ConocoPhillips manages profit amid pandemic

Despite facing negative oil prices and cutting production ConocoPhillips still managed to turn a profit in the first full reporting period of the global coronavirus pandemic.

ConocoPhillips executives reported net earnings of $260 million in the second quarter during a Thursday morning investor call.

The $260 million overall quarterly profit is a dramatic turnaround from the more than $1.7 billion ConocoPhillips lost in the first quarter when oil prices began to fall worldwide.

However, ConocoPhillips lost $141 million on its North Slope operations in the second quarter. It also lost $451 million cumulatively from its Lower 48 and Canadian segments. The North American losses were more than offset by profits turned elsewhere around the globe, according to the earnings report.

The company's net adjusted earnings, excluding income from asset sales and other special items, totaled a $994 million loss in the second quarter.

The Houston-based global oil and gas producer generated just more than $4 billion in total second quarter revenue, which was down from $4.8 billion in the first three months of the year, but also cuts its expenses by more than 35 percent to less than $4 billion. It ended the quarter with $2.9 billion in cash reserves, down $1 billion from the first quarter and more than $2 billion over the first half of the year, according to the earnings report.

CEO Ryan Lance said the result reflects the company’s strong underlying business operations and its commitment to continue work safely through the pandemic that at times has brought whole sectors of the economy to a complete halt, which has been reflected in energy markets worldwide.

“We are monitoring the market closely to develop a view around the timing and path of price recovery and to guide our corresponding actions,” Lance said, the company began reversing actions to curtail production as oil prices rose late in the quarter. “Our financial strength, flexibility and portfolio diversity represent a distinct advantage that enables us to navigate and preserve value in this volatile environment.”

Prices for oil on domestic markets, including Alaska, fell further in April and stayed there longer than the internationally-recognized benchmark of Brent crude. Prices on the Alaska North Slope and West Texas Intermediate oil markets went negative April 20 but stayed below $20 per barrel for weeks, while Brent prices dipped to $19 per barrel on separate occasions but rebounded afterwards.

ConocoPhillips reported a second quarter average realized price of $26.81 per barrel for its Alaska oil compared to $32.32 per barrel for production from Europe and Africa.

Alaska North Slope crude traded for $42.46 per barrel on Wednesday, according to the state Revenue Department.

The company paid $85 million in state taxes and royalties during quarter, according to spokeswoman Natalie Lowman, who also noted that ConocoPhillips invested $223 million in North Slope capital projects, or about 25 percent of the company’s global capital spend during the period.

Since mid-March, ConocoPhillips leaders announced $400 million of cuts to the company’s overall 2020 spending plan in Alaska. In early April the company told its drilling contractor Doyon Drilling that it would be laying down its North Slope drilling rig fleet indefinitely.

In May, ConocoPhillips began implementing oil production cuts on the North Slope that were originally planned to peak at about 100,000 barrels per day as part of a broader strategy to curtail up to 460,000 barrels per day companywide. The North Slope cuts were reversed to start July as oil prices pushed back above $40 per barrel.

Spread over the entire quarter, the North Slope production reduction averaged to 45,000 barrels per day less being produced in the second quarter — which averaged 153,000 barrels per day — compared to the first. The curtailment averaged a reduction of about 225,000 barrels of oil equivalent per day during the quarter, according to the company.

 

Elwood Brehmer can be reached at [email protected].

Updated: 
07/30/2020 - 3:41pm