ConocoPhillips absorbs $4.4B loss; nets just $4M in Alaska

  • ConocoPhillips reported large losses across its portfolio in 2015 totaling $4.4 billion. The company netted just $4 million in Alaska as it took a hit to its bottom line after writing down the value of the Chukchi Sea leases it bought for $500 million in 2008. Photo/Mark Thiessen/AP

ConocoPhillips’ fiscal situation looks a lot like the State of Alaska’s after the company posted a 2015 net loss of $4.4 billion in its year-end financial results released Feb. 4.

While Alaska leaders are contemplating cutting the Permanent Fund Dividend to help fund the budget, ConocoPhillips announced it was slashing its dividend from 74 cents to 25 cents per share.

Combined with reductions in capital expenditures to $6.4 billion from the $7.7 billion plan announced in December, the two moves will save the company $4.4 billion in 2016.

The company’s share price dropped 8.1 percent to $35.50 following the announcement.

In Alaska, ConocoPhillips reported earnings of $4 million for the year, compared with more than $2.04 billion in earnings for 2014.

Excluding negative special items totaling $478 million for the year that include a $412 million impairment related to its Chukchi Sea leases, adjusted earnings for Alaska were $482 million for the year compared to $2.07 billion in 2014.

The company posted positive Alaska earnings in the first three quarters, but reported a $389 million loss in the fourth quarter as its average realized price per barrel was $40.29 compared to $71.34 in the fourth quarter of 2014.

In January, Alaska North Slope crude prices dipped to less than $30 per barrel for the first time in more than a decade.

Including special items, ConocoPhillips reported an overall pre-tax net loss of $650 million for Alaska in the fourth quarter.

Company spokeswoman Natalie Lowman said ConocoPhillips is estimating its tax and royalty obligation for the year at $665 million, which, when combined with capital expenses, resulted in a negative cash flow exceeding $100 million in Alaska.

A $467 million fourth quarter after tax item loss for Alaska is primarily attributable to the company’s federal Chukchi Sea lease holdings, according to Lowman.

Following Shell’s lead, the company announced it would suspend development of the Chukchi leases it paid $500 million for in 2008.

New oil from the CD-5 development in the National Petroleum Reserve-Alaska and Drill Site 2S online late in the year helped boost fourth quarter production, Lowman said.

ConocoPhillips’ average daily Alaska production increased 5,000 barrels per day in the third and fourth quarters compared with 2014. Its average daily in-state production for the year was down 4,000 barrels to 158,000 per day, or about 2.4 percent.

The harsh financials likely mean a slight decrease to the previously announced $1.3 billion Alaska capital budget in 2016, Lowman said, but she also noted the state continues to have one of the highest capital spend levels of any sector of the company’s worldwide portfolio.

“For this year we expect our (Alaska) capital budget will be higher than in 2012,” Lowman said.

In November, ConocoPhillips announced the sanctioning of its Greater Moose’s Tooth-1 exploration in the NPR-A, with a projected development cost of $900 million.

LNG export permit renewed

On Feb. 9, ConocoPhillips received a renewal of its LNG export permit for its Nikiski plant. After allowing its permit to lapse in 2012 as Cook Inlet supply shortages were a concern, the company renewed exports from the plant in 2014 after utilities’ gas needs were secured.

“For nearly half a century, Alaska has exported liquefied natural gas to our friends and allies overseas,” said Alaska U.S. Sen. Lisa Murkowski. “As projects get underway in the rest of the nation, and planning continues for an even larger project here in the State, we should remember that Kenai set the precedent for the historic build-out of export capability now underway in North America. Alaska led the way, Alaskans can now continue to lead the way, and all Alaskans should be proud.”

Elwood Brehmer can be reached at [email protected].

02/10/2016 - 2:53pm