the relevant people in the government there to try to influence things. We’re hopeful, but it’s hard to speculate on what the impact might be.”

Kenai: supply or demand?

ConocoPhillips’ sales from the liquefied natural gas export facility on the Kenai Peninsula declined to 20 million cubic feet per day in the first quarter of 2011, down considerably from the 56 million cubic feet per day sold during the first quarter of 2010.

ConocoPhillips and co-owner Marathon planned to mothball the facility in April, but recently announced four additional shipments to Japan and China through August.

“If we do prolong it, it’s just for a short period of time,” Sheets said.

Sheets blamed declining Cook Inlet supplies for the decision to shut down the plant.

“Obviously there would be a market for that gas if we could produce it,” he said.

When the company pursued its extension of its export license last year, though, it asked only for more time to ship pre-existing volumes already deemed excess to local needs.

In February, Dan Clark, ConocoPhillips’ manager of Cook Inlet assets, told Petroleum News that both supply and demand problems factored into the decision to close the plant, but said ConocoPhillips would not have sought an extension without enough supplies.

ConocoPhillips reported $8 million in exploration charges in Alaska during the first quarter of the year, compared to $7 million during the same period last year. The company also reported $136 million in depletion, depreciation and amortization in Alaska during the first quarter of 2011, down from $152 million during the same period in 2010.

—Eric Lidji



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