Conoco Net Income More Than Doubles on Oil Prices

ConocoPhillips, the third-largest U.S. oil company, said first-quarter profit more than doubled after higher crude prices increased the value of its production.

Net income climbed to $2.1 billion, or $1.40 a share, from $800 million, or 54 cents, a year earlier, Houston-based ConocoPhillips said today in a statement. Excluding costs related to pulling out of two Middle East projects, profit was $1.47 a share, 10 cents higher than the average of 15 analyst estimates compiled by Bloomberg. Revenue surged 46 percent.

ConocoPhillips said in October it planned to divest $10 billion of assets as it intensifies its focus on exploring for oil and natural gas. The company reached nearly half its goal when it agreed this month to sell a Canadian oil-sands stake for $4.65 billion.

Improving economic conditions have helped crude prices rise this year. Oil futures traded in New York were 82 percent higher, on average, in the first quarter than a year earlier.

“I think they’re executing about as well as can be expected given the environment they have,” said James Halloran, a consultant at Financial America Securities in Cleveland.

ConocoPhillips rose 55 cents to $59.10 at 4:15 p.m. in New York Stock Exchange composite trading. The stock has nine buy ratings from analysts, eight holds and three sells. Before today, ConocoPhillips had climbed 15 percent this year in New York trading.

Production Falls

ConocoPhillips said production of oil and gas in the first quarter fell about 5 percent from a year earlier to 1.83 million barrels of oil equivalent a day. The company cited normal field declines in the U.K. and North America, the effects of production-sharing agreements and unplanned downtime in North America related to weather.

The company said its earnings from producing oil and gas more than doubled in the first quarter to $1.83 billion. The company’s stake in Russia’s OAO Lukoil had a first-quarter profit of $387 million, compared with $8 million a year earlier.

ConocoPhillips said in March that it wants to sell half its 20 percent stake in Lukoil by the end of 2011. A 10 percent stake was valued at about $5 billion last month. The Lukoil sale is in addition to a plan to sell $10 billion in assets within the same period. This month, ConocoPhillips also said it’s pulling out of the Yanbu refinery venture with Saudi Aramco and the Shah gas project with Abu Dhabi. Costs related to those two projects totaled $110 million in the first quarter.

More Focused

“I think they’re finally realizing that they don’t have to be big to be appreciated by the market,” said Brian Youngberg, an analyst at Edward Jones in St. Louis who has a “buy” rating on ConocoPhillips shares and owns none. “If they focus on returns and operate their assets well, they will be rewarded in terms of improved share price.”

ConocoPhillips said it is increasing drilling in the Eagle Ford shale formation, with four horizontal wells completed and three more being drilled. The company also said three wells in North Dakota’s Bakken Shale began producing last month.

The company is seeking to reduce its refining and marketing business, whose profit margins have been squeezed by reduced demand for transportation fuels. ConocoPhillips has said it eventually wants that segment to comprise 15 percent of its portfolio, compared with 28 percent last year.

Clayton Reasor, vice president of corporate affairs at ConocoPhillips, said in March that the company may enter into some refinery joint ventures or sell interests. ConocoPhillips doesn’t expect to sell a refinery in the next couple of years, he said.

Refining Loss

ConocoPhillips reported a loss of $4 million from refining and marketing in the first quarter, compared with earnings of $205 million a year earlier. The company said its U.S. refining utilization rate was 88 percent in the first quarter, while the international rate was 48 percent in part because of maintenance work.

Profit from DCP Midstream, a pipeline and gas-processing venture with Spectra Energy Corp., fell 37 percent to $77 million. ConocoPhillips’s chemicals business, held in a joint venture with Chevron Corp., earned $110 million, compared with a profit of $23 million a year earlier.

Exxon Mobil Corp. and Chevron are the biggest U.S. oil companies. Exxon Mobil said today that first-quarter profit rose 38 percent. Chevron is scheduled to report earnings tomorrow.

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ConocoPhillips reports 1st quarter profit

Conoco-Phillips announced Thursday that “significantly improved” oil and natural gas prices helped more than double net profit from one year ago, despite stumbling production.

