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Prices boost 1Q profits Despite falling outout, higher taxes, ConocoPhillips, BP post record earnings Eric Lidji Petroleum News
Using record oil prices to offset production declines and tax increases, ConocoPhillips posted $603 million in net income from its Alaska operations in the first quarter of the year, a nearly 19 percent increase over first quarter earnings from 2007.
Companywide, the Houston-based mega major earned $4.1 billion in net income on $54.9 billion in revenues for the quarter.
Prudhoe Bay operator BP earned $7.6 billion companywide in the first quarter of 2008, a 63 percent increase over first quarter profits in 2007. The company does not break out Alaska-specific information on a quarterly basis, but over the past five years, BP’s Alaska operations have accounted on average for 10.3 percent of total annual profits for the company.
Also for the first quarter of the year, ExxonMobil earned $10.9 billion and Marathon earned $731 million in net income companywide. Chevron released first quarter financial data on May 2, after press time. Historically none of those three companies list Alaska-specific financial information.
Oil prices offset production declines Quarter-over-quarter, ConocoPhillips’ crude oil production in Alaska dropped nearly 8 percent this year to 254,000 barrels per day. Meanwhile the company’s natural gas production for the quarter dropped to 100 million cubic feet per day, an 18 percent decline over the first quarter of last year.
Across the state, oil companies produced around 747,800 bpd on average over the first three months of the year, down from around 757,700 bpd over the same period last year, a 1.3 percent decline, according to state figures.
Declining production figures have worried both the industry and state government, but the impact of those numbers would be far more devastating for either under different market conditions.
The first three months of 2008 saw the delivered price of Alaska North Slope crude oil pass the $100 per barrel mark for the first time in history, and prices stayed above $100 per barrel for most of the month of March.
ConocoPhillips reported an average wellhead price of $89.07 per barrel in the first quarter, up 45 percent from the same period last year, and an average delivered price of $95.47 per barrel in the first quarter, up 42 percent from the same period last year.
The disparity between wellhead and delivered prices suggests a rise in transportation costs as the oil made its way through the producer-owned trans-Alaska oil pipeline and on producer-owned tankers to the West Coast.
By comparison, BP reported an average delivered price of $96.53 over the first quarter of 2008 for North Slope crude.
Natural gas price rises slightly During the first quarter of the year, ConocoPhillips reported an average natural gas price of $4.31 per mcf in Alaska, up from $4.19 per mcf in the first quarter of 2007.
ConocoPhillips produces natural gas in Alaska both for oilfield maintenance and for sale.
The company’s sales at the liquefied natural gas facility on the Kenai Peninsula dropped nearly 40 percent quarter over quarter to 63 million cubic feet per day. However, ConocoPhillips recovered some of that loss through increased sales prices, which jumped 13.2 percent to $6.72 per thousand cubic feet.
Exploration dollars drop ConocoPhillips spent less money on exploration in Alaska in the first quarter of the year compared to last year, even as the company spent considerably more money on exploration in other parts of the world.
Through the first three months of 2008, ConocoPhillips spent $11 million on “exploration charges” including dry holes and lease impairments in Alaska, down from the $17 million the company spent over the same time period last year.
Companywide in the first quarter of the year, ConocoPhillips spent $309 million on exploration costs, up 15.2 percent over the same period last year.
However, total exploration and production spending in Alaska increased quarter over quarter. ConocoPhillips spent $191 million in capital expenses in Alaska through the first three months of 2008, up from $158 million spent in the first quarter of 2007. The 20 percent increase falls below the 30 percent increase in capital expenses in the Lower 48, but well above the 0.7 percent increase in capital expenses internationally.
The capital expenses in Alaska went toward developmental drilling at Kuparuk, Prudhoe Bay, Alpine, Cook Inlet and exploration.
The first quarter results cover a busy time for ConocoPhillips. In February, the company bid several hundred million dollars for the right to drill in the Chukchi Sea, and in early April the company announced a partnership with BP to build a $30 billion natural gas pipeline from the North Slope to markets in the Lower 48 through Canada.
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