ConocoPhillips sees US output falling: UpdateOREANDA-NEWS. ConocoPhillips expects its Lower 48 oil output to fall in the second half of the year as the world's biggest independent oil and gas producer cuts its rig count to reduce costs amid the 50pc plunge in crude prices.

But strong first-quarter output and the startup of new projects will help ensure that the company meets its global production growth target of 2-3pc for the year. For next year the company plans to "modestly" ramp up its rig use in the US "in the anticipation that there will be some continued recovery in prices," executive vice president Matt Fox said in an earnings conference call today.

Overall, the company lowered its rig count by 50pc to 15 in the Lower 48 by April. That number will fall to 12 through the second half of the year.

"Costs are a big focus this year," chief financial officer Jeff Sheets said. "We could see further improvements in our cost guidance for the year, especially if the US dollar stays strong, but we are holding on to the current guideline for now."

ConocoPhillips, along with Continental Resources and Hess, have all reduced their capital expenditure (capex) budgets sharply to cope with the downturn in the market, focusing only on operations that offer the best returns. Overall, US rig use has already plunged by 50pc. That drop in activity is lowering the rates service providers and suppliers charge for rigs and chemicals, giving oil producers between 10-30pc reductions in cost.

ConocoPhillips said earlier this month it expects cut costs by \$1bn by 2016. Its operating costs for the quarter fell to \$2.1bn compared with \$2.3bn a year earlier.

The company posted a 5pc increase in output in the first quarter, driven by operations in the Bakken shale in North Dakota and the Eagle Ford in Texas. Bakken and Eagle Ford output together increased by 26pc to 230,000 b/d of oil equivalent (boe/d) from a year earlier, lifting overall Lower 48 output by 16pc to 542,000 boe/d.

That helped the independent boost its total net output from operations, excluding Libya, by 5pc for the first quarter to 1.6mn boe/d. It expects second-quarter output to be between 1.55mn boe/d and 1.59mn boe/d.

Net income fell because of lower prices and increased dry hole expense, which was partially offset by higher volumes. It posted a net loss of \$22mn compared with a \$2.3bn profit a year earlier. Its total realized price was \$36.96/boe compared with \$71.21/boe in the first quarter of 2014.

For the quarter, cash inflows were \$1.87bn. Excluding a \$250mn increase in working capital, ConocoPhillips generated \$2.1bn in cash from operations. Capital expenditure (capex) was \$3.3bn during the quarter.

ConocoPhillips is also on track to keep capex at \$11.5bn in 2015. In March the company said that it plans to keep capex at that level through 2017, nearly 30pc lower than its previous plan to spend \$16bn a year.

The producer is bringing online five projects in 2015 in Canada, Australia and elsewhere.