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Oil prices boost 2Q profits for Conoco Year-over-year net income jumps 31 percent despite declining production and rising taxes; natural gas prices fell during quarter By Eric Lidji Petroleum News
ConocoPhillips earned $700 million in Alaska in the second quarter of the year, a nearly 31 percent increase over the second quarter of 2007, the company announced on July 23.
The numbers follow a familiar story for producers in Alaska: higher commodities prices lifting profits year-over-year, despite declining production and the impact of higher taxes.
Companywide, ConocoPhillips earned $5.4 billion in net income in the second quarter.
So far this year, the company has earned $1.3 billion from its operations in Alaska.
Companywide, ConocoPhillips paid $264 million more in production taxes during the second quarter of the year than it did during the first quarter this year.
Chairman and Chief Executive Officer Jim Mulva attributed the increase mostly to a revised production tax enacted by state lawmakers in Alaska this past fall. The revision contains progressive elements that increase the tax rate with the price of oil.
Chevron, BP, ExxonMobil and Marathon all plan to release second-quarter figures later this month, but none of those companies typically break out Alaska-specific figures.
Slight dips in production Following a larger trend within the state, ConocoPhillips continued to see declining production from both its oil and its natural gas operations in Alaska.
ConocoPhillips produced 244,000 barrels of crude oil in Alaska on average each day between April and June, down from the 254,000 bpd produced during the first quarter of the year, a 4 percent decline.
The company produced 267,000 bpd during the second quarter of last year.
Total oil production in the state averaged 710,000 bpd between April and June, down 5.3 percent from the first three months of the year.
However, that 4 percent production decline between the first and second quarter of the year was offset by a nearly 25 percent increase in the nominal price of oil.
The delivered price of Alaska North Slope crude oil averaged $118.88 over the second quarter, up from $95.47 in the first quarter and $63.26 in the second quarter of last year.
Natural gas production also dipped in the second quarter to 98 million cubic feet per day, down 2 percent from both the first quarter of this year and the second quarter of last year.
The company attributed the production declines to planned and unplanned maintenance activities, mainly in the United Kingdom, Norway, Alaska and Canada.
Gas prices on the decline Although oil prices in Alaska rose significantly between the first and second quarter, local natural gas prices fell. Alaska North Slope crude oil is traded on world markets, whereas Cook Inlet natural gas is a more isolated market.
ConocoPhillips sold the natural gas it produced in Alaska for an average of $3.81 per thousand cubic feet in the second quarter of the year, down from the average price of $4.31 per mcf realized over the first quarter of the year. Across the Lower 48, ConocoPhillips saw an average sales price of $9.74 per mcf over the second quarter.
During the second quarter, ConocoPhillips sold 72 million cubic feet of natural gas per day from its liquefied natural gas facility in Kenai, on par with the second quarter of 2007 and up from the 63 million cubic feet sold daily during the first quarter of the year.
Although ConocoPhillips sold the same amount of LNG from the facility year-over-year, the company earned more off the product this year with an average sales price of $71.5 per mcf, up from an average price of $5.86 during the second quarter of 2007.
Exploration costs down ConocoPhillips spent $25 million on exploration in Alaska in the second quarter of the year, down from the $32 million spent in the state in the second quarter of last year, but up from the $11 million spent in the first quarter of this year.
Depletion, depreciation and amortization costs in Alaska totaled $163 million in the second quarter of the year, down from $149 million in the first quarter and $167 million in the second quarter of last year. No pipeline or Chukchi news Holding firm on previous statements, Mulva said ConocoPhillips would continue with its plans to build a natural gas pipeline from the North Slope to Canada, regardless of the whether state lawmakers award a license for the project to TransCanada.
The state House recently approved the license and the vote is now before the Senate.
Mulva also said the company likely would not have any “substantive” news about drilling planning in the Chukchi Sea before next year.
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