ConocoPhillips said Thursday that it would earmark more spending this year to cover rising costs across its U.S. onshore portfolio, more partner-operated activity and higher expenses in Alaska as it advances the Willow oil project there.
Increased transportation and processing costs, along with inflationary pressures in the Lower 48, prompted the company to raise its full-year operating cost guidance to $9.2-9.3 billion from the previous range of $8.9-9.1. Capital expenditures (capex) guidance also increased to $11.5 billion from a previous range of $11-11.5 billion.
The initial capex guidance range “included a number of uncertainties, including Willow,” said Andy O’Brien, senior vice president of strategy, commercial, sustainability and technology.
ConocoPhillips won federal approval for the $8 billion project on Alaska’s North Slope last year, which is expected to produce up to 180,000 b/d of oil at its peak. The company now has a better grip on what it will spend there this year, O’Brien said.
Moving forward, O’Brien added that the company expects to achieve $500 million of savings when it completes the $22.5 billion all-stock acquisition of Marathon Oil Corp. announced earlier this year.
CEO Ryan Lance said during the second quarter earnings call on Thursday that integration planning activities are underway “to ensure a seamless transition upon close.”
He added that Marathon shareholders are set to vote on the transaction on Aug. 29. The deal is still expected to close in 4Q2024.
The deal would add acreage to the U.S. onshore portfolio, mainly in the Bakken and Eagle Ford shales and the Permian Basin, regions where it already works.
O’Brien said adjacent operating areas, more scale and streamlined completion operations would all help to achieve savings with the takeover.
ConocoPhillips, the world’s largest independent exploration and production company, produced 1.9 million boe/d in the second quarter, up 140,000 boe/d from the year-ago period. Lower 48 production reached 1.1 million boe/d, including 748,000 boe/d from the Permian, 238,000 boe/d from the Eagle Ford Shale and 105,000 boe/d from the Bakken Shale.
The company also continued to advance its LNG business, which it has worked to expand across the world in recent years.
ConocoPhillips said last week that it expanded its ability to import liquefied natural gas in Europe after signing a long-term deal to secure 750,000 metric tons of regasification capacity at the Zeebrugge terminal in Belgium. The deal boosts the company’s regasification capacity on the continent to more than 4.5 million metric tons/year (mmty). It also signed an agreement to sell 1.5 mmty of LNG to an undisclosed buyer in Asia.
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“For competitive reasons, we don’t talk about where we’re developing offtake or sourcing regas capacity, but you can see from this quarter that we’re making really good progress on both fronts,” O’Brien told financial analysts on the call.
The company has signed contracts securing more than 7 mmty of LNG supply across the world. It is aiming to secure 10-15 mmty of offtake contracts overall.
“At that size, we could really achieve the full benefits of scale across our organization,” O’Brien added.
ConocoPhillips reported second quarter net income of $2.3 billion ($1.98/share), compared with net income of $2.2 billion ($1.84) in the year-ago period.
