ConocoPhillips in the Eagle Ford: A Good Story Gets Better

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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--In the Eagle Ford Shale, ConocoPhillips (NYSE:COP) (Houston, Texas) is a big fish that is getting bigger. Already one of the largest producers in the Eagle Ford, the company recently shared some good news with investors about production and reserve levels there.

The company's production from the Eagle Ford peaked at 163,000 barrels of oil equivalent per day (BOE/d) during the first quarter. For the quarter as a whole, production averaged 140,000 BOE/d, up 39% over first-quarter 2013 average production. ConocoPhillips sees its Eagle Ford production rising to more than 250,000 BOE/d in 2017, Chairman and Chief Executive Ryan Lance told financial analysts April 10. He also said the company has increased its estimate of reserves in the Eagle Ford by 39% to 2.5 billion barrels of oil in place, up from an earlier estimate of 1.8 billion barrels of oil in place.

"ConocoPhillips' wells in the Eagle Ford have the highest oil rates per well and are leading the industry in value," Lance told the analysts in New York. "This is attributable not only to the fact that we are in the best part of the play, but also to our relentless focus on technical innovation and drilling and completion cost efficiencies. We are applying these benefits and efficiencies across our unconventional portfolio in the Bakken, Permian, Niobrara, Canada, and outside of North America. We believe our unconventional resource base is unmatched, particularly for a company our size."

"ConocoPhillips is set for growth," Lance told the analysts. "Beginning this year, we will be growing production and margins across our diverse asset base."

A few weeks later, in announcing first-quarter earnings, Lance said: "We are off to a great start in 2014. Our operational performance was strong and our margins continued to grow. Production increased due to strong performance in our North American unconventional plays," among other areas. ConocoPhillips is an independent oil and gas producer that operates around the world.

Two years after divesting itself of its downstream refining and marketing unit, which now operates as Phillips 66 (NYSE:PSX) (Houston, Texas), ConocoPhillips is focusing exclusively on oil and gas production. Over the last two years, it has sold more than $12 billion of non-core assets and is investing those proceeds in the exploration and production of oil and gas. In North America, it is operating in the deepwater Gulf of Mexico, as well as unconventional plays in the Permian Basin and the Eagle Ford, Bakken and Niobrara shales, and in Canada's oil sands. Overseas, the company has operations in Colombia, Greenland, the U.K., Poland, Azerbaijan, Senegal, Angola, China, Malaysia, Indonesia and Australia.

Based on production and proved reserves, ConocoPhillips is the world's largest independent oil and gas exploration & production company. Speaking about the company's far-flung portfolio of oil and gas projects, Lance told investors 95% of ConocoPhillips' 2014 capital budget of $16 billion will go to "growth projects and programs with margins that are higher than our average margin today. We believe we have the asset base, technical capability, world-class workforce and financial strength to deliver on our unique value proposition."

"ConocoPhillips is an unusual story because it is really large E&P company that is operating successfully in North American unconventional plays like the Eagle Ford and Bakken," said Jesus Davis, Industrial Info's vice president of research for the Oil & Gas Production, Pipelines and Terminals industries. "Most other really large players waited too long to get into those plays and then overpaid for acreage when bidding wars erupted. When that happens, the parties who are last in are usually the first ones out the door when prices fall or capital budgets are cut."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.