ConocoPhillips' core Permian basin business is “an asset that keeps getting better and better” and is set to grow production about 7% annually through 2032, said executive vice-president Nick Olds.
Speaking to analysts and investors at Houston-based ConocoPhillips’ investor day meeting Apr. 12, Olds—who oversees the company’s operations in the US Lower 48—said the company’s roughly 910,000 acres in the Delaware and Midland basins are expected to generate about $45 billion in free cash flow through 2032, assuming a $60/bbl price for West Texas Intermediate.
In the Permian, the Delaware basin will be the primary growth engine, Olds said. Key to putting up high-single-digit growth in coming years will be taking advantage of operational efficiencies: Since 2019, ConocoPhillips’ equivalent bbl/ft drilled has grown about 30%. The Midland basin, which accounts for about one-third of ConocoPhillips’ inventory, is set to grow more slowly.
Addressing the idea that ConocoPhillips could be investing more in growing its Permian output, executive vice-president Dominic Macklon said the company is looking for the portfolio sweet spot between shorter-cycle projects and low-decline areas around the world. ConocoPhillips is prizing predictability over production, he said.
“We believe it’s very important and valuable to maintain diversity in our portfolio,” Macklon said. “We want to maintain that balance.”
During the extended presentation—headlined by a forecast of at least $115 billion in free cash flow by 2032 and $10 billion in average annual capital expenditures—the company provided the following North America development plan guidance:
- In Alaska, ConocoPhillips will drill 65 new wells in existing Coyote and Nuna projects at a project cost of about $1 billion annually. Work will be a combination of infill drilling and step-out pads and will aim to add 40,000 boe/d at peak production. In the Willow project—approved by the Biden administration early this month but facing lawsuits—the company plans to spend $7-7.5 billion by 2028 before first oil in 2029 (OGJ Online, Apr. 3, 2023). Senior vice-president Andy O’Brien said the company expects to then quickly reach peak production of 180,000 boe/d.
- In the Montney formation in Alberta, ConocoPhillips plans to add a second rig in 2024 and run one continuous frac crew. Over time, O'Brien said, that business could grow production by about 100,000 boe/d over the next decade from a base of about 30,000 boe/d in 2023.
- In the Surmont oil sands, where ConocoPhillips’ production hit a record 80,000 boe/d in second-half 2022, the company will this year drill its first new pad since 2016. The company’s cost of supply is expected to be less than $15/bbl.
Shares of ConocoPhillips (Ticker: COP) were changing hands around $108 in midday trading Apr. 14. Shares closed at $106.76 the evening prior to release of the 10-year plan and have lost about 8% of their value over the past 6 months.