ConocoPhillips posts $1.7-billion Q1 2020 loss, increases June curtailments by 195,000 b/d
ConocoPhillips lost $1.7 billion in first-quarter 2020, compared with first-quarter 2019 earnings of $1.8 billion. Excluding special items, first-quarter 2020 adjusted earnings were $500 million, compared with first-quarter 2019 adjusted earnings of $1.1 billion. Special items for the current quarter were primarily driven by an unrealized loss on Cenovus Energy equity and price-driven non-cash impairments.
The company recently announced it expects to voluntarily curtail production due to weak prices. Voluntary curtailments for the month of May are now estimated to be 265,000 b/d gross, comprised of 165,000 gross in the Lower 48 and 100,000 b/d gross at the Surmont SAGD bitumen recovery plant in Alberta, Canada. This represents 230,000 b/d on a net basis (OGJ Online, Apr. 16, 2020).
ConocoPhillips estimates voluntary curtailments for the month of June will be 460,000 b/d, comprised of 260,000 b/d gross in the Lower 48, 100,000 b/d gross at Surmont, and 100,000 b/d gross in Alaska. This represents 420,000 b/d on a net basis. Future voluntary curtailment decisions will be made on a month-by-month basis. The company also expects some level of additional curtailments from infrastructure constraints, actions from partner-operated assets, or government mandates.
Production excluding Libya for first-quarter 2020 was 1.278-million boe/d, a decrease of 40,000 boe/d from the same period a year ago. Adjusting for closed and pending dispositions, production increased 52,000 boe/d primarily due to growth in Eagle Ford, Bakken, and Permian unconventional production as well as development programs in Europe, Asia Pacific, and other Lower 48 US plays. This growth more than offset normal field decline and impacts from a third-party pipeline outage on Kebabangan field in Malaysia. Production from Libya averaged 11,000 boe/d.
Eagle Ford production averaged 233,000 boe/d, Bakken 96,000 boe/d, and Permian unconventional 70,000 boe/d. In Alaska, the company progressed construction of its multi-year GMT-2 project, which remains on track for late-2021 startup. ConocoPhillips formed the Greater Mooses Tooth (GMT) Unit, the first unit established entirely within the National Petroleum Reserve-Alaska NPR-A, in 2008. In 2017, the company began construction in the unit with two drill sites, GMT-1 and GMT-2. GMT-1 achieved first production in fourth-quarter 2018 (OGJ Online, Nov. 12, 2018).
The company also completed drilling two wells in Alaska to further appraise the Willow discovery and one well to test the Harpoon prospect, prior to early termination of the 2020 winter exploration program to minimize risks associated with COVID-19. In Canada, Phase 1 development at Montney shale was initiated with startup of a 14-well pad and associated infrastructure.
Upcoming operational activities for the company include several seasonal turnarounds and maintenance projects typically conducted in the second and third quarters each year. These activities are planned in Alaska, Norway, and various areas of the Asia Pacific region.
Given ongoing uncertainty, continued market volatility, and production curtailments over the coming months, the company recently announced that its original 2020 guidance items should not be relied upon and that further guidance has been temporarily suspended. During this suspension, the company may provide periodic updates, as appropriate.