ConocoPhillips management confirmed Thursday that it may sell part of its 30% equity stake in the first 1.8 Bcf/d phase of Sempra Infrastructure’s Port Arthur LNG export plant under construction southeast of Houston.
“With regard to Port Arthur, look, we’ve had some inbounds on the equity interest we have,” CEO Ryan Lance said during a call to discuss first quarter results. “We’re taking a look at that and trying to understand if that’s what’s right for the company going forward.”
ConocoPhillips, the world’s largest independent exploration and production (E&P) company, has been focused on building an international liquefied natural gas portfolio in recent years. It has secured offtake and equity positions in export projects across the globe, including those in the United States and Qatar.
“We don’t necessarily need to be an equity owner in these things,” Lance said of the liquefaction plants. “We wanted to be at Port Arthur to launch the project and phase one. But we’re not married to it if the right opportunity comes along.”
Andy O'Brien, senior vice president of strategy, commercial, sustainability and technology, said the bigger focus is securing additional regasification capacity to move the contracted LNG supplies to market. The Houston-based E&P also wants to contract for more long-term supplies, with a goal of securing 10-15 million metric tons/year (mmty).
“This would allow us to achieve the full benefits of scale across our organization,” O’Brien said. “I do want to be clear, this is an offtake ambition. We don’t feel we have to take on additional liquefaction capital.”
The company currently has 7.4 mmty of offtake contracts and the rights to 4.5 mmty of regasification capacity.
Permian Volatility
In the E&P segment, the company produced 1.9 million boe/d during the first quarter, up 110,000 boe/d from the year-ago period. Production from the Lower 48 was slightly more than 1 million boe/d, including 736,000 boe/d from the Permian Basin, 197,000 boe/d from the Eagle Ford Shale and 96,000 boe/d from the Bakken Shale.
First quarter gas price realizations improved slightly from 4Q2023, but were still pressured by Permian differentials. Natural gas in the play started trading at negative prices toward the end of the first quarter and has largely remained at those levels.
NGI data showed that West Texas/Southeast New Mexico Regional Average prices were negative 75.0 cents/MMBtu as recently as Wednesday. They rebounded to 45.0 cents on Thursday, when spot prices gained ground across most of the United States.
West Texas led the charge as pipeline maintenance and backed up supply is beginning to ease.
Waha jumped 63.5 cents day/day to average 47.0 cents and climbed out of the red. El Paso Permian followed suit, gaining 60.0 cents to 45.0 cents.
Management said it expects continued volatility in Permian differentials in the second quarter because of pipeline maintenance and third-party offtake constraints.
“I think everyone is expecting to see a lot of volatility this year,” said CFO W. L. Bullock. “We certainly expect realizations in the second quarter to be particularly low, but these are transitory. As we come out the back of the year with takeaway capacity, we expect that to return to more normal levels.”
Bullock said the company’s gas marketing has helped with flow assurance, which he added is important since gas is not flared routinely.
“We want to be able to continue to produce,” Bullock said. “We’ve got strong return profiles in the Permian, primarily driven by oil.”
Elsewhere, management said it concluded the first successful major winter construction season at the Willow project on Alaska’s North Slope. The $8 billion project received federal approval last year and is expected to produce up to 180,000 b/d of oil at its peak.
Management said the company mobilized 1,200 workers over the winter, built seven miles of gravel roads, 30 acres of gravel pads for future facilities and successfully constructed all pipelines it had planned for the season.
The company reported first quarter net income of $2.6 billion ($2.15/share), compared with net income of $2.9 billion ($2.38) in the year-ago period. The decline was attributed to lower 1Q2024 prices and higher costs, among other things.
