ConocoPhillips plans to spend more than half of next year’s capital expenditures (capex) on North America, with a focus on deepwater Gulf of Mexico (GOM) and unconventional onshore, the independent said.
The producer set a 2013 capex budget of $15.8 billion, with 60% directed to North America. The 2012 capex budget was $15.5 billion, with $14 billion set aside for exploration and production (E&P) activities. It now expects to end this year having spent a total of $15.5-16 billion.
“The 2013 capital budget reflects continued progress toward achieving a unique combination of growth and returns as an independent E&P company,” said CEO Ryan Lance. “Similar to 2012, next year’s investments will be directed predominantly toward high-quality growth projects and programs that are already in execution mode, as well as exploration opportunities to build inventory for the future.
“We also expect to complete our announced strategic asset disposition program in 2013. When this program is complete, the combination of portfolio high-grading and strong ongoing investment programs will put ConocoPhillips on track to deliver on our long-term annual growth goals of 3-5% on both volumes and margins, with a compelling dividend.”
Almost 40% of next year’s budget will be spent on exploitation programs in ConocoPhillips’ legacy assets, which include 21 million net acres in North America’s onshore, a significant portion of which is held by production. Close to two-thirds of the exploitation spending to be directed to the Lower 48, primarily on liquids-rich unconventional drilling programs and infrastructure development in the Eagle Ford, Bakken and Barnett shales, the Niobrara formation, and conventional and unconventional plays in the Permian Basin.
The rest of the exploitation spending is allocated for “other” conventional and unconventional opportunities, mostly in the North Sea, Alaska and Western Canada, with a focus on liquids, ConocoPhillips said.
“North American dry gas plays will continue to receive minimal funding.” Lance had said in July more rigs would be moved to liquids targets to “starve” dry gas drilling (see Daily GPI, July 26).
Major projects that are to receive a share of funding in 2013 include two big oilsands projects in Canada: the Surmont project in the Saleski, Thornbury and Clyden area, which is a joint venture with Total SA, and the FCCL, a partnership with Cenovus Energy that encompasses development of the Foster Creek and Christina Lake properties. Funding also is to continue at a second 4.5 million ton/year production train for its Australia Pacific liquefied natural gas (LNG) project in Queensland, Australia, which is taking coalbed methane gas and converting it to LNG. The project was sanctioned in July.
About 10% of the 2013 budget is set aside for maintenance projects within the legacy portfolio, primarily for Alaska, the Lower 48 states, Western Canada and the North Sea. Turnarounds also are planned in several areas. Close to 15% of next year’s capex will go to global exploration and appraisal, which includes acquiring, testing and appraising “material opportunities in both conventional and unconventional plays,” the producer said.
“In conventional exploration, activities will include drilling programs in the deepwater Gulf of Mexico on several nonoperated prospects, including the Shenandoah and Tiber appraisal programs.” ConocoPhillips holds close to 1.6 million net acres in the GOM deepwater and was the high bidder in the recent Western Gulf of Mexico lease sale on an additional 350,000 acres (see Daily GPI, Nov. 29).
Funding also will support “selective acreage acquisitions and appraisal programs across liquids-rich shale plays in the Lower 48 and Canada, where the company has added more than 750,000 acres since 2011.” ConocoPhillips plans to access and test several plays in North America, including the Wolfcamp and Niobrara formations, as well as the Canol and Duvernay shales.
“Our 2013 capital budget provides funding for the key growth projects and programs in our portfolio and provides flexibility to capture new opportunities that may arise,” said Lance.
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