The Houston refiner reported a first quarter net income of $2.1 billion, or $1.40 per share, from $800 million, or 54 cents per share, in the same quarter of 2009, according to ConocoPhillips documents. Earnings available to the common shareholders were $2.2 billion, or $1.47 per share, following the company’s decision to end participation in the Shah Gas Field and Yanbu refinery projects in the Middle East.

Revenue reached $44.8 billion in the quarter, up from $30.7 billion in 2009’s first quarter, company documents state.

“Improving market conditions in the first quarter contributed to increased earnings,” ConocoPhillips Chairman and CEO Jim Mulva said in a conference call with investors and the media.

Production of oil and gas in the first quarter fell about 5 percent from one year ago, when the company produced about 1.93 million barrels of oil per day, according to company documents.

The decrease was due to normal field declines in the United Kingdom and North America, the effects of production-sharing agreements and unplanned down time in North America related to weather, company documents state. But increased production from China and Canadian oil sands helped offset the decrease.

ConocoPhillips annou-nced in October it hopes to sell $10 billion in assets to focus on oil and natural gas exploration efforts.

The company agreed this month to sell its stake in Syncrude, a Canadian oil sands project, for $4.65 billion. It also hopes to sell half of its 20 percent stake in Russian oil giant Lukoil, which produced earnings of $387 million in the first quarter for ConocoPhillips.

“The increase in dividends and the sale of the Syncrude interest are examples of steps we have taken to increase distributions and improve our balance sheet,” Mulva said. “As previously annou-nced, we decided to opt out of the Yanbu refinery project and have elected not to participate in the Shah gas field development in Abu Dhabi. Over the next couple of years we expect to see improved shareholder returns through disciplined capital investment, a strengthened financial position and growth in shareholder distributions.”

The company reported gains in all but two segments.

ConocoPhillips exploration and production arm recorded first-quarter earnings of $1.83 billion, an increase from the $700 million it posted in last year’s first quarter, according to company documents.

“The higher crude oil and natural gas liquids prices resulted in improv-ed earnings across our E&P portfolio,” Mulva said.

ConocoPhillips refining and marketing segment lost $4 million in the first quarter, compared with a profit of $205 million in the year-ago quarter, company documents state. Weakened market conditions hurt the refining and marketing segment, but light-heavy crude differentials widened and earnings benefited from lower costs and improved clean product yields.

The company’s chemicals arm, Chevron Phillips Chemical, earned $110 million in the first quarter, compared to $24 million in the same period one year ago, company documents state.

ConocoPhillips’ emerging business arm earned $6 million in the first quarter, according to company documents.

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Oil production forecast falls by a billion barrels

A curious thing happened on the way to Alaska's latest long-term oil production forecast.

We lost a billion barrels.

Sound alarming?

It's probably not as bad as it sounds. Read on.

Declining projection

On April 9, the Alaska Department of Revenue released its new state revenue forecast.

The semiannual revenue forecast is a vital document, used by the governor and Legislature to plan a state budget extremely reliant on taxes and other revenue from oil and gas production.

Nearly all of the state's oil production comes from the North Slope, in particular the large Prudhoe Bay, Kuparuk River and Alpine oil fields.

As part of developing the revenue forecast, state officials and consultants must try to forecast the level of future oil production.

The Department of Revenue's latest forecast says North Slope production will total just over 5.2 billion barrels through the year 2050.

That's a great deal of oil, to be sure, worth a staggering $415 billion at today's market price of about $80 per barrel.

But the forecast is well shy of what the department was projecting a year ago: 6.3 billion barrels through 2050.

2,000 forecasts

So what's changed in a year?

Are some Prudhoe Bay wells playing out prematurely?

Are oil companies canceling new fields and other investments?

In fact, one of the biggest changes is the state's new approach to estimating the amount of oil each field is expected to produce.

In the past, the state looked at each field on an aggregate level to forecast production, said Jennifer Duval, a Department of Revenue petroleum economist.

