Houston-based ConocoPhillips is looking to leverage its experience as a natural gas marketer to become a more active player in the global LNG market, CEO Ryan Lance said Thursday.
Lance hosted a conference call to discuss the mega-indie’s second quarter results.
ConocoPhillips is one of North America’s largest oil and gas producers, with a significant presence in the Permian Basin, as well as the Eagle Ford, Bakken and Montney shales.
During the first quarter, the producer took second place in the NGI ranking of natural gas distributors in North America, posting a 10% year-over-year increase in volumes traded.
Last month it signed a non-binding memorandum of understanding (HOA) with Sempra Infrastructure that could give ConocoPhillips a 30% stake in the unauthorized Port Arthur liquefied natural gas export terminal east of Houston.
The HOA also establishes the framework for ConocoPhillips to take 5 million metric tons/year (mmty) of LNG from the terminal under a 20-year toll agreement. Under the integrated model defined in HOA, ConocoPhillips would supply the gas for its 5 mmty drawdown.
“We market 7 to 8 Bcf/d of gas in North America, so the opportunity to supply gas to a multi-train project in Port Arthur, TX intrigues us,” Lance told analysts on the call. . He said “we have a lot of experience” transporting gas to North American and global markets, noting sales teams in Japan, London and Singapore. As a result, “we are used to European and Asian markets,” the CEO said.
ConocoPhillips’ gas marketing unit is moving “orders of magnitude above our physical production” of gas, “so the option [of] Being able to supply LNG regassing facilities is quite exciting for us,” said CFO Bill Bullock.
“We have a history of over 40 years of marketing LNG across Asia.”
Lance also cited the opportunity to supply gas to Sempra’s LNG projects under development on Mexico’s west coast.
Besides the Sempra HOA, ConocoPhillips is among the partners appointed by QatarEnergy to develop the North Field East project, which would expand the country’s LNG export capacity to 110 mmty from 77 mmty. ConocoPhillips is expected to hold a 25% stake in the partnership, pending regulatory approvals.
Qatar produces “one of the cheapest gases in the world, and it will scale well globally to be directed to both Asia and Europe in the future,” said Spear.
What about the Inflation Reduction Act?
On the home front, Lance said he had “mixed views” on the inflation-cutting legislation proposed by Senate Democrats.
He questioned the need for the bill’s methane tax, given that the Environmental Protection Agency is already tightening regulations on emissions from the oil and gas industry.
“I don’t know if this is the right time to increase taxes and public spending,” Lance said of the bill.
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“Now, specific to our industry, at least the agreement recognizes that natural gas and oil are an important part of the energy transition, and they’re going to be around for decades.”
Lance also pointed to the need to streamline federal permits under the National Environmental Policy Act. He noted that oil and gas, as well as renewable projects, are affected by delays in the current system.
High prices = profit growth
Production from ConocoPhillips’ Lower 48 during the quarter averaged 977,000 boe/d, including 634,000 boe/d from the Permian, 233,000 boe/d from the Eagle Ford and 91,000 boe/d from the Bakken.
Total production was 1.69 billion boe/d, up 104,000 boe/d from the same period last year.
In Canada, drilling and completions activities continued on ConocoPhillips’ Montney Shale acreage as construction progressed on the second phase of the company’s natural gas processing facility, management said.
ConocoPhillips said higher realized prices were the main driver of annual profit growth during the period.
The company reached an average price of $88.57/boe, up 77% year-over-year, “as production remains unhedged and thus realizes the full impact” of changes in market prices.
“The second quarter delivered strong financial results and presented exceptional opportunities to accelerate progress on our triple mandate of reliably and responsibly delivering oil and gas production to meet energy transition demand, deliver competitive returns on and capital for our shareholders and achieve our net-zero operational emissions ambition,” said Lance.
“We are increasing our 2022 shareholder return target by an additional $5 billion while taking steps to meet transition demand with recent announcements to expand our global LNG portfolio.”
On the environmental front, Lance pointed out that ConocoPhillips has joined the Oil and Gas Methane Partnership (OGMP) 2.0 initiative. OGMP includes more than 80 global oil and gas companies committed to a “comprehensive, measurement-based reporting framework” for methane emissions.
ConocoPhillips reported net income of $5.1 billion ($3.96/share) for the second quarter, compared to 2Q2021 earnings of $2.1 billion ($1.55).