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ConocoPhillips restores half of shut-in output, expects full return by Septemberfrom SNL Energy Finance Daily ConocoPhillips restores half of shut-in output, expects full return by SeptemberByline: Starr Spencer ConocoPhillips has restored about half the 225,000 barrels of oil equivalent per day in production that was curtailed in the second quarter because of low demand and prices stemming from the COVID-19 pandemic, and it expects the remainder of that output to return by September, the company's top executives said July 30. Curtailments of about 145,000 boe/d came from the Lower 48, primarily in the Eagle Ford Shale and the Bakken Shale, 30,000 boe/d came from the Surmont oil sands operation in Canada, and 40,000 boe/d came from Alaska. The shut-in volumes knocked down the company's second-quarter production by 18% on the year to 957,000 boe/d, adjusting for dispositions. "Curtailments and dispositions mask the top line production numbers, but we have a very good handle on the base business," company CEO Ryan Lance said on a July 30 earnings call. "We believe our lower capital intensity and portfolio diversification represent a relative advantage" for the company. In the Lower 48, second-quarter production from the company's so-called Big 3 unconventional plays averaged 260,000 boe/d. That included 162,000 boe/d from the Eagle Ford Shale of South Texas, 52,000 boe/d from unconventional wells in the Permian Basin of West Texas/New Mexico, and 46,000 boe/d from the Bakken Shale of North Dakota and Montana, ConocoPhillips said in a statement. Those totals amount to a 35% drop in output from the Big 3 in the second quarter sequentially. The company, along with virtually all U.S. upstream operators, slashed its capital spending and vastly reduced drilling activity owing to the pandemic to preserve capital and maximize free cash flows in an uncertain environment. At peak, U.S. operators had shut in about 2 million barrels per day of oil production. By midyear, as oil prices began to regain some lost ground, most producers were ready to restore production and have done so with volumes ramping up where economics prevail. ConocoPhillips continues to evaluate output curtailments on a month-by-month basis, COO Matthew Fox said. Based on its individual economic criteria, the company has already restored curtailed production in Alaska and has begun bringing back some curtailed volumes in the Lower 48, which it expects to be fully restored in September. The company is also restoring production in Surmont, although the increase will be slower due to planned turnarounds in the third quarter and limited field crews as a coronavirus mitigation measure. Between the U.S. and Canada, ConocoPhillips shut in more than 2,000 production wells, including about 1,800 in the Lower 48, 300 in Alaska and 100 in Canada, Fox said. "At this time, we estimate [the company still has shut-in] about 115,000 net boe/d, or roughly half the volumes we curtailed in the second quarter," Fox added. The company is running seven rigs in the Lower 48, including four in the Eagle Ford, two in the Bakken Shale and one in the Permian, and should remain at that level for the rest of 2020, Fox said. "Since May, we have not had any frack spreads under contract, but we expect to add one or two crews in the Eagle Ford between now and the end of the year," Fox said. Frack spreads, or crews plus equipment, complete wells and ready them for production. ConocoPhillips CFO Don Wallette said the company's full-year 2020 production, adjusted for curtailments, dispositions and Libya, is expected to be "about flat" with underlying 2019 output due to an "uncertain and volatile" oil market. ConocoPhillips had no second-quarter production from Libya since it remained under force majeure during the period. The Texas-based producer reported an adjusted loss of $994 million, or 92 cents per share, for the second quarter, compared with adjusted earnings of $1.14 billion, or $1.01 per share, in the same period a year earlier. |
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