Houston-based ConocoPhillips has made the strategic decision to drop out of its deepwater exploration program by 2017, despite a significant program that the company is executing in 2016.
 |
|
Ekofisk. Image from ConocoPhillips. |
The move to stop exploration will help save the company money for its onshore program, and to cover shareholder payments.
Currently in its exit phase, ConocoPhillips said that deepwater operations might not cease entirely, and will consider continuing should the company see full value for those assets in development.
“Development of the discoveries that we have in deepwater is quite some way off and we may choose to stay with those developments, but we may choose to exit before development happens there,” Matt Fox, ConocoPhillips E&P EVP said in the company’s Q3 earnings call. “So really what we're in just now is a ramping down of exploration commitments and continuing appraisal on the existing discoveries. We're not at a development stage yet.”
However, should the company decide not to drill, its acreage positions will be put up for sale. For example, in the Gulf of Mexico, ConocoPhillips has approximately 2.2 million acres, and three existing discoveries.
“Our intention is to not be doing deepwater exploration by 2017. And those acreage positions that we hold that we don't intend to drill we will be marketing those positions,” Fox said.
In Q3 2015, ConocoPhillips’ reported total revenue dropped almost 42% to US$7.5 million, from nearly $13 million year-over-year, and 13.3% from nearly $8.7 million last quarter.
As the company moves forward with its further reduction in its deepwater exploration spending, ConocoPhillips took a hit this quarter with a Gulf of Mexico deepwater drillship termination fee of $246 million.The Ensco DS-9 newbuild was destined for the Gulf of Mexico in late 2015 as part of a three-year contract.
“Despite our stated plans to reduce deepwater exploration spending over time we're continuing to fund activity based on existing commitments while we also progress possible monetization options. This is important for protecting the value we've created from our existing program,” Fox said.
Fox said the company expects to invest $800 million in 2016 for its deepwater exploration and appraisal space.
“That's the order of magnitude on the capital side that we wouldn't be spending if we weren't doing deepwater exploration and appraisal for one year. And then there's G&G and G&A associated with that as well,” Fox said.
Current deepwater operations
Of its Gulf of Mexico acreage, ConocoPhillips recently had successful results at the Shenandoah appraisal well. Currently, the company is drilling the Vernaccia and Gibson exploration wells, with the expectation to spud the Melmar prospect this quarter.
Offshore Canada, the Cheshire exploration well was spudded off Nova Scotia this month, the first of two exploration well commitments.
For Europe, Q3 production averaged 192,000 boe/d, with several major turnarounds across the UK that were all completed successfully, the company said. Development drilling also continues at Ekofisk South and Eldfisk II offshore Norway.
For Asia Pacific and the Middle East, ConocoPhillips produced 332,000 boe/d in Q3, a 10% jump year-over-year, that company said was party due to Gumusut, offshore Malaysia. Gumusut underwent its first major turnaround, which was completed ahead of schedule.
Read more:
Subscribe
