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    Conoco sees Permian as a core strategic component

Summary

The company put down $9.5bn in cash in September to acquire Permian acreage from a division of Royal Dutch Shell.

by: Daniel Graeber

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Complimentary, Natural Gas & LNG News, Americas, Energy Transition, Corporate, Mergers & Acquisitions, Financials, Shale Gas , Shale Oil, News By Country, United States

Conoco sees Permian as a core strategic component

US major ConocoPhillips said November 2 that a pending transaction to build its footprint in the Permian shale basin helps support its “triple mandate” of offering low cost, low-carbon ways to address mounting demand.

Shell Enterprises, a subsidiary of the Anglo-Dutch major, agreed in September to sell its Permian shale assets to Conoco for $9.5bn in cash. Conoco, provided the deal clears regulatory hurdles by the expected close in the fourth quarter, gets 225,000 net acres in the Permian shale that yields an average of 175,000 barrels of oil equivalent (boe)/day.

“This transaction will spur another phase of positive performance as we head into 2022 and further strengthen our ability to deliver our distinctive triple mandate: meet future energy demand with the lowest cost of supply production through the energy transition, deliver competitive returns and meet our net zero ambition on operational emissions,” CEO Ryan Lance said. “These objectives, in addition to our well-established capital allocation priorities, ideally position us to remain a sector leader in any environment.”

The Permian basin is the largest inland oil producer and second-largest gas producer in the US. This marks ConocoPhillips' second acquisition of US shale assets in the last year, following its purchase of smaller rival Concho Resources for $9.7bn.

Conoco realised average US production  from Alaska and the Lower 48  of 968,000 boe/day in Q3 2021, including 445,000 boe/day from assets it already holds in the Permian basin. Year-on-year production is up around 2%.

International production was around 576,000 boe/day, not counting operations in Libya. Excluding Libya and the pending acquisition from Shell, Conoco expects global Q4 production to average between 1.53mn and 1.57mn boe/day compared to the Q3 global average of 1.54mn boe/day.

On financials, Conoco reported third quarter earnings of $2.4bn, compared with a Q3 2020 loss of $500mn. The company added that it increased its quarterly dividend by 7% to $0.46 per share.