ConocoPhillips to exit deep-water exploration by 2017

HOUSTON — ConocoPhillips officials say the company will stop searching for oil and gas in deep-water fields by 2017, and it plans to sell the offshore leases it doesn’t intend to drill.

Its exit from deep-water exploration would free up roughly $800 million in capital, the amount it has budgeted for exploration next year. Plus, it will save on costs on that side of the business, Matt Fox, ConocoPhillips’ executive vice president of exploration and production, told investors on Thursday.

“It’s a strategic decision to exit deep-water exploration,” Fox said.

It is part of the company’s plan to sell $1 billion to $2 billion assets a year as it braces for lower oil prices. The Houston company has about 2.2 million acres and three recent discoveries in the Gulf of Mexico.

Its decision on whether or not to develop the discoveries “is quite some ways off.”

“We may choose to stay with those developments but we may choose to exit before development happens,” Fox said. When asked by an analyst if the exit means ConocoPhillips will dispose of assets it has partially explored, Fox said “possibly, only if we get full value for it.”

“We haven’t made a commitment to exit deep-water, per se, but deep-water exploration,” he said.

ConocoPhillips had said this summer it would scale back on exploration spending, cutting its exploration spending to $1.8 billion of its estimated $11.5 billion budget.

ConocoPhillips lost about $1.1 billion in the third quarter as it took impairments and restructuring charges and paid a penalty for terminating a contract for a Gulf of Mexico deep-water rig.

It said it would lop off $1.3 billion from its capital budget guidance this year to $10.2 billion, and compress its operating costs by another $1 billion to $8.2 billion as it braces for a long downturn.

“We are accelerating actions to position our company for low and volatile prices, while improving the underlying performance of the business,” ConocoPhillips CEO Ryan Lance said in a written statement.

Related: ConocoPhillips cutting hundreds of jobs

Its $1.1 billion loss in the third quarter, about 87 cents a share, compared to its $2.7 billion profit in the same July-September period last year.

It wrote off $195 million in asset value, took a $156 million restructuring charge related to severance packages and a $246 million charge for terminating the Gulf rig contract.

“We are exercising flexibility in our capital program, dramatically lowering our cost structure and divesting assets that do not compete for funding in our portfolio,” Lance said.

ConocoPhillips said its daily oil and gas production grew by 81,000 barrels to 1.6 million barrels as it drew extra crude from Alaska, Canada, U.S. shale plays and the Middle East. The firm says it has seven major projects expected to come online and that its massive Canadian oil sands project drew its first barrels of thick oil in the quarter.

Its fields in the Eagle Ford Shale in South Texas and the Bakken Shale in North Dakota picked up a 10 percent increase in production while its Canadian operations bolstered output 39 percent.