Conoco to shut more natural gas output in 2012
By ISABEL ORDONEZ
ConocoPhillips said Wednesday it plans to shut in only a small portion of its natural-gas production in Canada and the lower 48 states due to lower commodity prices as the bulk of its production is tied to oil liquids output and is still profitable.
"We will have some shut ins of natural gas going forward," said Conoco chief financial officer Jeff Sheets in a conference call with analysts.
"It's going be on the order of 100 million cubic feet a day or something like 15,000 to 20,000 [barrels of oil equivalent] per day going forward,” Sheets added.
Conoco's fourth-quarter natural-gas production for Canada and the US lower 48 states was about 2.5 billion cubic feet per day, or about 410,000 barrels of oil equivalent per day.
The Houston company is one of the largest natural-gas producers in the US.
Conoco said it was difficult for the company to shut in more natural gas production because the bulk of its current output is linked to oil liquids production, which is profitable, Sheets said.
A significant part of Conoco's natural gas production is also operated by partners who don't want to shut in and lose the cash flow associated with it, Sheets said.
Conoco still expects natural gas prices to rebound in the long term to between $5 and $6 per million British thermal units as more producers are forced to cut drilling and production amid low commodity prices, Sheets said in an interview.
"You will see capital investment decline in the areas that are more dry gas," he said.
The company also said it expects to have a total oil and natural gas production of 1.6 million barrels of oil equivalent per day this year, unchanged from 2011. It said it expects to sharply increase production in the Eagle Ford Shale and the Permian Basin in Texas and the Bakken Shale in North Dakota.
Conoco's said production from its Bohai Bay platform is still shut-in despite a settlement with the Chinese government to pay damages but that it expect to resume as the years goes on.
The company also said it is currently producing 20,000 barrels of oil per day in Libya. That is the net production related to its 16.33% stake in the Waha oilfield. Before the civil unrest, Waha was producing 350,000 barrels of oil per day.
Separately, Sheets said the company is "at least two to three years away" from collecting compensation for the assets the government of Venezuela confiscated in 2007.
The company also said Venezuela's withdrawal from the World Bank's arbitration unit, the International Centre for Settlement of Investment Disputes will have "no effect" on its pending claim.
The company filed an arbitration claim shortly after the assets were confiscated seeking $20 billion in compensation.
"The Company's ICSID arbitration claim against Venezuela is currently pending before the appointed tribunal," a spokeswoman said in a statement.
Venezuela announced Wednesday it has moved to pull out from ICSID, in a move that some analysts said is aimed at forcing international companies, such as ConocoPhillips, to settle their claims over expropriation in Venezuelan courts.
Sheets said the company is still mulling making some small-scale acquisitions of exploratory acreage in the US Gulf of Mexico.
Conoco also confirmed it expects to drill an exploratory well this quarter in its Nursultan Prospect in Kazakhstan.
The firm said it expects to have a global refining capacity in the low 90% and that its previously announced spin-off of its refining arm could happened as soon as May.
Phillips 66, the new refining company, is likely to focus on spending its extra cash flow on reducing debt rather than in repurchasing shares, the company added.
Dow Jones Newswires
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