A Closer Look at What Fueled ConocoPhillips This Quarter

While shale shined, it wasn’t the only highlight for ConocoPhillips in the first quarter.

May 3, 2014 at 3:00PM

Conocophillips Ekofisk

Source: ConocoPhillips. 

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.

Producing results
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.

 Anadarko Petroleum Gom

Source: Anadarko Petroleum. 

Looking ahead
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.


Source: ConocoPhillips investor presentation (link opens a PDF).

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.

Investor takeaway
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.

OPEC is absolutely terrified of this game changer
Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling "OPEC's Worst Nightmare." Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable LANDSLIDE of profits!

Matt DiLallo owns shares of ConocoPhillips. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information