ConocoPhillips cuts capex further, raises output target

OREANDA-NEWS. July 29, 2016. The world's biggest independent ConocoPhillips set deeper spending cuts for 2016 but raised its output guidance as new projects ramp up.

The capex cut and output boost reflect a broader strategy deployed by most US independents, who are using the downturn to bring down costs and deploy better technology to improve output. ConocoPhillips says spending will decline as construction on mega projects like a liquefied natural gas facility in Australia and oil sands in Canada ends. The company is also exiting the deepwater exploration business.

"The price environment remains challenging, but our business is running well and we continue to beat our production, capital expenditures and operating cost targets," chief executive Ryan Lance said. "We remain focused on successfully executing our operating plan, lowering the breakeven price of the business and positioning for strong momentum as prices recover."

The new capex target is \\$5.5bn, down from the \\$5.7bn given in April, largely because of efficiency improvements. The latest numbers is 46pc below 2015 capex of \\$10.1bn, which was 41pc below the 2014 level.

Output for the full year is expected to inch higher to range between 1.54mn-1.57mn b/d of oil equivalent (boe/d) compared with a guidance given in the first quarter of 1.525mn boe/d, which was unchanged from a year earlier.

Output in the second quarter was 1.546mn boe/d, declining by 49mn boe/d compared with the same period a year ago as a result of normal field decline, dispositions, planned downtime and the impact of wildfires in Canada. After adjusting for 95mn boe/d for disposition and downtime, output increased by 3pc from a year earlier. Production in the third quarter is expected to decline to 1.51mn-1.55mn boe/d because of planned turnaround.

Among its major project updates, the independent ramped up production at its Australia Pacific LNG (APLNG) and the Surmont oil sands project in Canada, while it achieved first production at Foster Creek Phase G, also in Canada.

It reduced its debt in the second quarter by \\$800mn, bringing its total debt down to \\$28.7bn as of 30 June from \\$29.5bn at the end of the first quarter.

The company sold assets worth \\$200mn during the quarter and reiterated its target to sell about \\$1bn of assets by the end of the year. It progressed its phased exit from deepwater exploration with the sale of its three exploration blocks offshore Senegal in July for \\$350mn.

The independent earned an average of \\$42.72/bl for crude oil in the second quarter compared with \\$58/bl a year earlier and \\$16.55/bl for natural gas liquids (NGL) compared with \\$19.62/bl a year earlier. It earned \\$2.49/1,000 cf on natural gas in the second quarter compared with \\$3.90/1,000 cf a year earlier.

The company posted a net loss of \\$1.06bn in the second quarter compared with a loss of \\$164mn a year earlier.