ConocoPhillips Sees Solid Growth in Shale Plays in 2013, Expects Drilling Gains in 2014

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Researched by Industrial Info Resources (Sugar Land, Texas)--Global energy leader ConocoPhillips (NYSE:COP) (Houston, Texas) saw solid profits in fourth-quarter and full-year 2013, as the company benefited from strong volumes in fiscally advantageous regions, such as the North American shale market, which offset the effects of abnormal weather and normal field declines. Net income was reported to be $2.49 billion for the quarter, compared with $1.43 billion in fourth-quarter 2012, and $9.16 billion for full-year 2013, an 8.64% increase from 2012.

Total revenues stood at $13.96 billion for the quarter, a 14.55% decrease from the same period in 2012, and $58.25 billion for the year, a 6.06% decrease from 2012. The company's total realized price was reported to be $67.62 per barrel of oil equivalent, a slight decline from $67.68 per barrel in 2012. Liquid prices were lower, particularly in the fourth quarter, which also saw lower volumes and higher depreciating and operating costs. Normal field declines and disruptions in Libya, as well as weather-related factors in the fourth quarter, led to a slight decline in annual production to 1.51 billion barrels of oil equivalent per day, from 1.53 billion barrels in full-year 2012.

However, during the fourth quarter alone, production in the Eagle Ford Shale, Bakken Shale and Permian Basin grew 31% from the same period in 2012. Unconventional exploration in the "Lower 48" U.S. states centered around drilling in the Niobrara Shale and Permian Basin. ConocoPhillips also drilled a major oil discovery at the Gila prospect in the Gulf of Mexico.

The company is shifting to higher-value liquids, which accounted for about 60% of the quarter's reserve additions. For the full year, proved reserves stood at about 8.9 billion barrels of oil equivalent per day, a 3% increase from 2012.

Also boosting the fourth quarter were $7 billion in proceeds from asset sales, including $1.65 billion from the sale of its Algeria business unit, ConocoPhillips Algeria Limited, to Indonesia's state-owned Pertamina.

Capital expenditures and investments for the year totaled $16.31 billion, compared with $14.91 billion in 2012. For the quarter, capital expenditures and investments totaled $4.45 billion, compared with $3.64 billion in fourth-quarter 2012.

Industrial Info is tracking $71.75 billion in active projects involving ConocoPhillips, including the $3 billion construction of an LNG liquefaction and export plant in Quintana, Texas. The facility will have a natural gas inlet capacity of 650 million standard cubic feet per day and an LNG production capacity of 4.4 million tons per year. It will utilize APIC liquefaction technology and source the natural gas from the Eagle Ford Shale. The project is expected to kick off in the second quarter of this year.

"Underlying performance is improving," said Jeff Sheets, the executive vice president and chief financial officer of ConocoPhillips, in a conference call. "Realizations are about flat, but margins are growing due to increases in liquids production from places with better fiscals, which is consistent with our strategy. Despite volatile pricing and basis differentials throughout the year, all of our significant operating segments were profitable. We continue to believe that our diversified product and geographic splits are key to providing consistent performance over time."

ConocoPhillips executives expect to see 3% to 5% production growth in 2014, totaling about 1.55 billion barrels of oil equivalent per day (excluding Libya). In the first quarter, production is expected to be between 1.49 billion to 1.53 billion barrels of oil equivalent per day.

"Our 3% to 5% growth will come from major projects in development drilling programs across our operations," said Ryan Lance, the chairman and chief executive officer of ConocoPhillips, in the conference call. "In 2013, we achieved startups in several major projects, and we continue to wrap up our unconventional programs in the Lower 48. These activities will wrap up during 2014 as well, and also provide strong momentum in 2015."

For more information, visit Industrial Info's North American Oil & Gas Production Project Database.

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Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine 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.