ConocoPhillips rebounds to profitability after $2.7B loss in ‘20
ConocoPhillips rebounded with a profit of nearly $1 billion in the first quarter, with $159 million of that coming from Alaska.
CEO Ryan Lance said during a May 4 conference call with investors that ConocoPhillips executives are viewing 2021 as “a catalyst moment” to improve all aspects of the company’s business, similar to 2016 when oil prices reached lows of less than $30 per barrel early that year.
Following the depths of that price cycle, leaders of the Houston-based producer set a companywide breakeven target of $40 per barrel of oil production.
This time, ConocoPhillips leaders are focused on debt reduction to improve investor returns and driving down sustaining capital costs through supply chain and well-cost efficiencies, according to Lance.
“Our entire organization is focused on improving every aspect of our underlying business to make us the most competitive in the industry: capturing additional synergies, lowering our sustaining price, increasing capital efficiency, generating free cash flow, strengthening our balance sheet, consistently delivering peer-leading return of capital to our owners and lowering emissions,” Lance said. “These are the essential keys to long-term success in the business.”
The first quarter profit of $982 million is contrasted against a fourth quarter loss of $772 million and a first quarter 2020 loss of more than $1.7 billion when the combination of a Saudi-Russia price war and the global onset of the pandemic took oil prices to the lowest levels in decades. In total ConocoPhillips lost $2.7 billion last year.
The $982 million translates to earnings of 75 cents per share and was on the back of more than $10.5 billion of quarterly revenue. ConocoPhillips generated no more than $6.1 billion of gross revenue in any quarter last year. The company’s stock price mostly held steady May 4 following the morning earnings release, closing at $52.57 per share.
As to Alaska, where ConocoPhillips has become the predominant producer and explorer on the North Slope, the $159 million net for ConocoPhillips Alaska was the first positive quarter for the state in a year, when the company made $81 million here but lost big overall.
ConocoPhillips incurred a tax and royalty bill of $227 million to the State of Alaska during the quarter, according to a company statement.
The segment and companywide profits are largely the result of sustained price improvements in global oil markets. ConocoPhillips secured an average realized price of $59.56 per barrel in the first quarter for its Alaska oil, the highest price since the end of 2019.
ConocoPhillips’ North Slope liquids production remained ostensibly flat at 208,000 barrels per day in the first quarter when compared to the fourth, but was down from a year ago when the company produced 217,000 barrels of oil and natural gas liquids per day.
Senior Vice President of Global Operations Nick Olds said the company will restart four rigs on the Slope this year after suspending all drilling last spring and is still on track to start production late this year from its Greater Mooses Tooth-2 project in the National Petroleum Reserve-Alaska.
“Our base Alaska business is performing very well and we’ve built strong momentum coming out of 2020,” he said.
Facility and production costs are about 10 percent less than budget in the third and final construction season for the $1.4 billion GMT-2 drill site, according to Olds, who said production would likely start at about 10,000 barrels of oil per day and should eventually peak near 35,000 barrels per day. The company plans to eventually drill up to 48 wells on the 14-acre pad.
Engineering work continues on the company’s nearby $6 billion Willow oil project — stalled by a court injunction in a lawsuit over the Bureau of Land Management’s environmental review for the development — and it remains competitive in the company’s portfolio, but a final investment decision won’t be made until the litigation is resolved, Olds said.
ConocoPhillips spent $235 million on North Slope capital investments in the first quarter; the most in a year and part of a $1.2 billion capital spend companywide. Executives plan to spend roughly $5.5 billion total on capital projects this year.
Elwood Brehmer can be reached at [email protected].