Saturday, January 28, 2012

CPAI earns $1.9B in 2011; A 34 percent jump in oil prices helped offset a 6.5 percent decline in production

Eric Lidji
For Petroleum News

A steep rise in oil prices last year helped ConocoPhillips earn nearly $2 billion in Alaska, an increase over 2010 earning despite falling oil and natural gas production in the state.

ConocoPhillips earned $1.9 billion in Alaska last year, up from $1.7 billion in 2010.

While ConocoPhillips’ annual earnings in Alaska rose, its quarterly earnings fell.

The company earned $443 million in the fourth quarter, down 11 percent from the third quarter ($501 million) and 7 percent from the fourth quarter of 2010 ($476 million).

ConocoPhillips earned $1.2 billion from its Lower 48 E&P operations in 2011, up from around $1 billion in 2010, while maintain roughly level production throughout the year.

Companywide, the company earned $12.4 billion in 2011, up from $11.3 billion in 2010.

Rising Lower 48 oil

While ConocoPhillips continues to earn more from its upstream operations in Alaska than from its upstream operations in the Lower 48, that balance could start to shift this year.

The company plans to ramp up its activities in the oil-rich Eagle Ford and Bakken Shales this year to take advantage of high oil prices and, conversely, shut-in around 100 million cubic feet of North American natural gas production due to chronically depressed prices.

In Alaska, ConocoPhillips produced 215,000 barrels of oil and natural gas liquids per day in 2011, a 6.5 percent decline from the 230,000 bpd of liquids the company produced in 2010. ConocoPhillips produced 61 million cubic feet of natural gas per day in the state last year, down roughly 25 percent from the 82 mmcf per day the company produced in 2010.

In the Lower 48, ConocoPhillips produced 168,000 bpd of liquids in 2011, up slightly from 160,000 bpd in 2010, and 1.5 billion cubic feet of gas per day, down from 1.7 bcf in 2010.

Significantly higher oil prices in Alaska continue to offset gradual production declines for ConocoPhillips. The company realized an average oil price of $105.95 per barrel for Alaska last year, up from $78.61 in 2010. By comparison, the company realized an average price of $74.09 per barrel for Lower 48 liquids in 2011, up from $57.69 in 2010.

While oil jumped, natural gas prices remained relatively flat year-over-year for ConocoPhillips, from $4.62 per thousand cubic feet in 2010 to $4.56 per mcf in 2010. By comparison, Lower 48 gas prices fell from $4.25 per mcf in 2011 to $3.99 per mcf in 2010.

Liquefied natural gas sales declined considerably in 2011, as ConocoPhillips began the process of closing its nearly 45-year-old facility on the Kenai Peninsula. The company sold 26 mmcf per day in 2011, down nearly 45 percent from 47 mmcf per day in 2010.

While mentioning recent discussions about a proposal to market North Slope natural gas as LNG, ConocoPhillips’ executives made no noteworthy comments about the project.

Tax debate continues

ConocoPhillips has released its year-end earnings as Alaska lawmakers are once again considering changes in the state’s production tax code.

In his recent state-of-the-state address, Gov. Sean Parnell tied tax reform to his goal of increasing throughput in the trans-Alaska oil pipeline to 1 million barrels per day over the coming decade. Because it is the only major oil producer to break out financial figures for Alaska on a quarterly basis, something BP only does annually and Exxon does not do at all, ConocoPhillips’ earnings often become a wedge in those debates, something Parnell seemed to anticipate by asking, “Do we have enough will to give up short-term gains for long-term growth?”

With tax reform, the industry is willing to invest $5 billion in legacy fields, Parnell said.

Rep. Les Gara, an Anchorage Democrat, is promoting an alternative bill designed to create incentives for companies to explore and develop new fields in the state.

ConocoPhillips doesn’t release its complete annual report until late February. The filing typically includes Alaska-specific taxation, spending and budgetary information.