Conoco Q1 earnings up
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In Alaska, GMT2 progresses, Willow FID on hold pending resolution of legal issues
ConocoPhillips issued first quarter results May 4, including an update on its activities in Alaska, with 2021 corporate earnings up from first quarter 2020.
In Alaska, the company said, drilling at CD5 continued, with progress on Greater Mooses Tooth 2 infrastructure in advance of planned second quarter drilling.
At Willow, however, work toward a final investment decision is on hold pending resolution of legal issues.
Ryan Lance, the company’s president and chief executive officer, said in response to a question during the Q&A segment of the analysts’ call that the company is still looking at potentially marketing some of its Alaska position, but said that, more broadly, ConocoPhillips is combing through its portfolio and continually high grading.
Lance said they would have more to say on that in June. ConocoPhillips had previously planned a market update this November but moved that forward to June 30. The company said further information on the virtual meeting would be made available soon on the company’s website.
GMT, WillowNick Olds, the company’s senior vice president of global operations (a segment which includes Alaska along with international interests), called Greater Mooses Tooth 2 progress over the past several months “significant” and said facility and construction costs were running some 10% below budget this year - the third and final year of project construction.
Production at GMT2, expected to come online at the end of the year, will be some 10,000 barrels per day, Olds said, with peak production from GMT2 expected at 35,000 bpd.
He said ConocoPhillips is back to development drilling on the North Slope and commissioning has restarted on the new extended reach drilling rig, Doyon 26, with drilling expected in the second quarter. A May 4 release from ConocoPhillips Alaska said the company expects to have four rigs drilling on the Slope by the end of the year, along with one non-operated rig.
Olds said front end engineering and design continues on the company’s Willow project, and the company is taking actions to address legal challenges to the project. He said the 600 million barrel Willow discovery continues to remain very competitive in the company’s portfolio, but, he said, ConocoPhillips won’t take a final investment decision or make significant long-lead investments until legal issues have been resolved.
He said the target is FID, a final investment decision, later this year.
There are two lawsuits in federal court challenging Bureau of Land Management and Corps of Engineers records of decision on the project. An injunction by the 9th Circuit Court stopped what limited construction was planned for the project this winter, Olds said, with that work deferred to 2022. There are contingencies in the schedule, he said, so the delay into 2022 won’t impact the overall timeline.
A decision is expected from the court in the third quarter, he said, and noted that there has been significant stakeholder intervention in favor of the project.
Willow is still a great project and ConocoPhillips has the ability to extend the schedule, he said.
Olds noted that turnarounds are expected on the North Slope in the third quarter, mainly at the company’s western North Slope facilities and also at Greater Prudhoe Bay.
First-quarter financial resultsNet income for ConocoPhillips Alaska was $159 million in the first quarter, ConocoPhillips Alaska said.
That compares to $81 million in the first quarter of 2020, the company’s earnings report shows. There were Alaska losses in the other three quarters of 2020, $141 million in the second quarter, $16 million in the third quarter and $643 million in the fourth quarter, for a full-year loss of $719 million.
For the first quarter, ConocoPhillips Alaska “incurred an estimated $227 million due to the State of Alaska in the form of production taxes, royalties, property taxes and state income tax,” the company said. It invested $235 million in capital in the state in the first quarter, some 20% of the corporation’s global capital spend.
ConocoPhillips reported first-quarter 2021 corporate earnings of $1 billion, compared to a first-quarter 2020 loss of $1.7 billion. Excluding special items, the company said, first-quarter adjusted earnings were $0.9 billion, compared to first-quarter 2020 adjusted earnings of $0.5 billion, with first-quarter 2021 special items including unrealized gain on Cenovus Energy shares and a gain from the Australia-West divestiture, partially offset by previously announced transaction and restructuring expenses from the Concho acquisitions, and realized losses on the Concho hedging program.
ProductionAlaska production, combined crude oil, natural gas liquids and natural gas, was 208,000 barrels oil equivalent per day in the first quarter, the company’s data shows, compared to 218,000 boe in the first quarter of 2020, 167,000 boe in the second quarter 2020, 201,000 boe in the third quarter and 208,000 boe in the fourth quarter.
Alaska crude, 190,000 barrels per day in the first quarter of 2021, was 91% of the company’s production in the state.
The corporation’s total production, crude oil, NGLs and natural was, was 1,488,000 boe per day in the first quarter of 2021, compared to 1,278,000 boe in the first quarter of 2020, 981,000 boe in the second quarter, 1,066,000 boe in the third quarter and 1,144,000 in the fourth quarter (all exclude Libya).
In the first quarter the corporation’s crude production, 818,000 bpd, was 55% of its total production.
Alaska’s combined production in the first quarter represented 14% of the corporation’s total boe, but, because Alaska production is mostly oil, it represented 24% of the corporation’s crude oil production.