ConocoPhillips to keep next year’s capital budget flat

U.S. oil major ConocoPhillips has revealed that its capital expenditure budget for 2019 will be $6.1 billion. 

ConocoPhillips said on Monday that its 2019 capital expenditure budget of $6.1 billion is flat compared to expected full-year 2018 capital expenditures excluding acquisition costs.

The 2019 capital budget includes funding for ongoing conventional and unconventional development drilling programs, major projects, exploration and appraisal activities, and base maintenance activities.

Compared to the 2018 expected capital of $6.1 billion excluding acquisition costs, the 2019 capital budget reflects the roll-off and roll-on of major projects, additional activity associated with Montney success, and the impact of increased scope and a higher working interest in Alaska.

Ryan Lance, ConocoPhillips chairman and chief executive officer, said: “As we head into 2019, we plan to keep capital flat, increase our payout target, and deliver high-margin production per-share growth. This plan is focused on executing a consistent, balanced capital program that continues delivering predictable performance from our base business, as well as early-stage investments in attractive opportunities that can add low cost of supply inventory and drive sustained future returns.

“We no longer think of our value proposition as merely disciplined, we view it as the new order. We are running our business for sustained through-cycle financial returns, which is necessary for attracting investors back to the E&P sector. We believe we have designed ConocoPhillips to offer investors both resilience to lower prices and participation in higher prices via an approach that rations capital across a low cost of supply portfolio, competes on per-share versus absolute growth, and pays out a significant portion of cash from the business to shareholders.”

 

Budget cuts across regions

 

Looking at regions, approximately $0.7 billion, or about 11 percent, is allocated to Europe and North Africa, compared to 2018 expected expenditures of $0.9 billion. The reduction assumes the previously announced disposition of partial interest in the Clair field in the United Kingdom, which is subject to regulatory and other approvals, closes by year-end 2018. North Sea plans include further development in both the United Kingdom and Norwegian sectors.

Furthermore, approximately $0.5 billion, or about 8 percent, is allocated to Asia Pacific and Middle East, compared to 2018 expected expenditures of $0.7 billion. Within the segment, ConocoPhillips is proceeding with plans to backfill the Darwin natural gas liquefaction plant through development of the Barossa offshore producing field, and development projects in China, Malaysia and Indonesia.

 

Production growth in 2019 

 

The company’s full-year 2019 production guidance is 1,300 MBOED to 1,350 MBOED. This excludes Libya and does not reflect potential impacts from dispositions that may occur in 2019 or mandated production curtailment at Surmont. Guidance also assumes that the previously announced Clair and Kuparuk transactions, which are subject to regulatory and other approvals, close by year-end 2018.

At the midpoint, this represents 5 percent production growth on a pro-forma basis. Production growth in 2019 will come primarily from continued ramp up of unconventional production in the Lower 48 and conventional production increases in Alaska.

It is worth mentioning that last week Chevron announced a $20 billion-dollar capex for 2019, marking a first budget boost after it had lowered capex for four years in a row. The budget for 2018 was $18.3 billion.

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