ConocoPhillips reports Q3 losses of $450M, $16M in Alaska

  • Opponents of Ballot Measure One wave signs on the corner of East Northern Lights Boulevard and the Seward Highway in Anchorage on Nov. 2. The proposed oil tax increase was trailing with 65 percent of votes against after the initial counts on Nov. 3. (Photo/Emily Mesner/Anchorage Daily News)

ConocoPhillips lost $450 million in the third quarter, with $16 million of that coming from the company’s Alaska operations, according to a quarterly earnings report published Oct. 29.

The losses come as Alaska’s largest oil producer, and the state’s industry in general, awaits the fate of a citizens’ initiative in the Nov. 3 election, known as Ballot Measure 1, that would significantly raise production taxes on the three largest North Slope fields. Results from Nov. 3 showed the measure trailing with 65 percent against and 35 percent for with just more than 168,000 votes counted.

ConocoPhillips Alaska President Joe Marushack said in a statement provided by the company that there are no active drilling rigs as a result of the pandemic-induced price collapse at the large Alpine, Kuparuk and Prudhoe Bay North Slope fields for the first time since each was developed.

ConocoPhillips Alaska leaders have said they will make decisions regarding future drilling activity after Ballot Measure 1 is settled; the company instructed its drilling contractor, Doyon Drilling, in early April to lay down its North Slope drilling rig fleet indefinitely.

According to the company, ConocoPhillips paid taxes and royalties of approximately $136 million to the state in the quarter. For the year, the company has incurred a net loss of $76 million from its North Slope operations, paid taxes and royalties estimated at $442 million, and spent $882 million on capital projects.

In mid-March the company announced the first of multiple spending cuts to its 2020 Alaska spending plan that ultimately totaled approximately $400 million.

ConocoPhillips lost $141 million in the state during the second quarter when Alaska North Slope crude prices briefly went negative early in the pandemic but netted $81 million in the first quarter.

The $450 million companywide loss left ConocoPhillips with a $1.9 billion year-to-date net loss and translated to a loss of 42 cents per share, according to the earnings report.

ConocoPhillips netted $3.1 billion a year ago.

ConocoPhillips stock traded for $28.82 per share near the end of trading Oct. 29, in line with it’s pre-earnings closing price.

The Houston-based oil major with an upstream exploration and production focus has generated total quarterly revenues in the $4 billion to $5 billion range in 2020 after producing between $8 billion and $10 billion in revenue in each quarter of 2019.

CEO Ryan Lance said in a call with analysts that the third quarter results were largely what the company expected and ConocoPhillips “remains cautious on the timing and pace of recovery” for global energy prices as oil has hovered around $40 per barrel for months.

Lance also noted the company ended its production curtailments over the summer and completed all of its seasonal turnaround work.

“We remain very well-positioned financially and operationally thanks to our strong balance sheet and exceptional performance,” he said in a prepared statement. “Now that we’re back to more normal business, we’re focused on continued strong execution of our programs and progressing our announced transaction with Concho Resources.”

ConocoPhillips announced Oct. 19 that it has acquired Texas-based independent producer Concho Resources Inc. in a $9.7 billion all-stock sale that grows the company’s Lower 48 shale oil portfolio.

In May, ConocoPhillips began implementing oil production cuts on the North Slope that were originally planned to peak at about 100,000 barrels per day as part of a broader strategy to curtail up to 460,000 barrels per day companywide. The North Slope cuts were reversed to start July as oil prices pushed back above $40 per barrel.

Early indications are the company’s 2021 capital program will be in line with this year, Lance said, but firmer plans are forthcoming.

ConocoPhillips has spent $3.6 billion on capital projects worldwide so far this year — with the aforementioned $882 million in Alaska — compared with more than $6.6 billion in the first nine months of 2019.

The company is entering the second of two major winter construction seasons for its Greater Mooses Tooth-2 oil project in the National Petroleum Reserve-Alaska, which is scheduled to start production in late 2021.

The Bureau of Land Management on Tuesday issued a record of decision authorizing construction of ConocoPhillips roughly $5 billion Willow oil project in the NPA-A as well. While first oil from the large remote prospect is likely at least five years away, Willow is expected to produce nearly 160,000 barrels of oil per day at its peak, according to the company.

Elwood Brehmer can be reached at [email protected].

11/04/2020 - 9:42am