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Conoco earns $65M Alaska earnings up from ’15 on increased production, federal tax credits ERIC LIDJI For Petroleum News
A slight increase in oil production helped ConocoPhillips Co. report adjusted earnings of $65 million from its Alaska operations in the third quarter, an increase over last year.
The largest independent oil company in the world produced 162,000 barrels of oil equivalent per day in Alaska during the third quarter, up from 160,000 boepd during the same period last year. The increase, along with some tax benefits, allowed the company to increase earnings over last year, despite lower prices.
As a period of low oil prices continues, Alaska remains a bright spot on the company balance sheet. The Lower 48 and Canadian segments both reported losses during the quarter, while the European segment reported $3 million in adjusted earnings. Only the Asia Pacific and Middle East segment reported higher earnings, with $87 million.
Companywide, ConocoPhillips reported an adjusted loss of $826 million for the quarter.
Production up With many operators using the brief North Slope summer to conduct maintenance activities, third quarter oil production often declines from second quarter figures.
The 162,000 boepd ConocoPhillips produced in Alaska during the third quarter is down from 179,000 boepd in the second quarter. Although the company produced more during the third quarter this year than last year, the summer decline was also greater this year than last year - 14,000 boepd in 2015 and 17,000 boepd in 2016
The Alaska segment accounted for more than 10 percent of the 1.5 million barrels of oil equivalent ConocoPhillips produced across its entire portfolio during the third quarter.
The gains were entirely related to liquids production.
ConocoPhillips produced 148,000 barrels of oil per day during the third quarter, up from 144,000 bpd in 2015. As with overall production, the summer decline was greater this year - 10,000 bpd in 2015 and 15,000 bpd in 2016.
Companywide, ConocoPhillips produced 586,000 barrels of oil per day in the quarter.
ConocoPhillips produced 11,000 bpd of natural gas liquids in Alaska during the third quarter, up from 10,000 bpd during the same period last year.
ConocoPhillips reported a sharp decline in natural gas production from Alaska, reflecting the end of recent liquefied natural gas shipments combined with the sale of its stake in the Beluga River unit. The company produced 18 million cubic feet per day during the third quarter, down from 34 million cubic feet per day during the same period last year.
Companywide, ConocoPhillips produced 3.77 billion cubic feet per day in the quarter.
Prices stagnant Oil prices were down from the second quarter and remain at historic lows.
ConocoPhillips reported an average price of $43.43 per barrel in Alaska in the third quarter, down from $44.39 in the second quarter and $50.48 from the third quarter of last year. The Alaska price was in line with the company average of $43.21 per barrel.
The Alaska price includes both oil and natural gas liquids, whereas most other segments of the company portfolio report oil and natural gas liquids as two separate commodities.
By contrast, Alaska natural gas prices spiked during the quarter.
ConocoPhillips reported an average price of $6.95 per thousand cubic feet during the quarter, up from $4.82 during the second quarter and $4.26 during the third quarter of last year. The company reported an average price of $3.05 across its entire portfolio.
Alaska natural gas prices are often out of step with national prices because they are set on a few longer-term contracts, rather than shorter-term sales in a highly liquid market.
ConocoPhillips was unable to immediately provide an explanation for the spike.
Spending down Spending continues to reflect the end of several major capital projects in Alaska.
ConocoPhillips reported capital expenditures and investments of $199 million during the quarter, up from $183 million in the second quarter and down from $304 million during the third quarter of last year. The company finished construction at new Kuparuk River unit and Colville River unit pads over the past year, which accounts for the decline.
ConocoPhillips reported $214 million in depreciation, depletion and amortization expenses in Alaska during the third quarter of the year - down from $235 million during the second quarter and up from $183 million during the third quarter of last year.
The company was helped by a negative 41.6 percent adjusted effective income tax rate for its Alaska segment during the quarter, compared to negative 28.5 percent in the second quarter and positive 8.4 percent during the third quarter of last year. The negative tax rate was “driven primarily by federal enhanced oil recovery credits,” according to ConocoPhillips Alaska spokeswoman Natalie Knox Lowman. Those credits largely accounted for the difference between the $36 million in unadjusted pre-tax revenues and the $59 million in adjusted earnings the company reported for Alaska during the quarter, with $6 million loss relating to severance for workforce reductions, Lowman explained.
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