CP rebounds, buys Anadarko Slope interests for $400M

  • ConocoPhillips reported 2017 earnings, an asset purchase and an asset sale on Thursday. (AP Photo/Mark Thiessen)

ConocoPhillips reported its largest quarterly earnings in more than three years Feb. 1 when the company announced a profit of nearly $1.6 billion for the fourth quarter of 2017.

In Alaska, ConocoPhillips reported adjusted earnings of $283 million for the quarter and $652 million total for 2017. It also purchased all of Anadarko Petroleum Corp.’s North Slope assets for $400 million.

The companies have been joint bidders, with Anadarko in a minority position, on significant lease tracts in the eastern NPR-A and western state Slope leases in the past few years. Many of those areas are not currently unitized.

Also on Feb. 1, Andeavor, formerly Tesoro Corp., announced it has agreed to purchase the Kenai LNG plant and marine terminal from ConocoPhillips for an undisclosed amount. ConocoPhillips had been publicly shopping the aging facility since November 2016 and in July said it was taking steps to mothball the facilities. The plant has not exported LNG since 2015, primarily because of global market conditions.

ConocoPhillips’ adjusted earnings companywide were $540 million for the quarter, according to the balance sheet.

Company executives attributed the roughly $1 billion boost from its adjusted earnings to its overall profitability for the quarter primarily to benefits from the corporate tax reform legislation passed in December and an arbitration settlement in Ecuador.

ConocoPhillips was able to recalculate its deferred federal corporate tax obligation at the new, lower 21 percent tax rate compared to the previous 35 percent corporate rate, resulting in $900 million of benefits, a company release states.

Regardless, the fourth quarter of 2017 was by far the best quarter ConocoPhillips has had since oil prices began falling in the third quarter of 2014, when it netted $2.7 billion.

For the full-year 2017, ConocoPhillips still reported a loss of $855 million, compared to a $3.6 billion loss in 2016.

In 2017, its average realized price was $39.09 per barrel of oil equivalent, which includes the price of natural gas, compared with $28.35 per barrel equivalent in 2016.

“2017 was a very successful year by all measures,” CEO Ryan Lance said Feb. 1. “We accelerated our disciplined, returns-focused value proposition and delivered on our strategic priorities. We transformed our portfolio, strengthened our balance sheet, returned 61 percent cash flow from operations to shareholders through our dividend and (stock) buyback program, and achieved our operational milestones, including 200 percent organic reserve replacement.”

ConocoPhillips paid down $7.9 billion of debt in 2017 to bring its year-end debt to $19.7 billion. This year, the company has already paid down another $2.25 billion of debt, according to Lance.

The $1.6 billion in quarterly earnings was on the back of $8.7 billion in total revenues, compared to $7.2 billion in the last months of 2016. For the year, ConocoPhillips generated $32.5 billion in revenue versus $24.3 billion in 2016.

The company’s Alaska production was up an average of 4,000 barrels of oil per day in 2017 to 167,000 barrels per day, according to the financial report.

ConocoPhillips operates the large Kuparuk and Alpine oil fields and holds a 36 percent stake in Prudhoe Bay.

In November, the company began producing from its 1H NEWS (Northeast West Sak) viscous oil project in the Kuparuk field, which has an expected peak production rate of 8,000 barrels per day. It also recently brought additional wells online at its CD-5 development in the Alpine field, which started producing in late 2015 and has significantly exceeded production expectations. Originally expected to produce up to 16,000 barrels per day, CD-5 is currently producing roughly 37,000 barrels per day with the new wells, according to ConocoPhillips.

Anadarko buyout

Anadarko is a silent partner in much of ConocoPhillips’ work on the North Slope, but much of that partnership appears to be coming to an end.

The deal, subject to regulatory approval, has an effective date of Oct. 1, 2017, according to ConocoPhillips. It includes the Alpine oil field assets that produced an average of 63,000 barrels of oil per day in 2017, in which Anadarko holds a 22.45 percent stake, according to the state Division of Oil and Gas.

Conoco also reported the deal will give it a 100 percent interest in approximately 1.2 million acres of exploration and development areas; that includes the Willow prospect in the National Petroleum Reserve-Alaska, which the company estimates could produce up to 100,000 barrels of oil per day if fully developed.

According to Oil and Gas, Anadarko has a 22 percent stake in the Greater Mooses Tooth Unit in the NPR-A — the site of Willow and the two Greater Mooses Tooth oil projects — and a 24.62 percent interest in the adjacent Bear Tooth Unit, also in the NPR-A.

Elwood Brehmer can be reached at [email protected].

02/14/2018 - 12:09pm