On Feb. 22, ConocoPhillips announced yet another capital spending cut for its worldwide oil and gas exploration and production operations. In anticipation of continued low oil prices, the Houston-based major reduced its 2016 capital budget from the previously announced $7.7 billion to $6.4 billion, a decrease of 37 percent compared with 2015 capital expenditures of $10.1 billion.
In Alaska, however, company officials still expect only a slight decrease; so far, they are sticking with the $1.3 billion capex previously released, ConocoPhillips Alaska spokeswoman Natalie Lowman told Petroleum News Feb. 24.
“In late 2015 we announced a 2016 capital budget of $1.3 billion. In light of current oil prices, we expect to see a slight decrease but we haven’t announced what that number will be,” she said.
“However, in 2016 we anticipate levels of spending higher than our capital budget was in 2012 - prior to oil tax reform and when oil prices were in excess of $100 per barrel. Our decision to invest differentially in Alaska despite low oil prices has been positively influenced by tax reform passed in 2013 and ratified by the voters in 2014,” she said.
ConocoPhillips Alaska’s 2015 capital spend was $1.4 billion, “essentially on par with our 2014 capital spend of $1.6 billion. This compares with a 41 percent reduction in the corporation’s worldwide 2015 capital spend,” Lowman said.
Joe Marushack, president of ConocoPhillips Alaska, said in late November that his company was maintaining its capital spending program in the state, although it has reduced operating costs through a cut in its workforce of 5 percent with another 5 percent of the workforce retiring and not being replaced.
In the parent company’s annual report, filed with the Securities Exchange Commission Feb. 22, ConocoPhillips noted that in 2015, the United Kingdom enacted tax legislation that reduced its UK corporate tax rate by 12 percent, while Alberta enacted legislation increasing the company’s overall Canadian corporate tax rate by 2 percent.
“Our management carefully considers these events when evaluating projects or determining the level of activity in such countries,” the report said.
Robust spending in 2016
The annual report itemized spending by development drilling, major projects, exploration and appraisal activities, and maintaining base production and corporate expenditures, allocating 34 percent, 31 percent, 18 percent and 17 percent, respectively.
In Alaska, ConocoPhillips does not break out spending by activity, “but we are continuing with a robust drilling program and started oil production at Drill Site 2S and CD5,” Lowman said. “We have two new build rigs under construction, and work continues on GMT1. We also plan to drill two exploration wells in the Greater Mooses Tooth unit, and one exploration well in the Colville River unit this winter, the latter from the Alpine CD5 pad. We are also supporting the projects in our non-operated fields as well as pre-FEED funding for AK LNG.”
Alaska tax rate 49% for 2015
ConocoPhillips Alaska reported a 49 percent tax rate for the year and 48 percent tax rate for the fourth quarter, paying $673 million in taxes and royalties in 2015, of which $665 million went to the state of Alaska.
