ConocoPhillips (COP, Financial) remains quite optimistic on production in 2015. It anticipates its production base to rise about 2% to 3% in 2015. Its production is expected to range between 1.57 and 1.61 MMboe/d for the first quarter 2015. This is approximately 1.57 MMboe/d higher than the fourth quarter in 2014. Also, the company expects approximately 3% to 5% volume and margin growth this year.
What next
Conoco banks on various major projects it has started in Europe, Malaysia the oil sands and in APLNG of late. These projects should assist the company to gear up its volume in 2015. Also, it is progressing well with its exploration activities that includes discovery of new oil play offshore Senegal. It is additionally seeing growth in North American unconventional projects that should help the company to stay focused with its margins and returns.
Alongside, Conoco is executing various growth strategies such as lowering the cost of supply and accelerating the degree of the capital expenditure. Its multiyear inventorial unconventional projects in North America that carry lower cost of supply, considering the current price environment. It has effectively taper off its capital spending at Surmont and APLNG.
Also, it has reduced its capital expenditure to $1.7 billion for its Lower 48 regions. Conoco further plans to reduce its exploration spending by $0.3 billion in its Lower 48 states. It remains on track to reduce its rig in Lower 48 regions by approximately 60% as against fiscal 2014. These smart moves should enable the company to remain profitable all through reduced realized oil price environment. Lower 48 regions had recorded about 9% increase in production and approximately 25% rise in crude oil production in the last reported quarter.
Moreover, it continues to invest in its highest margin short cash cycle projects such as Eagle Ford and the Bakken. Both these projects are flagship assets for ConocoPhillips. These assets have huge depositories that can assist the company to remain intact with its exploration for next couple of decades. Eagle Ford recorded approximately 25% increase to 157,000 BOE per day, whereas Bakken managed to post nearly 62% growth in production to 55,000 BOE per day during the last reported quarter.
Looking ahead, Conoco is effectively engaged implementing and assessing pilot test in the upper Eagle Ford. It plans to develop one layer of wells in upper Eagle ford and two layers of wells in the lower Eagle Ford. These wells are planned to be drilled 660 feet apart in each layer and it is called an 80-acre triple stack. Similarly, it is progressing well with pilot test of around 160-acre dense spacing in the Bakken assets. These moves should assist the company to increase production at both these assets in the future.
Furthermore, Conoco is making significant progress with its Alaska and 1H NEWS (Northeast West Sak) projects. It is nearing completion for its major projects in Alaska such as CD-5 and Drill Site 2S. It expects the first production from these assets at the end of fiscal 2015. Conoco has alongside sanctioned the Greater Mooses Tooth project in Alaska and is expected to start with the drilling programs in the first quarter of 2015.
Likewise, the company is banking on the understated potential of 1H NEWS. It intends to sanction the first phase of the Northeast West Sak development, the 1H NEWS project. Also, it has recently signed a contract to build a new rotary drilling rig to optimize its long-term development drilling inventory in Alaska. These are certainly positive momentum and forecasts good exploration for Conoco in future.
Ending remarks
ConocoPhillips looks a good investment. The company is steadily making progress during not so friendly realized oil price environment. It has great assets at its disposal that will continue to deliver great returns to shareholders and investors.
