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ConocoPhillips’s Production Guidance and Key Management Strategies

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Jan. 29 2016, Updated 3:46 p.m. ET

Production guidance for 4Q15 and fiscal 2015

ConocoPhillips (COP) expects to achieve a 4Q15 production level in the range of 1,585–1,625 Mboe (thousand barrels of oil equivalent) per day and a fiscal 2015 production level in the range of 1,585–1,595 Mboe per day. This would bring the company’s fiscal 2015 growth rate up by 3%–4% from the 2%–3% it expected at the start of 2015.

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Major projects and portfolio reallocation: Key strategy in 2015

As we can see in the graph above, ConocoPhillips’s year-over-year production volumes grew significantly in 3Q15. This was largely possible due to new production from major projects and development programs. ConocoPhillips had expected to complete seven of its major projects in 2015.

Additionally, in July, ConocoPhillips announced that it would be exiting deepwater exploration for further capital flexibility. Deepwater drilling is usually considered to be high risk-high reward due to its high cost.

Operational and cost efficiencies in ConocoPhillips’s key assets

ConocoPhillips noted in its 2015 analyst day meeting that it has been able to reduce its drilling and completion cost per well in the Eagle Ford by 30% while increasing ultimate recovery per well by 30% between 2013 and 2015. The company also noted that since 2011, it has dropped its well costs and drilling costs in the Bakken by 40% and its unit completion costs by 50%. Marathon Oil (MRO) is among top operators in the Eagle Ford. Top Bakken operators include Whiting Petroleum (WLL) and Hess (HES). These companies combined make up ~6% of the Vanguard Energy ETF (VDE).

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