ConocoPhillips Alaska Inc. is reporting progress on three North Slope developments.
In a third quarter earnings call, the local subsidiary of the largest independent exploration and production company in the world said that it recently spud the first well in the 1H NEWS project and expects first oil by the end of the year; that the CD-5 project is producing significantly more oil than expected; and that the GMT-1 project is “running well under budget” and remains on track for producing first oil by the end of 2018.
The company is also permitting a seismic program across the 740,000 gross acres it acquired last December in a lease sale. “We see additional opportunity out to the west, but also have a nice pipeline of projects that we’re working on today,” Executive Vice President of Production, Drilling and Projects Al Hirshberg said, according to a transcript of the call.
The company spud the first well in the $460 million 1H NEWS project at the Kuparuk River unit in early August. The project should produce 8,000 barrels per day at its peak.
The CD-5 pad at the Colville River unit is producing 26,000 barrels per day, according to the company, compared with a projected plateau rate of 16,000 bpd.
The GMT-1 project at the Greater Mooses Tooth unit is the first National Petroleum Reserve-Alaska development on federal land. The cost savings to date have been large enough to be felt on overall spending rates companywide, according to Hirshberg
Earnings, production
ConocoPhillips Co. reported $103 million in adjusted earnings from its Alaska segment in the third quarter, representing increased production and prices from last summer.
The company produced 166,000 barrels of oil equivalent per day in Alaska in the third quarter, up from 162,000 boe per day during the same period in 2016.
A comparison of specific commodities is more dramatic, given the recent start-up of several North Slope oil projects and divestment of Cook Inlet gas projects. The company produced 5 million cubic feet of gas per day in Alaska during the third quarter, down from 18 million cubic feet per day in the period last year. At the same time, the company produced 154,000 barrels of oil per day this summer, up from 148,000 bpd last summer. Natural gas liquids production remained even at 11,000 bpd.
Adjusted earnings fell from $167 million in the second quarter. Quarter over quarter production also fell from 184,000 barrels of oil equivalent per day - 169,000 bpd of oil, 14,000 bpd of natural gas liquids and 7 million cubic feet per day of natural gas. Alaska production rates often fall in the summer, as operators use the warmer months to conduct major maintenance activities across their North Slope properties.
With most segments reporting losses, ConocoPhillips reported $436 million in total income during the third quarter and only $198 million in adjusted earnings.
Alaska accounted for 13.5 percent of the 1.226 billion boe ConocoPhillips produced companywide during the third quarter of the year. Alaska accounted for 26 percent of the 582,000 barrels of oil the company produced.
But the seasonal downturn in Alaska oil production opened the gap with the Lower 48, which has been narrowing in recent quarters after years of gains by Lower 48 properties. ConocoPhillips produced 175,000 bpd in the Lower 48 in the third quarter.
Prices, taxes, spending
Also helping earnings in Alaska was a bump in oil prices.
ConocoPhillips reported an average realized price of $50.53 per barrel for Alaska crude oil during the third quarter, up from $43.43 per barrel during the same period last year and up from $49.95 per barrel from the second quarter of this year. The Alaska crude price includes both oil and natural gas liquids, which are blended and shipped together.
Realized natural gas prices fell to $4.55 per thousand cubic feet, down from $6.95 per thousand cubic feet during the third quarter of last year but up considerably from $1.43 per thousand cubic feet in the second quarter of this year. Natural gas prices in Alaska are determined primarily through contracts with prices that are often tied to outside indexes.
ConocoPhillips reported an effective income tax rate of 35.3 percent and a total tax rate of 56.6 percent for its Alaska operations during the third quarter of the year, up from negative 64 percent and 36.4 percent respectively during the same period last year.
Capital expenditures and investments were $179 million in the third quarter, down from $229 million the second quarter and $199 million in the third quarter of last year.
Depreciation, depletion and amortization was $188 million in the third quarter, down from $216 million in the second quarter and $214 million in the third quarter of last year.
