ConocoPhillips to Further Reduce Capex, Oil Production

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Researched by Industrial Info Resources (Sugar Land, Texas)--Exploration and production company ConocoPhillips (NYSE:COP) (Houston, Texas) says it will make further moves to reduce capital expenditures (capex) and oil production this year. In March, the company announced that it would reduce 2020 capex by $700 million from its original guidance of $6.6 billion and halve its $3 billion-a-year share repurchase program. In an announcement on Thursday, the company said it will reduce capex by a further $1.6 billion, to $4.3 billion, and suspend share repurchases. In addition, ConocoPhillips said it would curtail oil production by about 225,000 barrels per day (BBL/d).

ConocoPhillips said the spending cuts would be sourced across its global portfolio but would be "primarily focused on Lower 48, Alaska and Canada areas where we have the highest levels of flexibility." Industrial Info is tracking more than $21.4 billion in active ConocoPhillips projects, including more than $15 billion worth in North America.

Among the company's single biggest drawdowns in production will be at the Surmont oil sands production facility in Alberta, Canada, where the company says that due to lower Western Canada Select crude oil prices, it will reduce production by approximately 100,000 BBL/d to 35,000 BBL/d. The company had been considering a possible expansion of the facility and has a scheduled maintenance turnaround there in the third quarter. While the capital spending plans are now almost certainly on the back burner, it remains unclear how the curtailment will affect maintenance schedules. Click here for a list of currently active Surmont projects.

ConocoPhillips said that beginning next month, it would begin curtailing production in the Lower 48 region, with an initial aim of about 125,000 BBL/d. The company said curtailment decisions would be made on a month-on-month basis and would depend on operating agreements and contractual obligations.

Among the largest of ConocoPhillips' active U.S. projects where work could be slowed is the Greater Moose's Tooth 2 production pad addition in Alaska. The project includes constructing new well pads with up to 48 wells that will use existing facilities to produce 35,000 to 40,000 BBL/d of oil. Construction began in the first half of last year and was expected to take about two years to complete. For more information, see Industrial Info's project report. ConocoPhillips also is in the process of constructing a pipeline addition between Greater Moose's Tooth 1 and Greater Moose's Tooth 2 to its Alpine Central Processing Facility. For more information, see Industrial Info's project report.

While the company seems to be targeting reductions in oil production, capital spending for natural gas-based projects could take a hit as gas prices have fallen alongside crude. Among ConocoPhillips' largest projects is the Barossa natural gas and condensate floating production, storage and offloading (FPSO) vessel offshore Australia. Construction was planned to kick off next year. The FPSO vessel would have a processing capacity of 600 million cubic feet per day of raw gas and 8,000 BBL/d of condensate along with 650,000 barrels of condensate storage. For more information, see Industrial Info's project report.

ConocoPhillips will release its first-quarter 2020 earnings on April 30, when it may provide further details of planned capex reduction and production curtailments.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 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. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.