ConocoPhillips (NYSE:COP) recently reported its first quarter earnings and discussed the following topics in its earnings conference call.
Eagle Ford Rate
Faisel Khan – Citigroup: I was just wondering if you could give us an exit rate in the quarter for the Eagle Ford.
Matt Fox – EVP, Exploration and Production: The exit rate was about 110,000 BOE per day and we’re continuing to grow production. I think we had a new peak production on Monday of 116,000 BOE per day in the Eagle Ford.
Faisel Khan – Citigroup: And where do you kind of see this going towards the end of the year?
Matt Fox – EVP, Exploration and Production: Right now, in the Eagle Ford we’re on a pretty linear growth trend and we see that continuing essentially as we go through the year.
Faisel Khan – Citigroup: Then on the recent change in the legislation in Alaska on the progressive tax. What do you mean – you said you’re going to add a rig to Alaska. What’s the current thinking now with the new tax regime in place?
Matt Fox – EVP, Exploration and Production: So, we’re encouraged by the changes to the regime. We’ve been advocating this for some time and the change will encourage additional investment in Alaska. And we’re looking at that. We’ve got a long list of projects that we are evaluating now and we did announce that we are immediately starting to increase (with us) a new rig that we’re bringing in. That rig is going to focus on working over wells and adding production that way. But we do have quite a few capital projects that we are now evaluating the impacts of the fiscal regime on…
Faisel Khan – Citigroup: So, on Alaska, you guys laid out I guess a production sort of decline in Alaska over the course of this year. Does this rig and the new activity sort of mitigate that decline rate and by how much?
Matt Fox – EVP, Exploration and Production: You won’t really see any significant change in the short-term. But the issue is that given the new fiscal regime, our incremental capital investments were no competitive. And we think they will be, but we’re taking that through our overall planning process this year and we will be more equipped to talk about that later in the year.
Production Cash Margins
Doug Terreson – ISI: In March at the Analyst Meeting, the Company provided a pretty detailed outlook for production and cash margins, and on this point, I think U.S. production from liquids-rich plays rose by over 40% versus the year ago period which is obviously a pretty strong result. But my question is on profitability and specifically whether cash margins in these plays are strengthening as you thought that they might? And also, whether there are any other performance-related factors that are worth mentioning in the Eagle Ford, at the Bakken and the Permian developments that you have underway?
Jeff W. Sheets – EVP, Finance and CFO: Yeah, pretty much. As Matt mentioned, the production is happening pretty much as we expected from all three of the plays; Eagle Ford, the Bakken and the Permian. And production from these is all – well, Eagle Ford is 60% oil and 20% NGLs and 20% gas, so that’s really strong cash margins, and Bakken, of course, is mostly oil, and the Permian is again a very favorable mix as well. So cash margins from all these assets are really much higher than the average of our current portfolio. So, as you see the portfolio, you’re starting to see that show up now finally in Lower 48 cash margins as that portfolio has moved now towards kind of about half liquids to where it was only 45% a year ago. So, you’re starting to see that all across the portfolio. Cash margins have been a little bit hurt in Canada because of the real recent weakness in bitumen prices, but we see that that’s going to start to recovering as well. So, overall, it’s kind of – Matt was summarizing, we see the trajectory of the growth in production happening as we thought it was going to, and it’s that trajectory of growing production that’s going to cause – growing the production of entire margin is going to cause cash margin to increase over time. So, production growth is on plan and margin growth is on plan as well…
Doug Terreson – ISI: And Jeff, I think you mentioned your efforts on optimization and higher netbacks is I think the way you talked about it, and on this point, I want to see if you could highlight some of the specifics that are being undertaken to improve the netbacks to the Company on production?
Jeff W. Sheets – EVP, Finance and CFO: Yeah, I think we talked about how a lot of – in particular, what we’re trying to make sure is that – talking about marketing in Eagle Ford, for example, Matt, maybe you want to talk something about what we’re doing there?
Matt Fox – EVP, Exploration and Production: Yeah, so, our goal here, Doug, is to have as much optionality as we can, because as you know, there is a lot of volatility in the various markers and then the production itself in all three of those businesses. So, for example, in the Eagle Ford just now, the way that we’re set up for our (sails), we’re realizing WTI plus about $5 from the Eagle Ford. And that’s a mixture of production that’s going by pipeline; a lot of production is still going by truck. Some of our production is priced of LLS; some of its priced of WTI. Our liquids – the non-NGL liquids are sold as light sweet and because we’ve got very high value middle distillate that makes some of the good refinery products, so they’re not going to be sold as condensate. And we feel good about the liquid and gas takeaway capacity just now in the Eagle Ford. In the Bakken we’re actually realizing WTI minus about $5 on average in the Bakken. And we’ve got to make sure of offtake there as well. About 35% is by pipeline just now, about 25% was selling to (reelers) to bring it south to capture the WTI Brent spread. So, we are managing that I think very well and we’re developing a lot of optionality to make sure that we have flexibility to maximize our realizations.