ConocoPhillips CEO Says Production Will Start Rising by Year's End

HOUSTON - ConocoPhillips Chief Executive Ryan Lance told shareholders at the company's annual meeting Tuesday that the company's long-awaited production growth rebound will begin by the end of this year.

He said 2013 will be an "inflection point" for ConocoPhillips, as it closes on $8.5 billion in announced asset sales and reaches a production low. But production will start to ramp up again by the end of the fourth quarter and into next year as the sales put cash on the company's balance sheet to fund development and grow its dividend.

"The growth is coming," Mr. Lance said. "You don't have to wait for that growth and the margin improvement for our company."

ConocoPhillips is in the midst of a transformation facilitated by drilling technologies that have unlocked oil and natural gas within the U.S. that had been unreachable or too expensive to drill. Mr. Lance's presentation to shareholders emphasized ConocoPhillips' ability to fund its operations and deliver on its promises of 3-5% production and margin growth even as it continues to pay a high dividend.

Mr. Lance said there's a "clear line of sight" to production of 1.9 million barrels of oil equivalent a day by 2017, up from an estimated 1.5 million barrels of oil equivalent per day this year. Much of that will be fueled by ConocoPhillips' acreage in unconventional U.S. shale formations--the Eagle Ford and Permian formations in Texas, and North Dakota's Bakken.

Income brought in from production in those areas will be used to fund the company's major projects around the world and exploration that is expected to fuel long-term growth. Mr. Lance highlighted the company's work in the Gulf of Mexico, where company is working to renew its presence. It will participate in five to eight wells this year, including its first operated well there in nearly a decade.

"We are back," Mr. Lance said of the Gulf.

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Deepwater Gulf of Mexico Drilling Activity to Keep Rising

Drilling activity in the deepwater U.S. Gulf of Mexico continues its recovery, according to data from Rigzone's database RigLogix.

As of April 23, 37 semisubmersibles and drillships are under contract in the deepwater Gulf of Mexico, according to RigLogix. Shell has seven deepwater rigs under contract – currently the highest number of rigs for an operator in the Gulf of Mexico. BP has the second largest number of deepwater rigs under contract with six, followed by Chevron with five, and Anadarko with four.  

Other operators currently active in the U.S. Gulf include Petrobras, BHP Billiton Plc, Eni S.p.A., LLOG Exploration and Hess. , which have two deepwater rigs each under contract.  Walter Oil & Gas, Noble Energy, ExxonMobil Corp., Cobalt International Energy and Apache Corp. each have one deepwater rig under contract in the region.

The number of deepwater semisubmersibles and drillships working in the U.S. Gulf of Mexico could rise to 52 in June 2014 and 54 in December 2014 if all of the deepwater rigs currently under contract remain so  according to data from Rigzone's RigLogix database.

Operators with rigs under firm contract in the U.S. Gulf in December 2014 will include BP plc, which will have six rigs, the most from any operator. Royal Dutch Shell plc will have five rigs under firm contract during that time. Anadarko Petroleum Corp. is expected to have four rigs working, followed by Chevron Corp. and LLOG Exploration Co. LLC, with three rigs each under firm contract.

Exxon Mobil Corp., Petroleo Brasiliero S.A. (Petrobras), Plains Exploration & Production Company, and Statoil ASA each are expected to have two rigs under contract in the Gulf of Mexico in December 2014.  At that time, BHP Billiton Ltd., Eni S.p.A, and Murphy Oil Corp. will each have one rig under firm contract.

Eight of these units have unexercised options, while 13 units do not have any future contracts. If these options are exercised and 13 units without contracts receive awards, the number of rigs under contract will reach 54, according to RigLogix.

Since the beginning of the year, 10 new contracts have been awarded, plus two options exercised, for a total of 12 contracts. Of those 10 contracts, two were sublet contracts.

Optimism over the Gulf of Mexico's exploration and production outlook continues to grow as drilling activity and bidding activity resumes following the post-Macondo moratorium imposed by the Obama administration. Earlier this month, Parks Paton Hoepfl & Brown Managing Director G. Allen Brooks noted that the results of Central Gulf of Mexico Lease Sale 227 suggest the oil and gas industry is bullish on prospects in the region.

Shell, Anadarko, Noble, ExxonMobil, BHP and Murphy Oil Corp. have drilled successful appraisal wells since the beginning of 2011. Statoil, Chevron, Noble, LLOG, Cobalt and Anadarko have also drilled successful exploration wells during that time.

