ConocoPhillips Expects Another Active Exploration and Appraisal Season in 2019

“We believe that the company’s Alaska plan aligns with our disciplined, returns-focused strategy, supports Alaska’s economy and creates significant value for shareholders,” said Ryan Lance, chairman and chief executive officer (Photo). “Alaska provides competitive investment opportunities and will generate profitable growth from diversified investments with significant exploration upside. We are proud of the value we create for the State of Alaska through the revenues we generate, the jobs we create and the community investments we make. Our shareholders realize the advantages of ANS-priced oil, competitive cash and earnings margins from our operations and our years of expertise and sound stewardship. We plan to continue to strive to safely unlock the energy potential of this world-class oil province for years to come and play an active role in Alaska’s economic future.”

Late yesterday, ConocoPhillips provided an update on its operating plan for Alaska, focusing on the company’s long history of creating value in the state and an ongoing commitment to invest in low cost of supply opportunities. Over the past few years, the company’s Alaska business has undergone a significant transformation, driven by a more competitive fiscal framework, cost reductions, technological advancements and an exploration renaissance.

Highlights include:

  • An outlook for continued investment and growth from investments in legacy assets and development of exploration success;
  • Captured net resource of 2.0 billion barrels of oil equivalent (BBOE) of less than $40 per barrel cost of supply resource in legacy assets;
  • Captured 0.5 – 1.1 BBOE of additional gross discovered resource associated with the exploration program in Alaska since 2016, with 75 percent of the play still undrilled; and
  • Strong realizations driven by premium ANS-priced oil.

The company’s legacy asset base consists of a non-operated interest in the Prudhoe Bay Field, an operated interest in the Kuparuk Field and an operated interest in the Alpine Field/Western North Slope assets. In 2018, the company acquired additional interest in the Alpine Field/Western North Slope assets and announced it has entered into an agreement to acquire additional interest in the Kuparuk Field (which is subject to regulatory and other approvals). On a pro-forma basis including the recent transactions, the company estimates 2018 production from its legacy assets would be approximately 225 thousand barrels of oil equivalent per day (MBOED).

Since 2016, ConocoPhillips has undertaken a significant and successful exploration program in Alaska. Based on the exploration results to date, the company believes it has captured 0.5 – 1.1 BBOE of gross discovered resource, with 75 percent of its prospective exploration acreage still to be drilled. The cost of supply of the new resource is estimated to be less than $40 per barrel. The company has a 100 percent working interest in this resource.

In the Greater Willow Area, the company now estimates its 2016-2018 exploration and appraisal campaign has discovered 400-750 MMBOE of gross resource, with undrilled resource upside. The company believes this resource estimate is sufficient to justify developing the area with a stand-alone hub. Preliminarily, the company estimates first oil can be achieved by 2024-2025 for approximately $2-3 billion spent over the course of four to five years after final investment decision. Once first oil is achieved, the company anticipates ramping quickly to full production. Thereafter, the company estimates that an additional $2-3 billion of cumulative drilling capital will be executed over multiple years to maintain production at this facility. Efforts are underway to analyze and evaluate results from the 2018 appraisal season in order to advance development planning and future appraisal needs.

In addition to exploration in the Greater Willow Area, the 2018 exploration campaign included the drilling, coring and flow testing of the Putu and Stony Hill wells in the Narwhal trend south of Alpine. Additional appraisal is required for both discoveries, but current discovered resource is estimated to be between 100 and 350 MMBOE gross. The company also has a 100 percent working interest in this resource.


We value Senator Sullivan’s judgment on almost everything.  In particular, he makes useful reference, in the KTUU article below, to our relationship with Russia from an energy perspective.
As to his statement about the Alaska LNG project, we also concur…but only if it reemerges as a private sector project.  Owned and controlled as it is now by temporarily elected and appointed politicians and bureaucrats, corruption is inevitable.
Its government sponsors are now exploring ways (see here) of financing the project which will likely include Trump administration (i.e. federal taxpayer) financial guarantees and/or politically influencing the Alaska Permanent Fund board of trustees to imprudently risk billions in a project dependent on Chinese communist adherence to long term LNG supply agreements.  -dh

U.S. Sen. Dan Sullivan, R – Alaska, appeared for an exclusive interview on Meet the Press, where the upcoming NATO Summit was only one talking point.
Sullivan said projects like the Alaska LNG that increase U.S. energy production could help to improve relations between the two countries.
“Putin understands power,” Sullivan told Meet the Press. “And let me just mention one other area, energy. Chuck, we have this great opportunity, unleashing American energy. I was in a meeting with senator McCain about a year and a half ago, with a senior Russian dissident, and at the end of the meeting I asked him ‘what more can we do to push back against Putin?’ He said the number one thing Americans can do is produce more American energy. We are doing that in Alaska with the opening of ANWR, LNG.”
Find the complete KTUU story here.

Gasline leaders face daunting list of tasks 

Alaskajournal.comby Elwood Brehmer.  …   
Sen. Bert Stedman, R-Sitka, who manages an investment firm, emphasized that cost overruns of up to 20 percent — beyond the $9 billion of contingency costs built into the $43 billion Alaska LNG estimate — are often considered a relative success for megaprojects. He urged Revenue officials to test the impacts of overruns in the $20 billion to $30 billion range, which he said are not out of the realm of possibility for the project that had an original estimated cost range of $45 billion to $65 billion.
He further requested the department analyze the financials of specifically Arctic infrastructure developments given the inherent challenges of building in that environment.
“I don’t mind betting the cow but I won’t bet the farm,” Stedman said of the state’s role in financing Alaska LNG.