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Vol. 14, No. 9 Week of March 01, 2009
Providing coverage of Alaska and northern Canada's oil and gas industry

$832M for Alaska

Conoco reduces capital spending as promised, announces NPR-A discoveries

Eric Lidji

Petroleum News

ConocoPhillips is budgeting $832 million for capital expenses in Alaska this year, representing 8.8 percent of the $9.5 billion budgeted for companywide capital expenses.

The Houston-based major spent $1.4 billion in the state last year, representing 8.6 percent of total companywide capital spending last year. However, $506 million of the Alaska spending in 2008 went to high bids at a February lease sale for Chukchi Sea acreage.

The 2009 budget for Alaska is a 41 percent reduction over total spending in the state in 2008, but only an 8.3 percent reduction not counting the Chukchi Sea high bids. The company spent $666 million in Alaska in 2007 and $820 million in the state in 2006.

Budgets rarely match actual spending. ConocoPhillips ended up spending more than the $1.007 billion it budgeted for 2008, but less than the $783 million it budgeted for 2007.

The budget figures come from annual filings released Feb. 25.

In late January, ConocoPhillips announced a $12.5 billion capital spending program for 2009, including a 20 percent reduction in capital spending in Alaska for the coming year.

Profits, taxes, costs: up

ConocoPhillips earned $2.3 billion in profit on $9.2 billion in revenue in Alaska in 2008 and paid $3.4 billion in non-income taxes. In the Lower 48, the company earned $2.7 billion in profit on $10.2 billion in revenue and paid $764 million in non-income taxes.

ConocoPhillips paid $1.7 billion in non-income taxes in Alaska in 2007.

ConocoPhillips paid $33.83 in non-income taxes on each oil-equivalent barrel produced in Alaska last year, up from $15.27 in 2007. The figure is significantly higher than all other areas listed in the report, except for the $50.14 reported for a region marked “other areas.” The company paid $4.20 in non-income taxes per barrel in the Lower 48 last year.

Production costs continue to rise in Alaska. ConocoPhillips reported per-barrel costs of $9.46 last year, up 33 percent from 2007 levels and up 48 percent from 2006 levels.

Alaska is the second most expensive region in ConocoPhillips portfolio. The company reported per barrel production costs of $10.74 in Canada, where it maintains operations in the expensive oil sands. Production costs in the Lower 48 averaged $7.72 per barrel.

Three NPR-A area discoveries

Of the three North Slope exploration wells ConocoPhillips drilled last year “all three encountered hydrocarbons,” although one was “expensed as a dry hole” and the company is “evaluating the potential for future development of the other two discoveries.”

Last winter, ConocoPhillips drilled the Spark DD-9 well, and re-entered and tested the Rendezvous No. 2 well, both in the Greater Mooses Tooth unit in the National Petroleum Reserve-Alaska, and drilled the Char No. 1 well in the nearby Colville River unit.

The company is planning to drill two exploration wells in NPR-A this winter.

ConocoPhillips said it drilled 47 development wells in Alaska last year, all productive.



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