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ConocoPhillips Biggest Contributions from Eagle Ford, Bakken

ConocoPhillips posted better-than-expected results in the first quarter, aided by its "biggest contributor" today, the Eagle Ford Shale.

Crude oil production rose 16% year/year, said exploration chief Matt Fox. He and CFO Jeff Sheets discussed the quarterly results Thursday during a conference call.

"As we progress through 2014 and then to 2015, we expect to see growth in almost every segment of our business," Fox told analysts. "And we're not just growing volumes. We’re growing margins…”

Production between January and March averaged 507,000 boe/d, 7% higher than the year-ago period.

"The biggest contributor to this growth is the Eagle Ford with an average of 147,000 boe/d during the quarter." Daily peak rates in the South Texas play were 163,000 b/d. "We achieved good momentum after the weather problems early in the quarter."

ConocoPhillips brought 48 wells online in the Eagle Ford during 1Q2014. The Houston-based operator is transitioning to 80-acre high-low development, with additional pilots being tested other than spacing, said Fox.

Results have been strong, but ConocoPhillips hasn't ramped up the pace of its Texas drilling -- or otherwise in the onshore -- and that was intentional, he said.

"We try to do it right and do it fast and we will focus on maximizing value" from its two biggest Lower 48 holdings, the Eagle Ford and the Bakken Shale, which averaged 43,000 boe/d with a peak rate of 54,000 b/d in the quarter.

"I think that the strategy that we've adopted in both of those places has proven that to be the best long-term strategy." Being in the sweet spot is most important.

"We think that the acreage that we have in the Eagle Ford and the Bakken is right in the sweet spot...The area where we have maturity and thickness and pressure and geologic characteristics of our Eagle Ford position is strong.

"So I wouldn't expect our results to be the same as everyone else else's. I would expect...as we continue this development, our returns will be higher than the average returns because of the position in the sweet spot."

The Bakken and Eagle Ford are but two of many Lower 48 targets.

"We’ll continue our North American unconventional exploration and appraisal programs with the focus on the Permian and Niobrara," said Fox. Horizontal testing is being done in the Permian's Delaware and Midland subbasins.

"As you go through this 500 feet of sort of stack opportunity that exists in the Delaware Basin in particular, you get a very significant variation...in some areas...gas with a high liquid yield and some areas...a relatively low API oil. In other areas you've got a strong condensate yield. It's going to be very variable.

"But it's clear that over the long run, there’s going to be quite a bit of gas, liquids condensate, and this is going to grow in production in the Permian business as a whole. And as our understanding and the industry's understanding matures," the leaseholders will better understand what infrastructure requirements are needed to "fully evacuate all of these products from the Permian area."

Unconventional tests are the focus also of a drilling program in the Niobrara formation.

"It's still early days, but...we remain optimistic about these amazing places," Fox said of the Lower 48 discoveries.

The operator, now the biggest independent in the United States, also has extensive oil and gas development ongoing in the deepwater Gulf of Mexico, as well as in Alaska and Canada.

"As part of our Western Canada winter drilling program, we successfully drilled 25 horizontal wells in the liquid-rich plains across our acreage position," which includes unconventional and conventional drilling that extends into the Montney and Duvernay formations, said Fox. "This program continues to deliver good returns and also a lot of drilling inventory. And we achieved a big milestone on the first quarter by drilling the longest horizontal well effort in Canada, over 13,000 feet.

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