ConocoPhillips posts strong 2Q result, to resume Kuparuk drilling
The resurgence in energy demand has treated ConocoPhillips well as the upstream-focused oil major posted a second quarter profit of nearly $2.1 billion, according to an Aug. 3 earnings report.
In Alaska, ConocoPhillips netted $371 million, more than double the company’s first quarter profit of $179 million in the state. ConocoPhillips also reported tax and royalty payments of $279 million to the State of Alaska during the quarter. Year-to-date, ConocoPhillips Alaska has paid an estimated $506 million in taxes and royalties to the state, according to the release.
The companywide earnings are also more than double a first quarter profit of $982 million and break down to $1.55 per share. Houston-based major previously announced it will pay a quarterly dividend of 43 cents per share on Sept. 1.
ConocoPhillips stock was trading up approximately 3 percent in the $56.50 per share range near the end of the day following the morning earnings release.
The company’s overall profit was on the back of more than $10.2 billion in revenue, down slightly from $10.5 billion in the first quarter but a vast improvement over the $6 billion it generated in the fourth quarter last year, which was its best revenue period in 2020.
CEO Ryan Lance said in a prepared statement that ConocoPhillips came out of the pandemic-induced oil market crash and the integration of Lower 48 producer Concho Resources with a durable business plan.
“We have a stronger, more flexible asset base and greater underlying efficiency resulting from the Concho acquisition and the restructuring work we’ve performed throughout our company,” Lance said.
In February, ConocoPhillips Alaska leaders said they would cut approximately 100 jobs from its workforce of roughly 1,100 in the state as part of a companywide restructuring after the $9.7 billion Concho purchase.
With drilling rigs active again on the North Slope, President Erec Isaacson said in a separate statement that the company’s motto so far this year has been “getting back to work.”
ConocoPhillips put $228 million towards capital projects on the North Slope in the second quarter, which represented 18 percent of the company’s global capital spend for the period, according to Alaska segment leaders. Year-to-date capital spending totals $463 million.
As is the case in many industries these days, the results are virtually incomparable to the second quarter of 2020 when oil prices bottomed out globally — Alaska North Slope crude went negative for a day — and production was cut industry-wide.
ConocoPhillips reported an average Alaska oil price of $63.93 in the second quarter this year, the highest price in two years. The company’s North Slope oil production averaged 184,000 barrels per day during the period, down slightly from 190,000 barrels per day to start the year, which is a common theme in the warmer months.
Kuparuk plan approved
ConocoPhillips is planning to get back to drilling in its oldest North Slope field, according to the 2021 Kuparuk River Unit work plan approved July 23 by state Division of Oil and Gas Director Tom Stokes.
Along with the now-common caveat for COVID-impacted work and market conditions, ConocoPhillips Alaska “assumes a return to regular operating condition,” the 2021 Kuparuk River plan of development, or POD, states.
The 2021 plan covers the August 2021 through July 2022 time period.
Drilling at Kuparuk will resume this quarter with the startup of a workover rig, likely followed by the restart of a coil tubing rig in the fourth quarter. Rotary drilling is scheduled to resume next spring, according to the POD.
The initial work will focus on reviving wells currently shut-in for mechanical problems or low production with sidetracks or new bottom-hole locations, the plan states. A maintenance turnaround is also scheduled for next summer.
The company suspended drilling Slope-wide at the onset of the pandemic in April 2020 and restarted drilling at some of its other fields and development projects late last year.
ConocoPhillips produced an average of 91,400 barrels of oil per day from Kuparuk in calendar year 2020, down from 104,700 barrels per day in 2019. The company expects to produce about half of the oil not produced from Kuparuk when it curtailed North Slope production last year at the bottom of the price depression over the next three years and the rest forgone oil will be recovered over subsequent remaining life of the mature field, according to the POD.
Elwood Brehmer can be reached at [email protected].