ConocoPhillips Co. expects to pull the brake on its United States production in 2024 and will instead focus on operational and capital efficiency, company leaders said, after it delivered a company record for the Lower 48 with an annual average output of 1.1 million barrels of oil equivalent per day (MMboepd).
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ConocoPhillips Wells Drilled in US 2023
The exploration and production global major plans to grow production elsewhere, putting total company production guidance at 1.91 MMboepd to 1.95 MMboepd, up from total actual production of 1.8 MMboepd for 2023, a record high.
Last year Houston, Texas-based ConocoPhillips fully took over the Surmont oil sands in Canada having bought co-venturer TotalEnergies SE’s 50 percent stake for $3 billion. The assets in the oil province of Alberta had a bitumen production of 135,000 bpd according to an April 26 news release by Suncor Energy Inc. announcing a deal with TotalEnergies to acquire the latter’s Surmont stake. That agreement failed with ConocoPhillips exercising its preemption right.
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Besides the acquisition ConocoPhillips has also grown its production capacity with several projects coming onstream in Canada, China and Norway in the fourth quarter of 2023.
“[W]e see a bit of de-acceleration in the growth rate coming from the U.S. driven by a number of factors around efficiency and the rig rates”, chair and chief executive Ryan Lance told ConocoPhillips’ earnings conference. ConocoPhillips still expects to increase liquids production in the Lower 48, or the contiguous 48 states, by 300,000 boe to 500,000 boe, Lance said. ConocoPhillips expects this growth to primarily come from the Permian basin.
“Relative to our expected Lower 48, we’re in that kind of same range, low- to single-digit kind of growth rates coming out of that on pretty much similar activity level to what we entered into 2023”, Lance said in the call, as quoted in the company’s transcript. “So we don’t intend—at this time, we don’t intend to be ramping our program in the Lower 48 and are coming into the year at a similar level to what we exited 2023 at”.
In noncontiguous Alaska, ConocoPhillips has begun construction for the Willow oil project, which is estimated to produce about 600 million barrels in its lifetime, according to a final investment decision announcement December 22. The project, considered to be near Arctic waters, had won over environmental opposition at the courts.
Dominic Macklon, executive vice-president for strategy, sustainability and technology, added, “[If] we did get more efficient and we felt there was some capital headroom there, I think—I suspect that we would pretty much hold things flat because we’re just so focused on efficiency”.
“We don’t want to swing our programs around”, Macklon said, adding: “We’re not chasing growth. It’s really an outcome of a return that’s focused on returns”.
ConocoPhillips plans to return $9 billion to shareholders this year, down from actual returns of $11 billion for 2023.
It put its capital guidance at $11 billion to $11.5 billion, compared to actual capital spending of $11.2 billion for 2023.
Net profit for 2023 stood at $11 billion—at $10.6 billion when adjusted for extraordinary or nonrecurring items. That was down from $18.7 billion for 2022, when oil and gas prices soared following Russia’s invasion of Ukraine. In per-share terms, ConocoPhillips posted $9.06 in income per common unit for 2023 assuming dilution.
ConocoPhillips plans to put about 60 percent of shareholder returns for 2024 on buybacks. “That would put our buybacks essentially flat with what we spent in 2023 at about $5.3 billion, $5.4 billion … we continue to like the value of our shares”, executive vice-president and chief financial officer William Bullock said in the call.
ConocoPhillips plans $0.2 in variable return on cash (VROC) per stock for 2024. “And as we’ve always said, VROC provides a really flexible tool to achieve our distribution targets as prices adjust to the cycles”, Bullock added. “It’s continued to serve us well in balancing our mix”.
Operating activities generated $20 billion in net cash with a 17 percent return on capital employed for 2023. Annual exploration, production and operating expenses totaled $8.1 billion.
ConocoPhillips exited 2023 with $14.3 billion in current assets—assets convertible to cash within a year—including $5.6 billion in cash and cash equivalents. Meanwhile it had current liabilities of $10 billion as of December including $1.1 billion in short-term debt.
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