ConocoPhillips' 2007 has begun with unwanted attention-to its 2006 organic reserves-replacement rate and earnings, and its exposure to Venezuela. John Herrlin, an E&P analyst with Merrill Lynch, calculates that the Houston-based major's replacement of reserves via the drillbit was 11% in 2006. When adding its success via Wall Street, its net gain to the proved-reserve column was 295%-through acquisitions, mainly that of Burlington Resources, the company added 2.6 billion barrels of oil equivalent (BOE). Its 2006 production was some 880 million BOE. Many producers buy the reserves they need during the year to make the year-end numbers, or to shift portfolio strategy, so ConocoPhillips' non-organic leap is not unusual. Long known as a more nimble major than the big three-ExxonMobil, Shell and BP-the producer has more catching up to do to its peers, if it is to carry an equivalent of their global clout. Herrlin says, however, that of more concern is what these reserve additions cost: $18 per proved BOE. "(Its) previous three-year, all-in (finding and development cost) was $5.94 per BOE and five-year average was $7.14 while the (majors') average over the same time frame was $8.90 and $7.44." For more on this, see the February issue of Oil and Gas Investor. For a subscription, call 713-260-6441.

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