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Charles Kennedy

Charles Kennedy

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ConocoPhillips Sheds Assets to Focus on US Shale

Seeking to balance out its portfolio and focus more solidly on US unconventional plays, ConocoPhillips (NYSE: COP) is divesting billions of dollars of its stakes in the Australia Pacific LNG project and in Canadian oil sands.

Late last week, ConocoPhillips announced it would shed some of its 37.5% interest in the Australia Pacific LNG project, which it owns with Origin Energy (37.5%) and China’s Sinopec (25%).

The company will also divest Canadian tar sands assets, which include a 50% interest in the Surmont, Foster Creek and Christina Lake oil sands projects in Alberta.

What’s the rebalance all about? ConocoPhillips’s unconventional plays in the South Texas Eagle Ford shale and the North Dakota Bakken formation.

The Australia Pacific LNG project and the company’s Canadian oil sands holdings are high-dollar undertakings and ConocoPhillips hopes the divestiture will trim costs and enable it to focus more money on the US shale plays.

In Australia, ConocoPhillips’s costs have risen by about 7%, exploding from A$23 billion in July 2012 with the final investment decision to A$24.7 billion now.

The project is still on track—though expensive—and will have a capacity of 9 million mt/year from two LNG production trains. The first cargo is expected in 2015. At the end of December 2012, the upstream component of the project was 29% complete and the downstream component was 31%.

Specifically, ConocoPhillips hopes the move will increase production and margins by 3% to 5% annually through 2017.

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By. Charles Kennedy of Oilprice.com


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