Houston-based ConocoPhillips has begun ramping up shut-in oil and gas volumes from across North America, with most output set to be “fully restored” in September.

The largest independent in the world issued its second quarter results on Thursday, with CEO Ryan Lance sharing insight during a conference call. He acknowledged what many of his peers have said, that Covid-19 knocked out energy demand and has forced operators to make quick decisions to preserve their viability.

The company reported a loss of $944 million (minus 92 cents/share), versus year-ago profits of $1.1 billion ($1.01). Total revenue of around $4 billion was down by half. However, about $700 million was generated in cash from operating activities and $800 million in assets were sold, giving the operator cash flow to finance projects and the dividend. The company ended June with $7.2 billion in cash and short-term investments.

“Headline second quarter performance was dominated by weak realized prices, coupled with our rational economic action to curtail production in favor of expected higher future prices,” Lance said. “Importantly, our underlying business results were strong, reflecting our ongoing commitment to safely executing our plans and the dedication of our workforce during this challenging time.”

More quarterly earnings coverage by NGI can be found here.

Production fell year/year by 24%, dinged by asset sales and shut-ins. Adjusted for sales, output fell by about 18%. An average of 225,000 boe/d was curtailed in the quarter; adjusted production would have been nearly flat year/year.

Realized commodity prices were 54% lower from a year ago to average $23.09/boe. The average realized price for oil was much lower in Canada, at $8.69/bbl, while it averaged only $19.87 in Alaska.

The company, Lance said, is “monitoring the market closely to develop a view around the timing and path of price recovery and to guide our corresponding actions. For example, as the market strengthened late in the second quarter, we began reversing our second quarter curtailments and ramping up production across the Lower 48, Alaska and Canada.”

Netback pricing and potential curtailments are being reviewed on a month-by-month basis. For now, based on the economic criteria, curtailed volumes were restored in Alaska during July. Shut-in volumes also began ramping up in the Lower 48, with all volumes set to be “fully restored in September.”

At the Surmont oilsands operation in Canada, production also began to ramp in July, but it may be slower because of planned turnarounds in 3Q2020 and “limited staffing in the field as a Covid-19 mitigation measure.”

The Lower 48’s “Big 3” operations in the Eagle Ford and Bakken shales and in the Permian Basin, drove output for the super producer, while Western Canada’s Montney Shale is proving to be a growing stronghold. No production was recorded in Libya as it remained in force majeure.

The towering trio in the Lower 48 contributed an average 260,000 boe/d, led by the Eagle Ford with 162,000 boe/d. Permian output averaged 52,000 boe/d, with the Bakken at 46,000 boe/d. 

Lower 48 shut-ins between April and June totaled around 145,000 boe/d, with most of the curtailments in the Eagle Ford and Bakken. 

About 40,000 boe/d also was curtailed in Alaska, but appraisal testing was completed at the Narwhal prospect. In addition, the company shut-in around 30,000 boe/d at the Surmont oilsands operation. 

However, work in the Montney continued, as an initial 14-well pad was ramped up, increasing average production to 14,000 boe/d. Almost half of the output was from oil and natural gas liquids. Completion operations on a second Montney development pad is expected to start up by the end of September. 

Only days ago, ConocoPhillips nearly doubled its Montney leasehold in a $375 million deal with Kelt Exploration Ltd.

Given the “ongoing variability and uncertainty in the outlook for production curtailments,” management has suspended forward-looking guidance.