ConocoPhillips (NYSE: COP ) turned in really strong first-quarter results. It easily beat earnings estimates and turned in strong production growth. Let's take a closer look at what fueled the company's strong quarter.
First-quarter production averaged 1.53 million barrels of oil equivalent per day. On an adjusted basis, that's up 3% over last year's first quarter, which is right in line with the company's goal to grow production by 3%-5% per year through 2017.
Crude oil production in the Lower 48 and Latin America grew about 16% over the past year. This was led by surging production growth in the Eagle Ford and Bakken Shale plays, which were up 41% year over year. Both shale plays hit new daily production peaks last quarter. In addition to that production in the Canadian oil sands increased 14% as phase E of the Christian Lake joint venture project with Cenovus Energy (NYSE: CVE ) approached full capacity in the quarter. This helped to offset production declines in Alaska as well as in ConocoPhillips' conventional operations in Canada.
The other highlight this past quarter was production growth in Europe. The ramp-up of production from major projects at Jasmin, Ekofisk South, and East Irish Sea combined to boost European production by 6% year over year. These projects, which combined with North American production growth to more than offset normal field decline across the rest of ConocoPhillips' portfolio.
ConocoPhillips' strong quarter has it on track to meet its production growth goals for the year. The other big driver in hitting that goal is the fact that ConocoPhillips is moving forward with four major projects that should begin delivering results later this year. Among the projects expected to deliver first production this year is phase F of Foster Creek, which is part of ConocoPhillips' 50% joint venture with Cenovus Energy and is expected to come online in the third quarter. Combining that with project start-ups in Malaysia and the United Kingdom as well as continued production growth from the Eagle Ford, Bakken, and Permian Basin have the company well on its way to meeting its targets.
That being said, investors should be aware of the fact that the company does expect to see its production declining over the next two quarters. As the following slide shows, annual planned turnarounds will have a negative impact on production for the next few months.
Beyond that ConocoPhillips continues to move forward with both conventional and unconventional exploration activities around the world. Conventional exploration is centered in the Gulf of Mexico, where the company is exploring and appraising the Tiber, Coronado, and Deep Nansen prospects. In addition to that, it is exploring two areas offshore of Africa.
The area to keep the closest eye on is the Gulf of Mexico. ConocoPhillips and its partners are drilling appraisal wells at the Tiber and Coronado prospects, while continuing exploration activities at Deep Nansen. ConocoPhillips' main partner in the Gulf of Mexico is Anadarko Petroleum (NYSE: APC ) as they are partners in Coronado, Deep Nansen, and the massive find at Shenandoah. That makes Anadarko Petroleum a company to keep an eye on as it's the operator of these prospects. Overall, the potential is there for these prospects to yield tremendous production growth for ConocoPhillips and Anadarko Petroleum in the future.
Meanwhile, unconventional exploration continues in North American shale plays with ConocoPhillips focused on exploring its acreage in the Permian Basin, Niobrara, Duvernay, and Montney. In addition, it is engaged in exploration activities in shale plays in Poland and Colombia. As these prospective plays emerge, there is the potential for these to fuel the company's future growth much like the Bakken and Eagle Ford Shale are doing today.
Needless to say, ConocoPhillips remains on track with its plan to grow its production and margins by 3%-5% annually. The company's major projects are all well under way, which should provide a big boost to production in the second half of the year. Add to that exploration activities around the world and ConocoPhillips should keep growing for years to come.
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