Last month, Chevron reported making a deepwater U.S. Gulf oil discovery at the Coronado prospect. In November 2012, Noble reported it had made a discovery in the Big Bend exploration area of the deepwater Gulf. 

Challenging conditions of the Lower Tertiary, including deep well depths, high pressure, high temperature conditions, and dense sub-surface salt have raised questions over the potential and timing for exploration success in this frontier Gulf play. Barclays analyst James C. West said in an April 23 research note.

The Coronado, Shenandoah and other Lower Tertiary discoveries have helped confirm the potential and drive further operator interest in the Lower Tertiary play in the deepwater Gulf, West added.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
For More Information on the Offshore Rig Fleet:
RigLogix can provide the information that you need about the offshore rig fleet, whether you need utilization and industry trends or detailed reports on future rig contracts. Subscribing to RigLogix will allow you to access dozens of prebuilt reports and build your own custom reports using hundreds of available data columns. For more information about a RigLogix subscription, visit http://www.riglogix.com/.

View the original article here

Deepwater Gulf of Mexico Drilling Activity to Keep Rising

Drilling activity in the deepwater U.S. Gulf of Mexico continues its recovery, according to data from Rigzone's database RigLogix.

As of April 23, 37 semisubmersibles and drillships are under contract in the deepwater Gulf of Mexico, according to RigLogix. Shell has seven deepwater rigs under contract – currently the highest number of rigs for an operator in the Gulf of Mexico. BP has the second largest number of deepwater rigs under contract with six, followed by Chevron with five, and Anadarko with four.  

Other operators currently active in the U.S. Gulf include Petrobras, BHP Billiton Plc, Eni S.p.A., LLOG Exploration and Hess. , which have two deepwater rigs each under contract.  Walter Oil & Gas, Noble Energy, ExxonMobil Corp., Cobalt International Energy and Apache Corp. each have one deepwater rig under contract in the region.

The number of deepwater semisubmersibles and drillships working in the U.S. Gulf of Mexico could rise to 52 in June 2014 and 54 in December 2014 if all of the deepwater rigs currently under contract remain so  according to data from Rigzone's RigLogix database.

Operators with rigs under firm contract in the U.S. Gulf in December 2014 will include BP plc, which will have six rigs, the most from any operator. Royal Dutch Shell plc will have five rigs under firm contract during that time. Anadarko Petroleum Corp. is expected to have four rigs working, followed by Chevron Corp. and LLOG Exploration Co. LLC, with three rigs each under firm contract.

Exxon Mobil Corp., Petroleo Brasiliero S.A. (Petrobras), Plains Exploration & Production Company, and Statoil ASA each are expected to have two rigs under contract in the Gulf of Mexico in December 2014.  At that time, BHP Billiton Ltd., Eni S.p.A, and Murphy Oil Corp. will each have one rig under firm contract.

Eight of these units have unexercised options, while 13 units do not have any future contracts. If these options are exercised and 13 units without contracts receive awards, the number of rigs under contract will reach 54, according to RigLogix.

Since the beginning of the year, 10 new contracts have been awarded, plus two options exercised, for a total of 12 contracts. Of those 10 contracts, two were sublet contracts.

Optimism over the Gulf of Mexico's exploration and production outlook continues to grow as drilling activity and bidding activity resumes following the post-Macondo moratorium imposed by the Obama administration. Earlier this month, Parks Paton Hoepfl & Brown Managing Director G. Allen Brooks noted that the results of Central Gulf of Mexico Lease Sale 227 suggest the oil and gas industry is bullish on prospects in the region.

Shell, Anadarko, Noble, ExxonMobil, BHP and Murphy Oil Corp. have drilled successful appraisal wells since the beginning of 2011. Statoil, Chevron, Noble, LLOG, Cobalt and Anadarko have also drilled successful exploration wells during that time.

Last month, Chevron reported making a deepwater U.S. Gulf oil discovery at the Coronado prospect. In November 2012, Noble reported it had made a discovery in the Big Bend exploration area of the deepwater Gulf. 

Challenging conditions of the Lower Tertiary, including deep well depths, high pressure, high temperature conditions, and dense sub-surface salt have raised questions over the potential and timing for exploration success in this frontier Gulf play. Barclays analyst James C. West said in an April 23 research note.

The Coronado, Shenandoah and other Lower Tertiary discoveries have helped confirm the potential and drive further operator interest in the Lower Tertiary play in the deepwater Gulf, West added.

Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
For More Information on the Offshore Rig Fleet:
RigLogix can provide the information that you need about the offshore rig fleet, whether you need utilization and industry trends or detailed reports on future rig contracts. Subscribing to RigLogix will allow you to access dozens of prebuilt reports and build your own custom reports using hundreds of available data columns. For more information about a RigLogix subscription, visit http://www.riglogix.com/.

View the original article here

Crude-Oil Futures Slide on US Jobs Data, Rising Inventories

Crude-oil futures prices slid for a second day Thursday, hit by rising U.S. oil supplies and new worries about economic recovery in the world's biggest oil consumer.

After a steep 2.8% drop Wednesday after news that U.S. crude-oil stocks climbed to their highest end-March level since 1931, crude prices shed a further 1.3% after U.S. initial claims for jobless benefits rose by more than expected last week, reaching their highest level since November.

The setback in the jobs picture presents further worries about the potential for the already slim growth expected in U.S. oil demand this year. The Energy Information Administration sees U.S. oil use up a fractional 0.2% this year, following last year's drop to a 16-year low.

Light, sweet crude oil for May delivery on the New York Mercantile Exchange fell $1.19 to settle at $93.26 a barrel, a two-week low. Crude fell intraday to a low of $92.12 a barrel, down $5.68, or 5.8%, from the session high of $97.80 hit Monday. The U.S. benchmark shed $3.93, or 4%, over the past two trading days.

ICE North Sea Brent crude oil settled 77 cents lower, at $106.34 a barrel, the lowest price since early November. Brent shed $4.74, or 4.3%, a barrel in the past two days, stung by increased output and greater competition between rising domestic U.S. oil supplies and imports in the key U.S. Gulf refining hub.

The sharp reversal in prices comes as money managers are stepping away from heavy bets on rising prices as supplies are increasing and economic worries threaten demand growth.

"The primary driver is the economic outlook, and how that's going to play out is a tough question to answer," said Gene McGillian, broker and analyst at Tradition Energy. "Until we see signs of economic improvement we're like to be between $90-$95" a barrel, he said.

U.S. crude oil prices could drop to five-month low of $85 a barrel in coming weeks, if money managers cut heavy bets on higher prices, said Citi Futures analyst Tim Evans, who also sees potential for Brent to fall to a nine-month low near $100 a barrel.

"We have seen a lot of speculative froth come into the market recently," said Kyle Cooper, analyst at IAF Advisors. Money managers lifted their net long position in Nymex crude futures and options by 16% last week, helping drive prices to the seven-week intraday high of $97.80 a barrel hit Monday.

U.S. crude oil stocks rose by 2.7 million barrels, nearly twice the expected level, last week to 388.6 million barrels, according to the federal Energy Information Administration. EIA data show stocks are the most at the end of March since 1931 and are the highest in any week since July 1990.

Early data show refiners boosted crude oil processing to its highest March level in six years, meaning inventories of refined products such as gasoline and diesel fuel are expected to be ample as the spring-summer driving season approaches.

By lifting crude oil runs to the highest level since early January, refiners are erasing earlier worries about potential tight supplies and sending prices lower.

When refinery operating rates dropped to two-year lows in early March, reformulated gasoline futures climbed to a six-month high near $3.27/gallon. With crude runs up by 7% from a month ago, RBOB futures prices have tumbled by 12%, or 40 cents a gallon, in the past four weeks.

May-delivery reformulated gasoline settled 1.53 cents lower, at $2.8987 a gallon Thursday, the lowest price since Feb. 27. The contract has dropped 6.8%, or 21.2 cents, in the past five sessions.

May heating oil settled 3.84 cents, or 1.3%, lower at $2.9636 a gallon Thursday and has fallen 12.4 cents, or 4%, in the past two sessions.

Copyright (c) 2013 Dow Jones & Company, Inc.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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Crude-Oil Futures Settle Down 1.5% on Expectations of Rising Inventory

Crude-oil futures prices posted their biggest decline in a month Wednesday, falling 1.5% to $95.23 a barrel, on expectations of a seasonal drop in demand from U.S. refiners.

The decline in prices came after crude climbed nearly $3 a barrel over the previous four days, culminating with the February light, sweet crude oil futures contract on the New York Mercantile Exchange expiring Tuesday at a four-month high.

Profit-takers ruled the day, cashing in on the recent gains, and the selloff accelerated with late-session news of an operating snag on the key Seaway Pipeline, which carries oil out of the Nymex contract delivery point of Cushing, Okla., to the key Gulf Coast refining region.

Capacity on the line recently tripled to 450,000 barrels a day and helped to drive Nymex prices up by $12 a barrel since early December, on hopes that record-high stocks at Cushing would decline and the oil would fetch a higher price in the Gulf.