But following the spring 2009 revenue forecast, the department began to review historic production data on about 2,000 individual wells on the North Slope, Duval said. The data come from the Alaska Oil and Gas Conservation Commission, which regulates subsurface work in the oil fields.

The idea was to study and forecast each well's performance to better understand what sort of production could be expected from corresponding fields, Duval said.

"I don't really want to say it's more accurate. We won't know for a while," Duval said. "But each well performs differently."

Already, the technique has been used twice -- for the fall 2009 forecast, and for the spring 2010 forecast.

In predicting well output from one forecast to the next, Duval said: "Some wells we were higher, some wells we were lower, some we were right on. On average, we were pretty good."

Lots of other variables go into the production forecast, she said, including talks with oil companies and a review of the development plans they're required to submit annually to the Department of Natural Resources.

Changing company plans can have a significant effect on the forecast. For example, production from a planned Conoco Phillips development, Alpine West, was "pushed out a year" in the latest forecast, Duval said, because of trouble obtaining a permit from the U.S. Army Corps of Engineers.

"Each forecast is made with a different set of assumptions," she said. "You make your best guess based on all the information you have available to you at the time."

Revenue's new man

The Department of Revenue awarded a contract to Frank Molli to do the production forecasts, starting with the fall 2009 projection. That forecast, like the spring 2010 forecast, predicted about 1 billion fewer barrels through 2050.

Molli is doing the forecasts, including the individual well analysis, using software he wrote himself, Duval said.

Molli isn't an Alaskan. He lives in Colorado Springs, Colo., and is president of Molli Computer Services Inc., his resume says. He has a bachelor's degree in electrical engineering from the University of Colorado, and worked as a process engineer and a reservoir engineer during the 1970s and 1980s for Phillips Petroleum Co.

Is this anything?

So Molli and the Department of Revenue are now forecasting, long-range, some 1 billion barrels of oil less than the department predicted a year ago.

But does this really matter?

As anyone in the oil business knows, a lot can change over 40 years and nobody has a clear enough crystal ball to see all the factors that could help or hurt Alaska oil production -- from drilling success and new technology to shifting politics and company priorities to price swings, weather and wars.

The spring 2009 and 2010 forecasts, near-term, really aren't very different. As an example, for 2015 the forecasts put total North Slope production at 232 million barrels and 227 million barrels respectively. Twenty years further out, in 2035, the divergence between forecasts is more pronounced: 117 million barrels vs. 78 million.

Here's another consideration on the significance of a mere 1 billion barrels when forecasting over decades: The department, for the most part, doesn't even include in its estimates the tens of billions of barrels of known heavy or viscous oil in deposits such as Ugnu and West Sak. Nor does it include known oil discoveries such as Kuvlum and Sandpiper on the federal outer continental shelf, or the potentially vast volumes of oil that might one day be recovered with technologies such as low-salinity waterflood or carbon dioxide injection.

"Accordingly, we believe that our current estimates of ultimate recovery from the North Slope are conservative," says the department's fall 2009 revenue forecast.

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Alaska Governor “outraged” by Corps of Engineers’ decision on drill pad More at : Alaska Governor “outraged” by Corps of Engineers’ decision on drill

Alaska Governor Sean Parnell said Saturday he is outraged by the U.S. Army Corps of Engineers’ decision to deny Conoco Phillips and Anadarko a permit to construct a drill pad in the National Petroleum Reserve-Alaska.“Just in the last six months, we’ve fought the federal government for tying up Outer Continental Shelf leasing, and for adding bureaucratic nightmares and costs with Endangered Species Act listings and critical habitat area designations,” Governor Parnell said.

“We’ve seen the U.S. Fish and Wildlife Service and the Environmental Protection Agency show reluctance to approve anything related to jobs in Alaska.”

“And then — first, by delay, and now, through their decision — the Corps of Engineers continues to set back our nation’s chances for economic recovery, domestic energy production, and Alaskans’ prospects for jobs,” Governor Parnell added.

Corps’ decision is “a half a billion dollars of development lost”, Republican state Rep. Craig Johnson said on Friday. The Corps of Engineers on Friday said that the company’s proposal did not comply with Clean Water Act rules.

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