Why Natural Gas – CococoPhillips
U.S. Gas Rigs Drop First Time in Three Weeks, Baker Hughes Says
By Lynn Doan – Apr 26, 2013
The number of gas rigs in the U.S. fell for the first time in three weeks, declining by 13 to 366, according to Baker Hughes Inc. (BHI)
Oil rigs increased by 10 to 1,381, data posted on Baker Hughes’ website show. Total energy rigs slipped by four to 1,754, the Houston-based field-services company said.
The U.S. gas rig count has dropped to less than a fourth of its peak of 1,606 in 2008 as energy producers abandoned natural- gas plays to drill for more lucrative crude and natural-gas liquids. The boom in tight-oil production helped the U.S. meet 84 percent of its energy needs last year, the most since 1991, according to the U.S. Energy Information Administration, the Energy Department’s statistical unit.
ConocoPhillips (COP), the largest independent U.S. oil and natural gas producer, has no plans to start “redirecting any capital toward gas assets until it’s significantly north of current prices,” Matthew Fox, an executive vice president at the Houston-based company, said in a conference call with investors yesterday.
The company’s fuel production in Texas’ Eagle Ford shale formation is about 60 percent oil, 20 percent natural gas liquids and 20 percent dry gas, Jeff Sheets, Conoco’s chief financial officer, said during the call. Its wells in North Dakota’s Bakken formation produce mostly oil, he said.
U.S. gas stockpiles increased by 30 billion cubic feet to 1.734 trillion in the week ended April 19, the EIA said yesterday. Supplies were 31.8 percent below a year earlier and 5.1 percent below the five-year average, down from a deficit of 4.2 percent the previous week.
Natural gas for May delivery fell 5.6 cents, or 1.3 percent, to $4.111 per million British thermal units on the New York Mercantile Exchange at 1:11 p.m. Futures have more than doubled in the past year and have been trading above $4 for three straight weeks.
Exxon Mobil Corp. (XOM) remains focused on liquids-rich drilling and has “the flexibility and optionality” to ramp up gas output should prices keep rising, David Rosenthal, vice president of investor relations for the Irving, Texas-based company, said in a conference call with investors yesterday.
“We don’t tend to take the last two data points and draw a trend line and react in that manner,” he said. “We tend to have longer-term approaches to the development of all of our resources.”
U.S. oil output reached 7.33 million barrels a day last week, a two-decade high, EIA data show. Stockpiles climbed to 388.6 million, near a 22-year high.
Crude for June delivery on the Nymex fell 66 cents, or 0.7 percent, to $92.98 a barrel. Prices have decreased 11 percent in the past year.
To contact the reporter on this story: Lynn Doan in San Francisco at firstname.lastname@example.org
To contact the editor responsible for this story: Dan Stets at email@example.com
Shale Gas Boom: ConocoPhillips, An Underrated LNG Player?
Fri, Apr 26 2013, 10:12 | by Stephan Dube
This article is presenting one of the major energy company in the U.S. and how the natural gas boom of the last few years have changed its producing strategy (see the article here). After a brief presentation, we will look at some of its current operations worldwide, focusing on its natural gas and LNG (liquefied natural gas) plays. The last part will discuss about some of its major natural gas projects under way, the financial highlights of the company including its Q1 2013 highlights, as well as its future outlook, in a second article. Let’s get started with the first part in this article beginning with the company’s presentation.
The third-largest energy company in the U.S.
Headquartered in Houston, Texas, ConocoPhillips (COP) has operations in almost 30 countries. Key focus areas include operating producing assets, developing its major projects and exploring for new resources in promising areas. The portfolio includes legacy assets in North America including its growing shale and oil sands businesses, Europe, Asia and Australia.
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Furthermore, the company is developing few major international projects and a global exploration program. The company’s production streams include light oil, heavy oil, oil sands, NGL (natural gas liquids), conventional natural gas, coalbed methane, shale gas and oil and LNG.
ConocoPhillips traces its beginnings to 1875, when Conoco founder Isaac E. Blake envisioned an idea to make kerosene available and affordable to townspeople in Ogden, Utah. Thirty years later, the foundation for Phillips Petroleum Company began when brothers Frank and L.E. Phillips hit the first of 81 wells without a dry hole. Nearly a century later, the two companies combined their strengths to form what is now the third-largest energy company in the U.S. The ConocoPhillips merger, completed during August 2002, paved the path for the company’s current and future success.
