ConocoPhillips records big profits, expects to start work at $8 billion Alaska oil project early next year

ConocoPhillips reported making huge profits in the latest quarter amid growing criticism that oil companies are benefiting as gas prices soar, and as President Joe Biden threatens to pursue a windfall profits tax on the industry.

A top official with the oil giant also said on Thursday the company expects to start working early next year on the $8 billion Willow oil prospect in Alaska, an effort that could lead to more than 2,000 construction jobs in the coming years.

ConocoPhillips, the largest oil producer in Alaska, reported earning $4.5 billion globally in the third quarter, while its Alaska operation brought in $580 million, according to the publicly traded company’s third quarter earnings report.

The profits sharply exceeded last year’s, thanks to oil prices that often hovered around $100 a barrel this summer, in large part due to the Russian war in Ukraine that has disrupted global oil supply.

Biden said in an Oct. 31 speech that oil companies are engaged in “war profiteering.” He threatened to work with Congress to implement a windfall profits tax on the industry.

“Oil companies’ record profits today are not because they’re doing something new or innovative,” he said. “Their profits are a windfall of war — the windfall from the brutal conflict that’s ravaging Ukraine and hurting tens of millions of people around the globe. You know, at a time of war, any company receiving historic windfall profits like this has a responsibility to act beyond their narrow self-interest of its executives and shareholders.”

The proposal may not have much chance in Congress if it’s introduced, but ConocoPhillips chief executive Ryan Lance addressed it in an earnings call with investors.

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Lance said that oil companies need “fiscal stability,” meaning taxes that don’t change, because oil and gas projects are based on multi-year timelines.

“The whole conversation around windfall profits taxes is not a helpful conversation right now,” he said.

The company’s Alaska operation has also fought proposals for tax increases in the state.

ConocoPhillips Alaska reported paying $580 million in taxes and royalties to the state in the quarter, the same as it earned, with another $183 million going to the federal government.

It said it invested $269 million in capital during the period in Alaska, keeping it on pace for a $1 billion investment in the state for the 2022.

The left-leaning think tank Center for American Progress on Thursday targeted ConocoPhillips’ third-quarter profits as “obscene” and almost double a year earlier.

“Oil companies have experienced record profits this year while Americans faced significant pain at the pump,” said Jenny Rowland-Shea, director of public lands at the group, said in a written statement. “The top five oil companies have seen over 200% increases in quarterly profits, compared to 2021; a trend that has continued in quarter three.”

Kara Moriarty, president of the Alaska Oil and Gas Association, said the state and industry receive more revenue when oil prices are high.

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“To be clear, the industry is not ‘war profiteering,’ ” she said. “Rhetoric like this is not only untrue but meant to divide and mislead. We would advise the president to first unleash domestic energy production to help bring oil prices down.”

The five largest U.S. oil companies include ConocoPhillips and ExxonMobil, another oil producer in Alaska. ConocoPhillips is the only Alaska oil producer to release its quarterly performance in the state.

The Center for American Progress and other environmental groups are also urging the Biden administration to reject the Willow project, currently under consideration by the federal Bureau of Land Management for a construction permit.

The project is located in the 23-million-acre National Petroleum Reserve-Alaska. The reserve is home to migratory birds, polar bears and calving grounds for the Teshekpuk Lake caribou herd.

Willow could potentially produce 600 million barrels of oil over a 30-year life, according to estimates. ConocoPhillips has said it believes it will cost $8 billion and create more than 2,000 construction jobs and 300 permanent jobs.

Nick Olds, executive vice president of global operations for ConocoPhillips, said on Thursday’s earnings call that the company expects a project decision from the federal agency by year’s end.

Following an affirmative decision by the federal government, the company early next year expects to make a final investment decision before major construction begins on the project, he said.

In a development that could open the door for federal approval, Olds said that ConocoPhillips supports a development proposal for the project presented in a draft environmental review from the agency earlier this year.

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That new plan would reduce the company’s original proposed footprint of drilling to three large gravel pads on the tundra to support drill rigs, down from five in an earlier proposal.

The plan followed a court decision by federal Anchorage district court Judge Sharon Gleason that tossed the agency’s earlier approval for development, after conservation groups sued to halt the project, arguing that the agency had underestimated the plan’s harm to wildlife, including polar bears, among other errors.

The company won’t make significant investments in Willow until the project is approved by the federal government, Olds said. But the company expects to have capital funding to support some early work at Willow this upcoming winter season, such as opening up a gravel mine site and laying some gravel roads, he said.

The downsized project remains a good value against other projects, even with inflation high, Olds said.

“Despite all the cost pressures, the project remains very competitive in our cost supply framework,” he said.

Lance, the chief executive, also said Willow is a project that “makes sense” for ConocoPhillips.

“We’re going to fund them,” Lance said of such projects. “We’re going to lean in on some of these medium- and longer-cycle projects. We think the world needs them.”