Buried in the April 26 edition of Petroleum News is an article that, with a little math, tells you 12 percent of ConocoPhillips’ worldwide oil and gas production produced 29 percent of the company’s profits in the first quarter of this year.
That production — approximately 290,000 barrels of oil equivalent out of 2.364 million boe per day worldwide — came from Alaska, and earned Conoco $244 million out of a company-wide total of $840 million in first quarter profit.
It has become a little known fact that Alaska is a good place to make money in the oil business.
A new, much-maligned, production tax was responsible for a large chunk of Conoco’s first quarter profit from Alaska, but the rest came from the company’s efficient business model in the state.
The new tax system, commonly known by its acronym ACES, was implemented in late 2007, and is based on a formula that increases the tax rate when oil prices rise and decreases it when they fall.
“Consistent with the lower price environment, we had a benefit of $153 million on production taxes, primarily in Alaska,” John Carrig, Conoco’s president and chief operating officer, told analysts on April 23.
Clayton Reasor, vice president of corporate affairs for the company, pointed out that Conoco’s “Lower 48 loss of $71 million was more than offset by the $244 million earnings that we had in Alaska.”
There are also smaller, independent oil companies operating in the state whose executives have said they are exploring in Alaska because of the generous exploration credits in ACES.
Although the new tax regime imposes an above average tax rate when oil prices are high, thus degrading the overall pre-drill economics of prospects, it also offers companies a safety net when prices drop — something that has become increasingly important since oil prices plummeted in the last half of 2008.
The Special Publications Division of Petroleum News, a weekly oil and gas newspaper based in Anchorage, has decided to take advantage of that fact by putting together a new annual magazine about the oil and gas business in Alaska, called “Big Risk, Bigger Rewards.”
The magazine, scheduled to be released at the Alliance’s annual Meet Alaska conference in January, will tout the successes of oil companies doing business in Alaska, big and small, thereby encouraging investment in those companies and their projects.
For those oil companies interested in operating in Alaska, the magazine will carry a story about the experiences of newcomers to the state, the most successful of which used local expertise, versus bringing in outside, inexperienced contractors.
In addition to being circulated to Petroleum News readers, some of whom work for outside oil companies that are not active in Alaska, “Big Risk, Bigger Rewards” will be distributed with The Explorers magazine at most U.S. and Canada conferences heavily attended by landmen, geologists and business development executives looking for investment opportunities.
One such event is NAPE Expo in Houston. Formerly called the North American Prospect Expo, NAPE was created in 1993 to provide a marketplace for the buying, selling and trading of oil and gas prospects. In 1993 NAPE had 781 attendees; in 2008 it had 15,708.
For more information on “Big Risk, Bigger Rewards,” contact Theresa Collins at Petroleum News in Anchorage via email, [email protected], or by phone 907 770-3506.