UK sale close boosts ConocoPhillips income; nets $306M in-state
ConocoPhillips netted more than $3 billion in the third quarter as the major oil producer continues to focus its long-term strategy.
Much of the large quarterly profit stemmed from closing a $2.2 billion sale of North Sea assets in Britain to BP during the period. The $3 billion net is a 60 percent year-over-year improvement and includes a nearly $1.8 billion gain from dispositions, according to the earnings report released Oct. 29.
ConocoPhillips reported adjusted quarterly earnings — omitting one-time items — of $914 million, a 43 percent decrease from a nearly $1.6 billion adjusted profit a year ago.
On the financial side, ConocoPhillips’ Alaska operations generated a $306 million third quarter profit, which was down 29 percent year-over-year from $427 million.
Alaska spokeswoman Natalie Lowman wrote via email that ConocoPhillips paid $283 million in taxes and royalties to the State of Alaska in the third quarter.
The company’s North Slope oil production increased 20 percent year-over-year to average 190,000 barrels per day; however North Slope oil prices for the quarter were down 18 percent from a year prior at $62.78 per barrel, according to the earnings report.
ConocoPhillips invested $427 million in North Slope capital projects during the quarter, bringing its year-to-date capital spend in the state to more than $1.2 billion, compared to a full-year 2018 spend of just less than $1.3 billion. Lowman noted that the increased capital expenses mean the company “has reinvested 112 percent of our adjusted net income back into Alaska projects.”
ConocoPhillips’ year-to-date adjusted net income in Alaska is $1.07 billion.
The North Sea sale announced in July 2018 coincided with a North Slope deal with BP in which ConocoPhillips acquired the London-based major’s 38 percent stake in the Kuparuk River field, which it operates.
The companies said at the time that the transactions generally amounted to cash-neutral asset swap. ConocoPhillips now holds 92 percent of Kuparuk; the legacy oil field produced 107,000 barrels per day during the 2019 state fiscal year, according to the Alaska Department of Revenue.
Chairman and CEO Ryan Lance said in a formal statement that the third quarter results continue the company’s success since it reset its value proposition when oil prices bottomed out in 2016.
“This business is all about having a sustainable strategy with consistent execution,” Lance said. “We believe ConocoPhillips offers both — a shareholder-friendly, returns-oriented value proposition and strong delivery on our commitments.”
The net income totals were the product of nearly $10.1 billion in revenue during the quarter, which roughly matched the company’s third quarter 2018 revenue total when oil prices were markedly higher.
The net income translated to quarterly earnings of $2.76 per share. ConocoPhillips stock closed trading Oct. 29 at $57.09 per share, up 2.5 percent for the day following the strong earnings report.
ConocoPhillips also finalized its acquisition of the mid-sized Nuna prospect on the North Slope from small independent Caelus Energy in the third quarter. Company executives have described the Nuna deal as a roughly $100 million purchase. Now folded into the Kuparuk River Unit, ConocoPhillips Alaska leaders have said they expect Nuna to begin producing oil in 2022, with peak production hitting about 20,000 barrels per day.
During the coming winter the company plans to drill seven more exploration and appraisal wells on its large lease holdings in the National Petroleum Reserve-Alaska, following up eight such wells the company drilled last winter in one of its busiest North Slope exploration seasons.
ConocoPhillips is in the midst of constructing the Greater Mooses Tooth-2 oil project — peak production is pegged at up to 40,000 barrels per day — in the NPR-A as well as permitting its very large Willow prospect in the reserve. Willow is scheduled to come online in the 2025-26 timeframe with peak production estimates reaching 130,000 barrels per day.
Elwood Brehmer can be reached at [email protected].