ConocoPhillips’ LNG business should not be affected in the near term by a freeze on federal approvals for new export capacity, executives said Thursday.
The Biden administration’s current pause on authorizations for new liquefied natural gas exports to non-free trade agreement (FTA) countries is “unfortunate” and “clearly more politically driven than fundamental,” said CEO Ryan Lance during a conference call to discuss fourth quarter earnings for the Houston-based independent. On the other hand, “it makes us feel a little bit better about what we’re doing on the LNG side because of what we do have permitted. I think it’s shortsighted in the short term; hopefully it will be fixed in the long term.”
Lance was joined on the call by CFO William Bullock, who noted that the Port Arthur LNG Phase 1 project, in which ConocoPhillips is both an equity holder and an offtaker, is fully permitted for FTA and non-FTA exports. The project “is in a great spot,” Bullock said.
The CFO also cited offtake agreements that ConocoPhillips has secured with Sempra’s Energía Costa Azul Phase 1 and Mexico Pacific Ltd.’s Saguaro Energía liquefaction projects on Mexico’s Pacific Coast. Each of those projects has secured non-FTA export approvals as well, though Saguaro has yet to reach a final investment decision (FID).
“We remain interested in a number of LNG opportunities because we think the market is going to be strong for decades to come,” Bullock said. “We’re focusing on low-cost supply, low greenhouse gas intensity resources that meet that transition pathway.”
ConocoPhillips was the 10th leading U.S. publicly traded natural gas producer as of the third quarter of 2023, according to NGI calculations, and has been a top five U.S. natural gas marketer since 2002.
The company is targeting capital expenditures (capex) of $11-11.5 billion this year, versus $11.2 billion in 2023. Production is expected to range from 1.91-1.95 million boe/d, up 5% at the midpoint from 2023.
‘Weaker Permian Differentials’
ConocoPhillips reported average Lower 48 natural gas price realizations of $1.93/Mcf or 67% of Henry Hub bidweek pricing during the 4Q2023, versus $4.82 (77%) in 4Q2022.
The company cited “weakened Permian differentials due to mild weather and production growth” as impacting price realizations during the final three months of 2023.
NGI’s Waha Bidweek price averaged $2.235/MMBtu for February 2024, versus $2.260 for February 2023.
The company advanced its LNG business on multiple fronts during the year, including reaching FID for Port Arthur Phase 1, offtake agreements in Mexico, expansion in Qatar and regasification agreements in the Netherlands.
ConocoPhillips also sanctioned the Willow project on Alaska’s North Slope, following its approval by the Biden administration, and took full ownership of the Surmont bitumen project in the Alberta oilsands. Capex at Willow this year is expected to range from $900 million to $1 billion.
Record Production
The company achieved record companywide and Lower 48 production of 1.83 million boe/d and 1.07 million boe/d, respectively, for full-year 2023.
Lower 48 production in 4Q2023 averaged 1.09 million boe/d, including 750,000 boe/d from the Permian Basin, 211,000 boe/d from the Eagle Ford Shale and 110,000 boe/d from the Bakken Shale.
During 2023, the company “reached several key milestones across our global operations and returned $11 billion to shareholders,” said Lance. “We also continued to enhance our portfolio by opportunistically acquiring the remaining 50% of Surmont, reaching a final investment decision on the Willow project in Alaska and further progressing our global LNG strategy.”
He added, “We remain committed to our triple mandate of responsibly and reliably meeting energy transition pathway demand, delivering competitive returns on and of capital, and achieving our net-zero operational emissions ambition. Our deep, durable and diversified portfolio continues to generate robust cash flow, enabling us to start the year with a $9 billion return of capital target.”
The company’s climate targets include a 50-60% greenhouse gas emissions-intensity reduction through 2030 from a 2016 baseline.
ConocoPhillips reported net income of $3 billion ($2.52/share) in 4Q2023, versus earnings of $3.2 billion ($2.61) in the same period of 2022. Full-year 2023 earnings were $11 billion ($9.06/share), down from $18.7 billion ($14.57) in 2022.