In 2006, Burlington Resources joined ConocoPhillips. The acquisition brought Burlington’s more than 100 years of experience to ConocoPhillips and enhanced the company’s position as a leading producer and marketer of natural gas.
Best Natural Gas Worldwide Assets
Source: ConocoPhillips 2012 Annual Report
Prudhoe Bay also is the site of one of the largest waterflood and enhanced oil recovery projects in the world, as well as a large natural gas processing plant that processes more than 6.75Bcf/d (billion cubic feet per day) of natural gas that is reinjected into the reservoir. Prudhoe Bay also contains natural gas, and ConocoPhillips continues to work on opportunities to develop and monetize that resource.
North Cook Inlet
Owned and operated by COP at 100%, the field was discovered in the northern waters of Cook Inlet in 1962 and is produced from the Tyonek Platform which began operation in 1968. While natural gas production averaged nearly 34Mmcf/d (million cubic feet per day) in 2011, the company managed to increase its production for 2012 with 49Mmcf/d.
Source: Alaska Oil and Gas Conservation Commission
Part of the Cook Inlet Area, the Beluga River natural gas field serves major customers in south-central Alaska, including local utilities and industrial consumers. Beluga River is owned at 33.3% and operated by COP with co-venturers Hilcorp at 33.3% and Municipal Light and Power with 33.3%. Total production for 2012 averaged 55Mmcf/d.
Trans Alaska Pipeline System
The 800-mile Trans Alaska Pipeline System is a joint-venture operated by Alyeska Pipeline Service Co. The co-venturers are BP (BP) at 46.9%, ConocoPhillips at 28.3%, ExxonMobil (XOM) with 20.3%, Koch Alaska Pipeline Co. with 3.1% and Chevron (CVX) at 1.4%. The pipeline transports North Slope oil to the tanker terminal in the ice-free port of Valdez, Alaska. The pipeline carries approximately 600Mbd (thousand barrels per day) of crude oil and NGL.
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The liquids-rich Eagle Ford shale trend in South Texas represents one of ConocoPhillips’ most promising opportunities. With approximately 223,000 net leasehold acres in the area, the company accelerated its delineation activities during 2011. For 2012, production increased by 144% over 2011, with an average of 85Mboe/d (million barrels of oil equivalent) and a peak production of 103Mboe/d while running 11 operated drilling rigs.
Fort Worth Basin
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With a significant working interest in about 147,000 net acres in north-central Texas, ConocoPhillips is able to strongly influence the pace of development in this basin. The company added 24 new wells in 2012. For 2012, production has averaged 49Mboe/d. The basin includes the liquids-rich North Barnett Trend.
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The Permian Basin in West Texas and southeastern New Mexico is a prime example of increasing existing company resources from legacy assets. COP continues to effectively optimize production from its 1.1-million-net-acre lease position. The company drilled 103 wells in 2011 and increased drilling activity in 2012, resulting in a production of an average of 111Mmcf/d. With resources of approximately 1Bboe (billion barrels of oil equivalent), the basin is expected to remain a high-liquids-production asset for years to come.
San Juan Basin
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ConocoPhillips is the largest operator in the San Juan Basin, located in northwestern New Mexico and southwestern Colorado. The company has a significant number of productive leaseholds and mineral acreage in this area. To offset the natural decline rate, the company has an ongoing program of drilling new wells, performing workovers on existing wells, adding compression and installing artificial lift when economic to do so.
In 2011, net production from the Fruitland Coal Formation averaged 296Mmcf/d of natural gas and 3Mb/d of liquids. The Mesa Verde Formation, which consists of the Lewis Shale, Cliffhouse, Menefee and Point Lookout sands, is the largest producing tight-gas formation in the San Juan Basin. Net production from the conventional tight-gas producing formations averaged 477Mmcf/d of natural gas and 46Mbd of liquids in 2011. For 2012, San Juan produced in all, 750Mmcf/d of natural gas and 49Mb/d of liquids.
Texas and Oklahoma Panhandles
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The company holds approximately 1.1 million net acres of development and exploration assets in this region. Producing wells are primarily shallow gas wells in the panhandles of Texas and Oklahoma.
