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ConocoPhillips' 2023 Lower-48 production growth seen in mid-single digits: VP


Lower-48 output fell 1.5% sequentially in Q4

Capex for 2023 set at $11 billion at the midpoint

Production in 2023 targeted at 1.78 million boe/d

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  • Starr Spencer
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ConocoPhillips' production growth for its Lower-48 segment should be in the mid-single digits in 2023, from the 989,000 barrels of equivalent the previous year, with the majority of increase weighted to the Permian Basin of West Texas and New Mexico, a top company executive said Feb. 2.

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The focus of 2023 in the Lower 48, including the "Big Three" plays in that region—the Permian, the Eagle Ford Shale of South Texas, and the Bakken Shale of North Dakota and Montana—"will really be around improving capital and operating efficiency," Nick Olds, ConocoPhillips' executive vice president-Lower 48, said in webcast remarks during the company's fourth-quarter earnings conference call.

"We've assumed a level-loaded steady-state program for 2023, based on the second half of 2022 for rigs and frac crew," Olds said, "We do expect some modest growth in partner activity as the year progresses."

"And then we have some larger operated pads that will come online in the second and third quarters, but in the back end, we'll be weighted in 2023 for a production profile," Olds said.

In Q4, the company's Lower-48 production totaled 997,000 boe/d, down about 1.5% sequentially.

Permian output in Q4 averaged 671,000 boe/d from that giant basin, essentially flat with Q3, the company said in its quarterly presentation materials.

The Permian accounted for about two-thirds of ConocoPhillips' Lower-48 production in Q4; another 21% came from the Eagle Ford and 9% from the Bakken. Those basins comprise virtually all of its US output.

In the Lower 48, the company's development well performances in 2022 have "slightly" exceeded type curves, or norms for oil and gas yields, Olds said.

"Our focus is on maximizing returns and recovery while minimizing the future interference" between wells that are located near each other, which can happen if they are too closely spaced," he said.

"In fact, when you look at our accelerated learning curve, we've drilled the most horizontal wells in the Delaware and Midland Basins [the two main Permian sub-basins), more than any other company," he added. "When you combine that data along with our significant non-operated portfolio, and then the learnings in our mature development in the Eagle Ford and the Bakken, that's really helped us hone in on the best development approach of the stack"—that is, the stacked geological intervals in the Permian.

While inflation was a significant factor during 2022 in the oil and gas patch, with some groups of equipment and supplies in the double-digits year over year, some of ConocoPhillips' key spending categories are starting to plateau "and even roll over a little bit," company CEO Ryan Lance said.

"One we're watching pretty closely is ... tubulars,'" Lance said. "Some of the raw materials that are going into making those are starting to come down a little bit. We're seeing the rate of increase in the onshore rig market start to lessen a little bit, which is good," he said, adding, "so when we wrap all those categories to spend together for the company, it kind of manifests itself in an annual year-over-year inflation in the mid-single digits."

ConocoPhillips unveiled Feb. 2 its 2023 capital budget of $10.7 billion-$11.3 billion, up nearly 8% from the year before, a spending plan which includes $9.1 billion-$9.3 billion for base capital and $1.6 billion-$2 billion for projected major project spending for LNG projects in Qatar and Port Arthur, Texas and the Willow project in Alaska.

Capex for 2022 was $10.2 billion which included $8.1 billion in base capital and roughly $2.1 billion to acquire a 10% additional stake in Asia-Pacific LNG, Lower 48 bolt-on transactions, and Qatar's North Field East payments.

In addition, the company's total oil and gas 2023 production guidance is 1.76 million-1.80 million boe/d, which would be up 2% from 1.738 million boe/d in 2022.

ConocoPhillips' Q4 2022 production averaged 1.758 million boe/d, up 150,000 boe/d, or 9%, from the same period a year ago. When adjusted for closed acquisitions, dispositions, and conversion of previously acquired Concho Resources' contracted volumes from a two-stream to a three-stream basis, Q4 2022 production decreased by 3,000 boe/d or about flat to slightly down from the same period a year ago.