uploads///COP Q Barnett Production Mix

Why ConocoPhillips Sold Its Barnett Assets

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Dec. 4 2020, Updated 10:53 a.m. ET

Barnett assets’ production volumes

ConocoPhillips’s (COP) Barnett assets have a relatively small contribution to its overall production. In 2016, COP’s Barnett assets produced only 11 MBoepd (thousand barrels of oil equivalent per day), less than 1% compared to COP’s total production excluding Libya of 1.6 MMboepd (million barrels of oil equivalent) in 2016.

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ConocoPhillips’s Barnett assets’ production mix

ConocoPhillips’s Barnett assets have a production mix of 55% natural gas (UNG) and 45% natural gas liquids. This means that COP’s Barnett assets have no crude oil in their production mix.

Why ConocoPhillips sold its Barnett assets

In November 2016, while presenting at its analyst and investor meeting in New York, ConocoPhillips revealed its production mix strategy for the next two years. As part of this strategy, COP plans to reduce its natural gas exposure in North America. As we can see in the chart above, COP’s production mix in the Barnett Basin contains 55% natural gas, so the Barnett asset sale will reduce COP’s exposure to North American natural gas.

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Even COP’s recent divestiture of its Canadian gas assets to Cenovus (CVE) and its divestiture of its San Juan assets were part of its production mix strategy. COP’s San Juan assets have a production mix of 78% natural gas. To know more, read Market Realist’s ConocoPhillips’s Production Mix Strategy for 2017–2018.

Impact on production guidance

According to COP’s press release, its Barnett asset divestiture will have an impact of less than 5 MBoepd on its 2017 production guidance. The impact on its 2017 production guidance will vary depending on the transaction’s closing date.

Other oil and gas producers

In 2016, Devon Energy (DVN) successfully completed its non-core asset divestiture program, in which it sold its non-core upstream assets for a total of $3.2 billion.

Due to its 2016 asset divestiture program, DVN’s production fell from ~681 MBoepd in 4Q15 to ~537 MBoepd in 4Q16. 

The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) generally invests at least 80% of its total assets in oil and gas exploration companies, whereas the Energy Select Sector SPDR ETF (XLE) generally invests at least 95% of its total assets in oil and gas companies.

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