Located primarily in western Oklahoma, Anadarko encompasses 250,000 net acres and contains producing formations ranging in depth from 11,000 feet to more than 21,000 feet. ConocoPhillips has over 140,000 net acres in the Granite Wash Play in the Anadarko Basin. The industry has transitioned its development focus from vertical to horizontal wells, targeting the most prolific liquids-rich intervals. For 2012, Anadarko produced an average of 124Mmcf/d.
Wind River Basin
The Wind River Basin operations cover more than 1.1 million net acres in Wyoming with natural gas operations from multiple horizons ranging in depth from 5,000 feet to more than 25,000 feet, where the deep Madison Formation occurs. The company owns an approximate 46% working interest in the Lost Cabin Gas Plant and net revenue interests varying from 22% to 40% in the producing reservoirs. Wind River produced for 2012, an average of 78Mmcf/d.
Total production for the U.S excluding Alaska averaged 1,493Mmcf/d of natural gas in 2012.
Freeport LNG Terminal
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ConocoPhillips has a long-term agreement with Freeport LNG Development, L.P. to utilize 0.9Bcf/d of regasification capacity at Freeport’s 1.5Bcf/d LNG receiving terminal in Quintana, Texas. The terminal became operational in 2008. In order to deliver natural gas from the Freeport Terminal to market, ConocoPhillips constructed a 32-mile, 42-inch pipeline from the terminal to a point near Iowa Colony, Texas. For more information on Freeport LNG, one of my article discuss about the top promising LNG investments here.
Golden Pass LNG Terminal
Source: Natural Gas Daily
ConocoPhillips has a 12.4% ownership interest in the Golden Pass LNG Terminal and affiliated Golden Pass Pipeline. It is located adjacent to the Sabine-Neches Industrial Ship Channel northwest of Sabine Pass, Texas. The terminal became commercially operational in May 2011. ConocoPhillips will hold terminal and pipeline capacity for the receipt, storage and re-gasification of LNG purchased from Qatargas 3 and the transportation of re-gasified LNG to major interstate and intrastate natural gas pipelines.
Phoenix Park Gas Processors Limited
Source: The Trinidad Guardian
ConocoPhillips owns a 39% interest in Phoenix Park Gas Processors Limited which processes natural gas in Trinidad and markets NGL in the Caribbean, Central America and the U.S. Gulf Coast. Its facilities include a 2Bcf/d gas processing plant and a 70Mb/d NGL fractionator. In 2011, ConocoPhillips’ share of NGL extracted from this facility averaged 8Mb/d, while the company’s share of fractionated liquids averaged 16Mb/d.
The Wingate Fractionator, located in Gallup, N.M., is 100% owned and operated by ConocoPhillips and has an inlet capacity of 25Mb/d.
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ConocoPhillips is one of the top three natural gas producers in Canada. Its operations are located primarily in Alberta and British Columbia, with some production in Saskatchewan. The company has an ownership position in 80 natural gas processing plants in the region. The company holds leasehold rights in 8.8 million gross acres (6.1 million net acres) in western Canada.
Canada’s Oil Sands
ConocoPhillips holds approximately 1 million net acres of land in the Athabasca Region of northeastern Alberta. The significant bitumen deposits on these lands are estimated to contain more than 15 billion net barrels of resources, making ConocoPhillips the holder of one of the largest land and resource positions in the region.
ConocoPhillips’ bitumen resources in Canada are produced via SAGD technology. SAGD involves injection of steam into the reservoir, effectively liquefying the heavy bitumen, which then is recovered and pumped to the surface for further processing.
COP’s net bitumen production from the FCCL Partnership (50% COP) and Surmont SAGD operations has grown by an average of 23% over the past three years to 67Mb/d in 2011, second among SAGD producers in Canada. The company has a number of ongoing development projects and further opportunities in these assets.
Net bitumen production is targeted to double by 2016, with a further doubling from 2016 to 2020, achieving a 17% compounded annual growth rate over the next 10 years. Additional opportunities in its portfolio have COP well-positioned to continue as a leading SAGD producer in Canada in the future. Total daily net production from COP in Canada averaged 928Mmcf/d in 2011, a decrease over 857Mmcf/d from last year.
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Britannia is one of the largest natural gas and condensate fields in the North Sea. This joint-venture is operated by Britannia Operator Limited and is owned by ConocoPhillips at 58.7%, Chevron with 32.3% and BP with 9.0%.