But operators of the line said "unforeseen constraints" have limited the flow to 175,000 barrels a day for an unspecified period.

"The key is the duration," said Andrew Lebow, senior vice president of energy futures at Jefferies Bache in New York.

The potential for U.S. crudes now bottlenecked at Cushing to compete with imports in the Gulf has lifted Nymex crude at the expense of North Sea Brent, the pricing bases for much foreign crude sent to the U.S.

"Every bank in the world has been advising buy WTI-sell Brent," Mr. Lebow said, referring to the U.S. benchmark, West Texas Intermediate crude oil.

Nymex crude oil for March delivery settled $1.45 a barrel lower, at $95.23 a barrel, the lowest price in a week. The one-day drop was the most since Dec. 21. ICE March Brent crude oil rose 38 cents, to $112.80 a barrel, the highest price since Oct. 17. Brent's premium to the U.S. benchmark of $17.57 a barrel was the highest since Jan. 14.

Mark Waggoner, president of Excel Futures in Bend, Ore., called crude-oil futures "extremely overbought" and said he expects a pullback in the next few weeks to $90 a barrel, where he would be a buyer.

Analysts surveyed by Dow Jones Newswires expect upcoming government oil-inventory data to show crude-oil stocks fell 1.7 million barrels last week, while refineries trimmed operations by 0.4 percentage point, to 87.5% of capacity. Gasoline stocks are expected to show a 900,000-barrel rise, while distillate stocks (diesel/heating oil) are expected to drop by 100,000 barrels.

The data, for the week ended Jan. 18, are set for release by the Energy Information Administration at 11 a.m. EST Thursday, a day later than usual due to the government holiday celebrated Monday.

U.S. refiners have been processing crude at a rate of nearly 15.2 million barrels a day in the first two weeks of January, while the EIA has projected a monthly average of 14.5 million barrels a day, the lowest in a year.

Rising U.S. crude-oil output, now at a 20-year high above 7 million barrels a day, has plumped up crude-oil inventories, which stand 8.8% above the five-year average level, EIA data show. Last week, crude-oil stocks were at a 30-year high for the week. Inventories at Cushing have climbed nearly 14% since early December to record levels near 52 million barrels.

Gasoline stocks last week were the highest for this time of year on records beginning in 1990 and have gained 17% in the past eight weeks. But in the New York Harbor region, the delivery point for the contract, inventories were the lowest on record for this time of year are more than 14% below the five-year average.

February-delivery reformulated gasoline blendstock futures rose for a fifth straight session, up 0.39 cent to $2.8338 a gallon, the highest settlement since Oct. 16.

Gene McGillian, broker and analyst at Tradition Energy, said the rise of more than 12 cents in RBOB futures in the past week, reflects expectation that high inventories will tighten when refinery operations slow. "We're likely to see a more extensive [maintenance] season than maybe some people anticipated," he said.

Nymex heating oil futures settled 0.99 cent higher, at $3.0781 a gallon. The fourth straight rise put prices at the highest level since Oct. 30.

Copyright (c) 2012 Dow Jones & Company, Inc.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

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The President’s Actions, and Rising Prices

Is President Obama the “anti-energy” president, as former Gov. Pete Du Pont argues in an op-ed piece for the Wall Street Journal (sub. required)? Certainly, in the areas that matter most – oil and natural gas development – a case can be made from the infographic below that the president’s policies haven’t helped.

Administration Oil Strategy Contributes to Price Increases

By “matters most” we mean the sources that current supply more than 60 percent of the energy we use – and which will continue to supply nearly 60 percent of the energy we use for the next quarter century, according to the Energy Information Administration.

That’s not knocking other energy forms, because we need them all. It’s recognizing this energy reality: Our economy runs on oil and natural gas – and will continue to do so for the foreseeable future.

In that context the president and his team should acknowledge that energy reality – by protecting and enhancing the energy sources that play the leading role supporting our economy. Here, this president and his administration often appear to be doing the opposite.

As the graphic shows, the president basically is pursuing an off-oil policy: delaying or canceling development on federal areas onshore and offshore, proposing punitive tax increases on America’s energy producers, threatening new layers of unnecessary regulation and rejecting key components like the Keystone XL pipeline. The president claims credit for oil and gas production (that belongs to others), while pursuing policies that actually put a drag on future oil and gas development, potentially jeopardizing America’s overall security.

Meanwhile, as the lines at the base of the graphic show, prices for crude oil have risen steadily since 2009, boosting costs for gasoline and diesel.

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