The leaders of ConocoPhillips, Houston, are allocating more capital to their assets in the Permian basin this year as they look to lock in some operational efficiencies in the company’s largest profit-generating region.
While reporting ConocoPhillips’ first-quarter results—net income of nearly $2.2 billion on revenues of almost $15.8 billion and total production of 2.3 MMboe/d—executives said they have raised their full-year capital spending forecast to $12-12.5 billion from the previous $12 billion. The increase will go to the Permian basin but, said chairman and chief executive officer Ryan Lance and his team, also reflects uncertainty about spending this year at the company’s operations in Qatar.
Andy O’Brien, chief financial officer and executive vice-president of strategy and commercial, said on the conference call with analysts that the uptick in Permian basin spending—which will focus on both operated and non-operated assets in the Delaware basin—is about keeping production level into next year and not the precursor to a big ramp up.
“On the operated side, it really is just a continuation basically of our steady state, just given how efficient we’re being,” O’Brien said, referencing drilling and completion cost gains of 15% last year. “On the non-operated side, […] it’s more in anticipation and starting to see the early signs of […] some of our non-operated partners starting to ballot us for more wells.”
ConocoPhillips’ capex in the first quarter was a little more than $2.9 billion, of which $1.5 billion went to activity in the Lower 48 and $949 million was allocated to Alaska, where teams are working on the Western North Slope and in the Greater Kuparuk Area. Spending last year was $12.6 billion.
Lance called the incremental investments now on the books “no-brainers” that are “going to keep our efficient machine running.” Looking longer term, he added, the ConocoPhillips team thinks the Iran war will move the price of oil “up a little bit, at least relative to where we were before the conflict started.” That will inform executives’ 2027 planning process but is not a driver of this latest capex increase.
“Recall, we were pretty constructive over the last few years before this got started with some uncertainty around how the physical and paper markets were acting […] and this has just accelerated a lot of that,” Lance said. “The floor probably has to come up to account for the changes that have occurred over the last couple of months.”
Shares of ConocoPhillips (Ticker: COP) slipped 2% to about $126 after the earnings report and conference call. Over the past 6 months, shares are still up more than 40%, a rise that has grown the operator's market capitalization to more than $153 billion.
About the Author
Geert De Lombaerde
Senior Editor
A native of Belgium, Geert De Lombaerde has more than two decades of business journalism experience and writes about markets and economic trends for Endeavor Business Media publications Healthcare Innovation, IndustryWeek, FleetOwner, Oil & Gas Journal and T&D World. With a degree in journalism from the University of Missouri, he began his reporting career at the Business Courier in Cincinnati and later was managing editor and editor of the Nashville Business Journal. Most recently, he oversaw the online and print products of the Nashville Post and reported primarily on Middle Tennessee’s finance sector as well as many of its publicly traded companies.