ConocoPhillips juggles volumes

Gary Park

For Petroleum News

Despite layoffs and a slowdown in the latest phase of its Alberta oil sands expansion, ConocoPhillips is setting an ambitious goal of raising its Canadian production by 80,000 barrels of oil equivalent per day over the next two years.

Although the company is counting on ramping up its unconventional activities in that time by spending US$1.3 billion a year over a three-year stretch, it needs 100,000 bpd to offset production declines.

But it has ample prospects based on an estimated 25 years of inventory tied to established and early-stage unconventional drilling plays on almost 3 million acres in Western Canada, including Glauconite, Cardium, Montney and Duvernay formations.

“We’ve got two vast resource positions in Canada - in the oil sands and the unconventional,” Matt Fox, executive vice president of exploration and production, said on a webcast.

ConocoPhillips’ is heavily tied to its Surmont steam-assisted gravity drainage oil sands project - a 50:50 joint venture with France’s Total - with the first stage producing 30,000 bpd and the second stage scheduled to start steaming wells by mid-2015 and targeted to ramp up output from the operation to 136,000 bpd.

The company applied last July for regulatory approval to add another 125,000 bpd of capacity at Surmont, but has since slowed the rate of development by cutting 200 workers, or 7 percent of its Canadian payroll.

ConocoPhillips also hired Scotia Waterous to help sell gas-weighted assets in Western Canada that are producing 35,000 boe per day.

“In the current price environment, we’ve decided to slow the pace of new development at Surmont and instead we’re focusing on optimizing our production through existing facilities,” Fox said.

By 2017 the company expects there will be a “significant increase” in capital allocated to unconventional programs in Alberta and British Columbia, he said.

In addition to Surmont, ConocoPhillips has a 50 percent stake in the Foster Creek, Christina Lake and Narrows Lake oil sands assets operated by Calgary-based Cenovus Energy in exchange for giving Cenovus a position in ConocoPhillips’ refineries in the United States.

Brian Youngberg, an analyst at Edward Jones, said the company has “created a niche as a major independent producer with an attractive dividend and stable returns that trades more like” larger oil companies such as ExxonMobil.

Investors now want to see the producer shore up its finances and spend in line with cash flow, he said.

The Houston-based parent company has cut its overall capital spending over the next three years to US$11.5 billion from US$16 billion as it tries to building production by 10 percent to 1.7 million boe per day.