ConocoPhillips boosts Alaska output by 20% in first quarter

ConocoPhillips continued its run of strong returns to start 2019 with its third consecutive quarterly profit of $1.8 billion as its Alaska oil production increased nearly 20 percent.

The Houston-based explorer and producer netted $384 million in the first quarter from its North Slope operations compared to $445 million in 2018, according to its earnings report released April 30. In turn, ConocoPhillips paid $249 million in taxes and royalties to the State of Alaska, according to spokeswoman Natalie Lowman.

The $1.8 billion first quarter profit companywide was a drastic improvement over the $888 million ConocoPhillips earned in the first quarter of 2018. The recent profit translates to $1.60 per share and came on the back of $10 billion in revenue.

ConocoPhillips generated $1.3 billion in free cash flow and with that repurchased roughly $800 million worth of stock shares and paid another $300 million in dividends, according to a company release. It ended the quarter holding $6.5 billion in cash.

Venezuela was also ordered to pay ConocoPhillips $8.7 billion via a ruling issued during the quarter from the International Centre of Investment Disputes for its previous expropriation of the company’s assets in the country.

CEO Ryan Lance said in a formal statement that the company’s efforts to better insulate itself from volatile oil and gas markets are paying off.

ConocoPhillips leaders Alaska have said they set a “break even” goal of $40 per barrel for their operations in the state after the 2014-15 oil price decline, in large measure to compete with ever-cheaper to produce Lower 48 shale oil prospects.

“We continue to execute and deliver on a plan that’s resilient to lower prices, while offering investors upside at higher prices. We approach the business with an aim to level-load our investment and distribution programs, rather than chase cycles up or down, because we believe that is the best way to create sustained value in the energy sector,” Lance said. “By focusing on free cash flow generation and distributing a significant portion of cash flows to shareholders, we offer the market a path to value creation in this cyclical business.”

ConocoPhillips stock sold for $63.12 per share when markets closed April 30, up slightly from a pre-earnings report April 29 closing price of $62.65 per share.

Specifically to Alaska, ConocoPhillips produced an average of 210,000 barrels of oil per day in the state, up significantly from an average of 174,000 barrels per day to start 2018, according to the report.

The company operates the large Kuparuk River and Alpine oil fields on the North Slope and oil production at its Greater Moose’s Tooth-1 project — an Alpine satellite with peak production near 30,000 barrels per day — began last October. GMT-1 startup marked the first oil produced from federal leases within the massive National Petroleum Reserve-Alaska on the western Slope.

ConocoPhillips Alaska oil and gas production accounted for 16 percent of the company’s worldwide production, while its earnings from the state accounted for 21 percent of its quarterly profit.

Work is ongoing at its slightly larger GMT-2 project.

The company is also in the midst of permitting its large Willow oil prospect, also in the NPR-A, which has been estimated as a roughly $5 billion undertaking to fully develop.

ConocoPhillips spent $410 million on North Slope capital investments during the quarter — about 25 percent of its overall investment portfolio. Alaska investments have accounted for about 20 percent of the company’s capital budget in recent years.

BP, which operates Prudhoe Bay, reported a $2.4 billion replacement cost quarterly profit April 30 and ExxonMobil also netted $2.4 billion to start 2019, according to an April 26 release.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.