CP earns $199M in Alaska but down $3.4B overall
ConocoPhillips netted $199 million in Alaska in the second quarter, but still lost $3.4 billion overall as the oil major continues to reform its operations to be more competitive at lower market prices.
Despite the face value hit to his company’s balance sheet, ConocoPhillips CEO Ryan Lance said in a July 27 statement that substantial progress was made in the second quarter in the ongoing effort to transform the company.
“In just six months we’ve exceeded the three-year plan we laid out in late 2016. We’ve reset our portfolio through strategic dispositions that generated substantial proceeds, allowing us to accelerate key financial and operational priorities,” Lance said. “We are on track to far surpass our initial debt reduction and shareholder payout targets, while accelerating strong underlying financial and operational performance. We remain focused on lowering our breakeven price for the business, generating free cash flow and delivering strong per-share growth with improving returns through price cycles.”
Companywide, ConocoPhillips retired about $3 billion of debt ahead of schedule and repurchased another $1 billion worth of outstanding shares during the quarter, according to the earnings report.
For the year, company leaders expect to buy back about $3 billion in stock, sell off more than $16 billion of assets and end 2017 with less than $20 billion in debt, according to a release accompanying the financial report.
The company has had trouble selling its small and aging but historic Kenai LNG plant this year; it announced earlier this month the plant would be put in long-term “mothball” status as world market conditions — that don’t appear to be changing anytime soon — have killed the economics of LNG exports from the Cook Inlet facility.
ConocoPhillips started the year with $26.4 billion in debt and $35.6 billion in equity. It held $29.4 billion of debt and $39.4 billion of equity at the start of 2016.
As an oil and gas production, or “upstream,” company, ConocoPhillips does not have the downstream refining and retail segments to its business that have helped other petroleum giants better weather several years of lower oil and natural gas prices.
Year-to-date the company has lost $2.8 billion after absorbing $3.6 billion of losses in 2016.
The $3.4 billion quarterly loss was driven by a $2.5 billion loss in the Lower 48 caused by nearly $3.9 billion impairments, or the reduced value of company assets. Comparatively, the company made more than $1.3 billion in profits from its Canadian operations during the quarter.
The negative quarter translates to losses of $2.78 per share. ConocoPhillips stock closed trading July 27 up 2.2 percent for the day at $44.66 per share on the New York Stock Exchange.
The company turned a $586 million profit in the first quarter of the year.
Despite the challenging bottom line figures, ConocoPhillips generated nearly $8.9 billion in total revenue during the second quarter, up from $7.7 billion in the first quarter and $5.5 billion of revenue in the second quarter of 2016.
It realized an average price of $36.08 per barrel of oil equivalent sold during the quarter, up from $27.79 per barrel year-over-year.
ConocoPhillips’ worldwide production was down 9.8 percent from the first quarter and down 7.1 percent from the second quarter of 2016 at 1.43 million barrels of oil equivalent per day.
For the company’s Alaska business, the second quarter was largely more of the same.
Oil production was unsurprisingly down slightly quarter-over-quarter, but up about 4 percent from the second quarter of last year, averaging 169,000 barrels per day.
North Slope oil production typically dips in the spring and summer months from the peak winter work season.
The company spent $229 million on capital projects in the state during the quarter, on par with the first quarter and up from $183 million in 2016. Alaska has consistently accounted for about 20 percent of the company’s capital budget of late, which was just more than $1 billion for the quarter worldwide.
A chunk of that money in Alaska went to progressing two projects. Facilities at the 1H NEWS (Northeast West Sak) drill site in the Kuparuk River Unit are ready for startup, according to the report. The project is expected to produce up to 8,000 barrels of oil per day.
And the winter work season at ConocoPhillips’ larger, western Slope $900 million Greater Moose’s Tooth-1 project in the National Petroleum Reserve-Alaska wrapped up during the quarter with two bridges, a 12-acre drilling pad and 14 miles of pipeline tying the project to existing infrastructure completed, according to Alaska spokeswoman Natalie Lowman.
GMT-1 is expected to produce its first oil in late 2018 with peak production expected to hit about 30,000 barrels per day.
It is the first project on federal leases in the NPR-A, as other projects the company has developed in the reserve were on Alaska Native corporation holdings within the borders of the federal acreage.
BP reports 2Q profit
BP reported second quarter earnings of $144 million Aug. 1, a vast improvement over the $1.4 billion loss the London-based company absorbed in the second quarter of 2016.
The $144 million profit was on on the back of $6.9 billion in operating cash flow for the quarter. BP’s second quarter operating revenue base was $4.9 billion when its ongoing settlement payments from the 2010 Deepwater Horizon oil spill were factored into its balance sheet.
“We continue to position BP for the new oil price environment, with a continued tight focus on costs, efficiency and discipline in capital spending,” BP CEO Bob Dudley said in a formal statement. “We delivered strong operational performance in the first half of 2017 and have considerable strategic momentum coming into the rest of the year and 2018, with rising production from our new upstream projects and marketing growth in the downstream.”
BP has increased its upstream production by 6 percent in the first half of 2017, despite an 18 percent decrease in per unit production costs. First-half earnings from its retail business were also about 20 percent better than 2016, according to the company.
Year-to-date BP has managed nearly $1.6 billion in profits juxtaposed by more than $2 billion in losses through the first six months of 2016.
BP, which operates the Prudhoe Bay oil and gas field on the North Slope, also has an agreement with the Alaska Gasline Development Corp. to help the state advance the Alaska LNG Project through the end of the year.
Elwood Brehmer can be reached at [email protected].