Commercial production began in 1998. Condensate is delivered through the Forties Pipeline to the oil stabilization and processing plant, Kerse of Kinneil, near the Grangemouth Refinery in Scotland, and natural gas is transported through a dedicated Britannia pipeline to the Scottish Area Gas Evacuation (SAGE) facility at St. Fergus, Scotland. Britannia’s daily net production averaged in 2012, 117Mmcf/d of natural gas. Total daily net production from COP in U.K. averaged 463Mmcf/d in 2011 over 356Mmcf/d produced in 2012.
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ConocoPhillips has had a presence in Indonesia for more than 40 years, operating six PSCs (production-sharing contracts). Three of the blocks are located offshore: the South Natuna Sea Block B PSC, the Kuma PSC and the Arafura Sea PSC. The three onshore PSCs are the Corridor Block PSC and the South Jambi ‘B’ PSC, both in South Sumatra, as well as the Warim PSC in Papua. Total daily net production from COP in Indonesia averaged 437Mmcf/d last year, a little decrease over 2011 with an average of 450Mmcf/d of natural gas produced.
In 2003, ConocoPhillips and Qatar Petroleum signed a Heads of Agreement to develop Qatargas 3, a large-scale LNG project in Ras Laffan Industrial City, Qatar. The integrated project comprises upstream natural gas production facilities to produce approximately 1.4Bcf/d of natural gas over the 25-year life of the project, as well as an initial average of about 70Mb/d of LNG and condensate combined from Qatar’s North Field.
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The project also includes a 7.8Mtpa (million tonnes per annum) LNG facility. The first LNG cargo was loaded in November 2010, and the Qatargas 3 Plant is now fully operational. The LNG is exported in carriers owned by Qatargas Transport Co. and time chartered to Qatargas 3. Peak production was achieved in 2011 and is expected to continue for the life of the project. Total daily net production from COP in Qatar for 2012 averaged 367Mmcf/d compared to 2011 with an average of 370Mmcf/d of produced gas.
This concludes the presentation of ConocoPhillips’ current major assets worldwide in the natural gas play. Several other assets such as its plays in Norway, Malaysia, Australia or Nigeria could have been talked about. However, I tried to present the most prominent ones to give the investors a better idea of this company’s involvement in natural gas play.
The last part will discuss about some of its major natural gas projects under way, the financial highlights of the company including Q1 2013 highlights, as well as its future outlook in a forthcoming article. Will ConocoPhillips will profit from the natural gas boom of recent years? Does the company represents a good investment by taking into consideration its current plays in the commodity? These are the questions I will try to answer.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Oil and Gas: The Key to America’s Energy Security
The domestic oil and natural gas industry supports 9.2 million American jobs and 7.7 percent of the U.S. economy, while producing 51 percent of all the oil and petroleum products Americans consume. Every day, the industry fills state and federal government coffers with more than $86 million in taxes, fees and royalties. All while investing more than $2 trillion in U.S. capital projects to advance all forms of energy, including alternatives. There is no question—a thriving domestic oil and gas industry is vital to America’s energy and economic security.
And did you know that, with the right policies in place, the industry can contribute even more? In fact, U.S. and Canadian supplies can provide 100 percent of our liquid fuel needs by 2030 with the implementation of two straightforward policies—(1) accessing U.S. oil and natural gas reserves that are currently off-limits; and (2) partnering with our friendly neighbor to the north, Canada, in the development of the Keystone XL pipeline.
A recent study found that U.S. State Department approval of the pipeline expansion could bring an extra 830,000 barrels of oil per day—equal to about half of what is currently imported from the Persian Gulf. Canada has long been a vital partner in delivering American energy security. It currently supplies 25 percent of U.S. oil imports—more than any other country in the world.
In addition to powering America with reliable supplies of energy, in 2010 alone, the industry delivered benefits to the U.S. economy roughly equivalent to 60 percent of the government’s 2009 stimulus package—$476 billion in industry benefits, compared to $787 billion in planned government stimulus expenditures.
$266 billion in new U.S. capital project investment, $176 billion in wages and $35 billion in 2010 dividends also spur growth in manufacturing, transportation, technology, accounting services and in the larger U.S. economy.
The oil and gas industry also contributes to retirement security for millions of Americans. A 2011 Sonecon study found that, on average, oil and gas stocks comprise 4.6 percent of state pension fund assets, yet provide 15.7 percent of the returns—a ratio of 3.4 to 1.