uploads///COP Q Wordwide Operations

Analyzing ConocoPhillips’s Operational Strategies


Sep. 22 2016, Published 1:29 p.m. ET

ConocoPhillips’s Canada operations

In its 2Q16 earnings conference call, ConocoPhillips (COP) updated investors on the status of its upcoming projects in Canada. It said that it has achieved first production at the Foster Creek Phase G in Canada, and its plans to achieve first production at Christina Lake Phase F in Canada are progressing well.

In the future, ConocoPhillips expects growth in its Canadian operations to continue due to these new projects and Surmont 2, which will ramp up to full capacity through 2017.

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ConocoPhillips’s Alaska operations

For its Alaska operations, ConocoPhillips approved an expansion phase of CD5 in 2Q16, which will add an additional 16 wells and bring CD5 to its full design capacity. COP’s Alaska assets are producing ~91% crude oil in their production mix. We’ll take a look at ConocoPhillips’s production mix in Part 6 of this series.

ConocoPhillips’s Asia Pacific and Middle East operations

ConocoPhillips’s APLNG (Australia Pacific liquefied natural gas) project in Australia is driving COP’s APME (Asia Pacific and Middle East) production growth. In the first half of 2016, APLNG train 1 loaded 27 cargos, which was more than expectations. ConocoPhillips also said it’s on track for first cargo from APLNG Train 2 in Australia in 4Q16.

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ConocoPhillips’s Europe operations

Within ConocoPhillips’s Europe operations, it’s expecting first production from Alder in Europe in 4Q16. We’ll take a detailed look at that production in Part 4 of this series.

ConocoPhillips’s divestiture

On July 13, 2016, ConocoPhillips entered into an agreement to sell its 35% interest in three exploration blocks in offshore Senegal. The sale agreement is for $350 million plus net customary adjustments of ~$80 million. This divestiture is part of the company’s strategy to exit deepwater exploration in West Africa. The transaction is expected to close by the end of 2016.

In 2Q16, ConocoPhillips completed noncore asset sales of $200 million, which includes the sale of its Beluga River asset in the Cook Inlet in Alaska. In the first half of 2016, the company completed noncore asset sales totaling ~$400 million.

Other upstream players

In order to deal with lower energy prices and raise cash, other upstream players from the S&P 500 (SPY), including Murphy Oil (MUR), Consol Energy (CNX), Devon Energy (DVN), Chesapeake Energy (CHK), and Anadarko Petroleum (APC), have also recently completed divestitures.

In the next part of this series, we’ll give you a rundown of Wall Street’s reaction to these divestitures.


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