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ConocoPhillips Curtailed Far More Oil Production Than Peers In Second Quarter

Curtailments of oil and gas production by leading U.S. producer ConocoPhillips

amounted to nearly 25% of the 957,000 barrels of oil or the equivalent that it produced per day in the second quarter, easily exceeding the share of output cut by peer producers that have reported quarterly results so far.

Conoco curtailed production everywhere from Alaska to Canada to North Dakota’s Bakken shale patch to the Eagle Ford basin in Texas, pausing 225,000 barrels per day (b/d) overall. It began making cuts after oil prices started cratered in March because of evaporating oil demand. With much of its production shut in and sales for unaffected output sharply lower, Conoco recorded a loss of $1.5 billion (or $1.37 per share) for the first six months of 2020.

Shares of ConocoPhillips initially fell around 9% after it released earnings but have since recovered around half of that.

Chief executive officer Ryan Lance said that Conoco had begun restoring production. “As the market strengthened late in the second quarter, we began reversing our second-quarter curtailments and ramping up production across the Lower 48, Alaska and Canada.”

Conoco’s production was also hit by the widespread shut-in of production in Libya because of military and political conflict there. Conoco’s Libya operations produced just 5,000 b/d of oil or the equivalent in the first six months of the year and none in the second quarter, compared with 45,000 b/d in the fourth quarter of 2019.

Conoco was hardly the only oil company to shut in output. Apache Corpration

, which reported a loss yesterday, curtailed some 33-35,000 b/d of oil or the equivalent, around 10% of its output in the quarter. And overall U.S. crude oil production has fallen from close to 13 million barrels of oil per day to around 11 million b/d, though some of that is because many producers have elected not to bring on new wells even as some existing wells run dry, a consequence of shale wells’ notoriously rapid lifecycle.

Still, the quarterly decline in Conoco’s production due in large part to shut-ins easily exceeds the decline in output from at least four other producers that have also reported quarterly results: QEP Resources, Concho Resources, WPX Energy, and Apache.

Some of these companies were better insulated from the price crash than others because they were extensively covered by financial hedges, allowing them to sell fresh crude oil not at prevailing market prices but at higher prices spelled out in futures contracts. Concho Resources in particular was well-hedged, analysts said.

With more second quarter results due in coming days — Chevron

and ExxonMobil

will report tomorrow and a number of others next week — others are likely to also reveal curtailed production. Consultant Rystad Energy said in May that it expected June curtailments by producers in the U.S. to total just shy of 900,000 b/d, slightly more than in May. (The second quarter includes all of April, May and June.) Aside from Conoco, Rystad anticipated curtailments by Continental Resources

to come in at around 140,000 b/d and ExxonMobil’s to reach 100,000 b/d.

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