Asset sales boost ConocoPhillips earnings

HOUSTON — Third-quarter earnings for ConocoPhillips jumped by a third, as the company continued to sell assets.

Houston-based ConocoPhillips reported earnings of $2.5 billion during the three months ending Sept. 30, up from $1.8 billion in the same period a year ago. The company said it banked $749 million from the sales of undeveloped oil sands holdings in Canada and a midstream asset in Trinidad and Tobago.

ConocoPhillips, which split from its refining arm last year to become the world’s largest independent exploration and production company, also announced Thursday that it had sold its holdings in a Kazakhstan oil field for $5.4 billion.

The company’s asset sales, along with stable production, has helped ConocoPhillips pad its balance sheet, presenting the possibility that the company may soon begin buying back its shares.

“We could be approaching in the neighborhood of $10 bill of cash on our balance sheet” by the end of the year, ConocoPhillips Chief Financial Officer Jeff Sheets said during a conference call with analysts. Asked about a share buyback program, which would reward investors, Sheets says it was in consideration.

“I think that’s something we’re going to be thinking more about as we get to the point where cash from operations funds capital and dividends on a go-forward basis,” he said.

Excluding production associated with asset sales, ConocoPhillips pumped about 1.47 million barrels of oil equivalent per day during the third quarter, on par with a year ago.

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Production was hampered by two months of disruptions in Libya, but it benefited from growth in its Eagle Ford and Permian Basin holdings, where production jumped 40 percent compared with a year ago, ConocoPhillips said. In the Eagle Ford alone, production surged 66 percent compared with the third quarter of 2012, to 126,000 barrels of oil equivalent per day.

ConocoPhillips has identified at least 1,800 potential well sites within its Eagle Ford acreage, with a plan to develop them gradually and to test whether they can add more wells by placing them closer together, said Matt Fox, executive vice president for exploration and production.

“We are still very exciting and I would say getting more excited about our Eagle Ford position,” Fox said.

The company is also being deliberate about its development of shale assets in the Permian Basin, where ConocoPhillips continues to work mainly with conventional reservoirs. That is largely because the company, like others with large holdings in the region, is gauging the best approaches to produces from tight oil formations in the West Texas region.

ConocoPhillips also has no plans to accelerate its drilling programs in the Eagle Ford and Bakken shale plays, maintaining 11 rigs in both regions, Fox said. The deliberate approach allows the company to learn better, more efficient drilling methods while preventing it from outpacing the development of pipelines and other infrastructure, he said.

“These opportunities are not going way, so we think our strategy is the right strategy,” Fox said.

In China, the company’s production grew by 11 percent, to 317,000 barrels of oil equivalent per day, the company said.

“We have made significant progress toward positioning the company for 3 to 5 percent growth in volumes and margins,” CEO Ryan Lance said in a written statement. “We successfully completed our major turnaround activity and have brought two major projects on line, with another three major projects expected to start production in the coming months.”

Those new projects include the company’s first production from its Ekofisk South project in Norway, which is expected to grow to 60,000 barrels of oil equivalent per day. ConocoPhillips did not disclose the production rate from its initial well there.

The company reported earnings per share of $2, up from $1.46 a year ago, and said it would increase its quarterly dividend by 4.5 percent, to 69 cents per share.

The company’s revenues in the quarter jumped 5 percent compared with the third quarter of 2012, to $15.5 billion.

ConocoPhillips sold a barrel of oil for an average of $110.95 during the quarter, up from $106.53 a year ago. It sold a barrel of bitumen for $76.90, up from $56.23 a year ago.

Natural gas sales averaged $4.09 per thousand cubic feet, up from the company’s average sale price of $3.97 a year ago, the company said.