Houston-based ConocoPhillips expects to close an acquisition of Marathon Oil this quarter. (Source: Shutterstock.com)
On track to close a blockbuster $17.1 billion acquisition of Marathon Oil before year-end, ConocoPhillips reported record Lower 48 output in third-quarter 2024.
Houston-based ConocoPhillips’ third-quarter production averaged 1.147 MMboe/d across its Lower 48 footprint, the company reported Oct. 31.
That includes record production of 781,000 boe/d from the Permian and record Eagle Ford volumes of 246,000 boe/d, Nick Olds, ConocoPhillips’ Lower 48 executive vice president, said during an earnings call. Bakken volumes averaged 107,000 boe/d.
“We’ve seen more feet per day, more stages per day,” Olds said. “In fact, in 3Q in the Delaware Basin, we had a best-ever feet per day for that entire quarter within the program.”
In the Midland Basin, ConocoPhillips saw “strong performance” from several 3-mile lateral wells during the third quarter, he said.
ConocoPhillips is getting a huge lift across its Lower 48 position through the acquisition of Houston-based Marathon Oil. ConocoPhillips will also assume $5.4 billion in Marathon debt.
The companies still anticipate closing the transaction during the fourth quarter.
ConocoPhillips aims to drive significant synergies by combining the two portfolios; company guidance is to achieve over $500 million in annual synergy cost savings within a year of closing the Marathon deal.
The Marathon acquisition will add another 2,000 drilling locations to the combined portfolio. Roughly half of the new inventory is in the Eagle Ford Shale of South Texas, where Marathon and ConocoPhillips are both top producers.
The deal will also combine the two companies’ smaller inventories in the Bakken and in the Permian’s Delaware Basin.
The companies see additional upside from reworking the combined drilling and efract programs at the asset level, said Andy O’Brien, senior vice president of strategy, commercial, sustainability and technology, for ConocoPhillips.
Compared to its 2024 capital spend, ConocoPhillips plans to reduce the combined development program by at least $500 million in 2025.
The reductions will come primarily from the Eagle Ford and the Bakken, O’Brien said.
“We're confident in our ability to achieve an optimal plateau level at lower levels of activities versus as standalone companies,” he said. “Simply put, we need fewer rigs and fewer frac crews to achieve the same outcome.”
Recompletion projects, or so-called refracs, are becoming more topical in mature basins like the Eagle Ford and Bakken, where early horizontal wells were drilled without modern technologies and a decade-plus of shale learnings.
ConocoPhillips has been using refrac techniques on its own Eagle Ford asset for some time to expand its drilling inventory.
A growing number of producers are leaning toward refracs, re-entries, recompletions and other re-do jobs underground to breathe new life into declining wells.
RELATED
Report: ConocoPhillips Shopping Delaware Basin Assets for $1B Sale
Chopping block
After acquiring Marathon’s net debt, ConocoPhillips aims to deleverage by divesting $2 billion of non-core assets over the next several years.
Rumors are swirling that the company is marketing a package of Delaware Basin assets that could fetch over $1 billion.
The package includes 55,000 net acres. Production is estimated to reach around 17,000 boe/d by year-end.
Executives declined to address the reports but said ConocoPhillips is confident it can hit the $2 billion disposition target.
“Activities are well underway on multiple disposition candidates at this stage,” O’Brien said.
In addition to reducing debt, ConocoPhillips is appeasing investors by raising its ordinary dividend by 34% to $0.78 per share.
ConocoPhillips distributed $2.1 billion to shareholders during the third quarter, including $1.2 billion in share repurchases and $900,000 through the ordinary dividend and variable return of cash.
Share buybacks will approach $2 billion in the fourth quarter, ConocoPhillips CEO Ryan Lance said.
RELATED
Marathon Oil Expects ‘Mass Layoff’ After ConocoPhillips Deal Closes
Recommended Reading
Exxon to Sell Older Permian Assets to Hilcorp in $1B Deal, Sources Say
2024-11-13 - Reuters reported in June that Exxon was auctioning the assets to focus on higher growth shale drilling properties, following the completion of its $60 billion takeover of Pioneer Natural Resources in May.
APA Divests $950 Million in Non-core Permian Basin Assets
2024-09-13 - APA Corp. said it would sell assets in the Central Basin Platform, Texas and New Mexico Shelf and Northwest Shelf that average 21,000 boe/d, 57% oil.
After M&A, Some ‘Stingy’ E&Ps Plan to Hold Operated Shale Inventory
2024-10-10 - After a whirlwind run of upstream consolidation, experts anticipated a wave of portfolio rationalization and divestitures. But with high-quality drilling locations already scarce, E&Ps may cling to operated inventory.
As Permian Targets Grow Scarce, 3Q M&A Drops to $12B—Enverus
2024-10-16 - Upstream M&A activity fell sharply in the third quarter as public consolidation slowed and Permian Basin targets dwindled, according to Enverus Intelligence Research.
Validus to Buy Citizen Energy in Deal Worth Over $2 billion, Sources Say
2024-09-26 - Citizen Energy, backed by private equity firm Warburg Pincus, started exploring a sale in recent months after Validus Energy offered to buy the company, the sources said.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.