Houston-based ConocoPhillips said Tuesday it expects to begin restoring some curtailed Alaska and Lower 48 oil output in July after shuttering an average 225,000 boe/d net across its global operations in 2Q2020.
In a second quarter update ahead of issuing results late in July, the super independent said oil output despite the shut-ins was in line with a year ago and down only 5% from 1Q2020 at around 960,000-980,000 boe/d. Output was reduced between April and June from curtailments and planned seasonal turnaround activity.
The Lower 48 took the brunt of the curtailments at 65% of the total, with 15% of Alaska oil output shut-in and 15% shuttered from Surmont oilsands operations in Canada. Malaysia shut-ins accounted for most of the remaining reductions.
“ConocoPhillips established a consistent set of criteria for evaluating and implementing economic curtailments during the recent weakness in netback oil prices,” said CEO Ryan Lance. “Due to our strong balance sheet, we were in an advantaged position to create value for shareholders by forgoing some production and cash flow in the second quarter in anticipation of receiving higher cash flows for those volumes in the future.”
Lance had warned earlier in June that Lower 48 upstream activity overall, not only from ConocoPhillips, was unlikely to return to pre-Covid levels anytime soon, if at all.
“If I were a betting man, today I would say it would be pretty difficult for us to return to 13 million b/d,” Lance said in an interview with IHS Markit Vice Chairman Daniel Yergin. Lance said the Lower 48 would get above 10 million b/d again, possibly above 11 million b/d, “maybe encroaching on 12 as we go through. A lot depends on the shape of this recovery.”
Netback pricing is being monitored and curtailments are being evaluated on a month-to-month basis, management noted.
ConocoPhillips plans to begin restoring curtailed production in Alaska in July. In the Lower 48, some curtailed volumes also are set to come back online, and the operator said it would “continue to make economically driven production decisions at the asset level in the months ahead.” Some curtailed Surmont production also is to be brought online.
While most activity is in North America, ConocoPhillips at the end of March had 10,500 employees and activities ongoing in 17 countries, with an estimated $65 billion of total assets.
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