200% disposition-adjusted reserve replacement ratio
ConocoPhillips (ticker: APC) announced full year results and reserves today, showing how the world’s largest independent dealt with the past year’s developments.
ConocoPhillips earned $1.6 billion in Q4 2017, or $1.32 per share, but reported a loss of $0.9 billion in 2017, ($0.70) per share for the full year. These results significantly exceed Q4 2016, when the company reported a loss of $35 million in Q4 and $3.6 billion for the full year.
ConocoPhillips reported 5,038 MMBOE of reserves, down from 6,424 MMBOE at year-end 2016. However, this decrease is entirely due to the company’s divestments in the year. The company sold $13.3 billion in Canadian assets in March, $3 billion in San Juan gas assets in April and $305 million in Barnett assets in June, so a decrease in reserves was unsurprising. The company reports that if divestments are excluded, it added a total of 1,036 MMBOE in the past year, 431 MMBOE of which was due to improving commodity prices. This works out to a 200% organic reserve replacement ratio.
20% lower 48 production growth expected
Conoco expects to spend $5.5 billion in 2018, to produce about 1,215 MBOEPD. Significant production growth in the Lower 48 is expected, with increases of more than 20% likely. The company plans first production from several projects, including Bohai Phase 3, Clair Ridge, Aasta Hansteen and GMT-1.
Conoco is also expanding its programs to return cash to shareholders. The company increased its quarterly dividend by 7.5%, to 28.5 cents per share, and expanded its previously announced 2018 share repurchase program by 33%, from $1.5 billion to $2 billion.
1.2 million-acre Alaska acquisition consolidates acreage
ConocoPhillips also announced a $400 million bolt-on acquisition in Alaska from Anadarko (ticker: APC). Conoco will acquire Anadarko’s 22% nonoperated interest in the Western North Slope of Alaska, and its interest in the Alpine pipeline. The gross daily production from these assets was 63 MBOEPD. Conoco will also hold a 100% interest in about 1.2 million acres of exploration and development lands, including the Willow discovery.
Announced in early January 2017, the Willow discovery is a promising oil project. Conoco reports the play could produce up to 100 MBOPD and could begin production as early as 2023, with total recoverable resource upwards of 300 MMBO.
