ConocoPhillips is on track for a “new era of development” in the United States, fueled by a growing list of discoveries in the deepwater Gulf of Mexico (GOM) and a solid portfolio in some onshore unconventional plays, the exploration and production (E&P) chief said Thursday.

Matt Fox, who is in charge of E&P for the Houston-based operator, and CFO Jeff Sheets discussed the company’s performance in the first quarter. This year marked a new beginning for ConocoPhillips, now the largest independent in the United States, after it spun off its downstream operations last year into Phillips 66.

Through 2017 plans are to spend $25 billion in the Lower 48, led by three unconventional plays, the Eagle Ford and Bakken shales and the Permian Basin. In the GOM, new discoveries and a 30-plus prospect list of new tracts secured in the March Department of Interior Lease Sale 229 are expected to fuel even more growth. However, following ExxonMobil Corp.’s lead, there are no plans to pursue increased natural gas activity (see related story).

Long leveraged to natural gas-focused operations, ConocoPhillips over the past year shifted focus to liquids and oil. The plan paid off, with liquids production jumping 19% from a year ago. Liquids now are 51% of the production mix, up from 45%.

“There is a lot potential to invest” in U.S. natural gas prospects, said Fox, “but we are really focused on liquids-rich assets, and we also get associated gas with that. I don’t see us redirecting more to gas until [$4.00-plus prices] are significantly north on a sustained basis.”

Added Sheets, “Prices need to be sustainable to a higher level,” not just higher than they were in 2012 or last month. The operator doesn’t rely on any hedging for its output, he noted.

Most of the North America capital expenditures for 2013 will target liquids-rich development. On the exploration side, it “clearly will be a very big year for the deepwater program,” said Fox.

ConocoPhillips participated in two discoveries in the GOM between January and March, the Shenandoah and the Coronado (see Daily GPI, March 22). It now is participating in a wildcat well at the Ardennes prospect (30% stake), and the Thorn wildcat (18%), which ExxonMobil is operating, “should spud any day now,” said Fox. An appraisal well also is planned at Tiber (18%), and in the second half of this year, another wildcat is scheduled for the Deep Nansen prospect (25%).

Net earnings fell year/year on the Phillips 66 spinoff to $2.14 billion ($1.73/share), from $2.94 billion ($2.27). Minus the losses from the loss of the downstream, earnings were nearly flat at $1.8 billion ($.142/share) from $1.8 billion ($1.38).

The company remains committed to volume and margin growth this year of 3-5%. The Phillips 66 spinoff completed a big part of a multi-year strategy to zero in on the most profitable arm of the business. The operator has announced $12 billion in asset sales since the beginning of 2012, exceeding an original target to sell of up to $10 billion combined for 2012 and 2013.

Total production reached 1.596 million boe/d, including continuing operations of 1.56 million boe/d and discontinued operations of 41,000 boe/d. In North America, production climbed 42% overall from a year ago in the Eagle Ford and Bakken shales, and the Permian Basin, while Canada oilsands output was up 30% to average 109,000 boe/d.

Total realized prices in 1Q2013 fell to $68.57/boe from $70.78 a year ago. Realized natural gas prices increased to $5.84/Mcf, versus $5.61.

“First quarter North American activity focused on drilling in the Niobrara and Permian Basin Wolfcamp plays in the Lower 48, as well as logging and coring two vertical wells in the Canol Shale in Canada,” the company said.

In the combined Lower 48 states and Latin America, production reached 475,000 boe/d, up 24,000 boe/d from the year-ago period. The Eagle Ford, Bakken and Permian Basin assets delivered a total of 182,000 boe/d. However, weather-related downtime impacted San Juan Basin operations. Canadian production increased by 17,000 boe/d to 283,000 boe/d.

Alaska output in January through March declined to 218,000 boe/d, down 18,000 boe/d from a year earlier, primarily reflecting normal field decline, said the operator. Plans to drill in the Chukchi Sea in 2014 were shelved earlier this month, and Fox didn’t know when it might be back on the table (see Daily GPI, April 11).

“The reason we decided to not drill in 2014 is that we were on the cusp of having to make significant commitments for rigs and vessels, and so on, and we felt there was not enough stability in the regulatory framework shaping up to get permits in time when rigs turned up…We felt it was the prudent thing to do and take a pause and let things evolve before we decide to drill those wells.

“We still like the prospects for the Chukchi; there’s a lot of potential out there,” he said. Drilling “potentially” could be started in 2015, but “we really need to fully understand the regulatory framework and make sure we get ready for that.”

©Copyright 2013Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.