ConocoPhillips Co. reported adjusted earnings of $473 million from Alaska in the third quarter, a year-over-year decline caused by lower oil production and lower oil prices.
The Houston-based multinational independent produced 155,000 barrels of oil equivalent per day in Alaska during the third quarter, down nearly 13 percent year-over-year and nearly 20 percent quarter-over-quarter. Third quarter production is often low in Alaska because companies use the warm summer months for maintenance activities. This year, that trend was heightened by increased maintenance activities at the Prudhoe Bay unit.
The decline in production resulted in lower tax payments as well.
Companywide, ConocoPhillips reported adjusted earnings of $1.6 billion.
Opposing production trends
Third quarter production figures show crisscrossing trends: liquids production is falling in Alaska and rising in the Lower 48 while natural gas production is doing the opposite.
ConocoPhillips produced 139,000 barrels of oil per day in Alaska, down from 170,000 bpd in the second quarter of this year and from 161,000 bpd the third quarter of 2013.
The company produced 8,000 bpd of natural gas liquids in Alaska during the quarter, down from 16,000 bpd in the second quarter and 11,000 in the third quarter of 2013.
That drop includes systemic declines on top of seasonal declines. The drop comes as ConocoPhillips is seeing increased liquids production from its Lower 48 properties.
The company produced 191,000 bpd of oil and 104,000 bpd of natural gas liquids in the Lower 48 third quarter, compared to 153,000 bpd of oil and 94,000 bpd of NGLs produced in the third quarter of 2013. That growth is largely attributable to a 33 percent year-over-year increase in liquids production from the Eagle Ford and Bakken plays.
But ConocoPhillips saw increased natural gas production in Alaska in the third quarter.
The company produced 48 million cubic feet per day in Alaska in the quarter, up from 45 mmcf per day in the second quarter of the year and 35 mmcf per day in the third quarter of 2013, largely on resumed liquefied natural gas exports from its facility in Kenai.
By comparison, ConocoPhillips produced some 1.48 billion cubic feet of gas per day from its Lower 48 properties during the third quarter, down slightly from 1.49 bcf per day in the second quarter of the year and from 1.51 bcf per day in third quarter of 2013.
Companywide, ConocoPhillips produced 565,000 barrels of oil, 158,000 barrels of natural gas liquids and 3.88 bcf of natural gas per day during the quarter.
Those combine to 1.49 million barrels of oil equivalent per day.
With reduced production comes lower production taxes.
ConocoPhillips paid some $649 million in taxes and royalties in Alaska during the third quarter, down from $872 million in the second quarter of the year. Of the total, the company paid some $420 million in state obligations, such as royalties, severance taxes and other taxes, down from $553 million in state obligations in the second quarter.
Those figures come from ConocoPhillips, as does a claim that the third quarter tax burden is “about the same” as it would have been under the previous fiscal regime.
The remaining obligations are to the federal government.
ConocoPhillips reported a 34.4 percent adjusted effective income tax rate in Alaska during the third quarter, down from 35.6 percent in the second quarter and down from 37.1 percent in the third quarter of last year. Companywide, ConocoPhillips reported a 40 percent adjusted effective income tax rate across all its business segments.
Prices also fell in the third quarter.
ConocoPhillips reported an average price of $102.36 per barrel for Alaska liquids, down from $108.93 in the second quarter and $110.95 in the third quarter of 2013. By comparison, ConocoPhillips earned $87.91 per barrel in the Lower 48, down from $93.73 per barrel in the second quarter and $100.25 per barrel in the third quarter of 2013.
The Alaska price is usually higher because it includes natural gas liquids.
Companywide, ConocoPhillips sold its oil for $96.97 per barrel in the third quarter, down from $103.53 in the second quarter and $106.74 per barrel in the third quarter of 2013.
ConocoPhillips reported an average natural gas price of $5.47 per thousand cubic feet in Alaska during the quarter, down from $6.03 per mcf in the second quarter and up from $4.09 per mcf in the third quarter of 2013. By comparison, ConocoPhillips earned $3.96 per mcf in the Lower 48 during the third quarter, down from $4.43 per mcf in the second quarter of this year and up from $3.39 per mcf in the third quarter of last year.
The Alaska natural gas price is set on longer-term contracts, many of which are indexed to oil prices. In the Lower 48, natural gas price are determined on a spot market.
Companywide, ConocoPhillips earned $5.91 per mcf during the quarter, the result of higher than average commodity prices in Norway, the United Kingdom and Indonesia.
ConocoPhillips is in the early days of an increased capital program in Alaska.
The company recently sanctioned Drill Site 2S at the Kuparuk River unit, intends to sanction the GMT-1 pad at the Greater Mooses Tooth unit in the first quarter of 2015, commissioned a new rig for infill work and is progressing on heavier oil development.
The company spent $369 million on capital expenses in the third quarter in Alaska, down from $390 million in the second quarter but up from $291 million in the quarter of 2013.
By comparison, ConocoPhillips spent $1.6 billion across the Lower 48 and nearly $4.9 billion across its entire portfolio on capital expenses during the third quarter.
ConocoPhillips also reported $123 million in depreciation, depletion and amortization expenses in Alaska in the third quarter, roughly even with figures from last year.
