Alaska’s top oil companies adjusting to low prices

Arriving at ConocoPhillips Kuparuk River Unit, the temperature hovered around -7 degrees. Photo: Rachel Waldholz/APRN
Arriving at ConocoPhillips Kuparuk River Unit, the temperature hovered around -7 degrees. Photo: Rachel Waldholz/APRNc

The big three oil majors that operate in Alaska — BP, ConocoPhillips and Exxon Mobil Corp. — all released third quarter earnings results in the past week.

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The financial reports are a window into how the companies are weathering the dramatic decline in oil prices. And you don’t need a business degree to know it’s a rough time to be an oil company.

“While we operated well this quarter, low commodity prices continued to impact financial results,” ConocoPhillips Chief Financial Officer Don Wallette Jr. said during the company’s third-quarter earnings call last week. His company suffered an $826 million loss last quarter.

Earnings calls are designed to inform investors about how a company is doing. Taken together, they help indicate how confident an industry is feeling about the future. And oil companies are still cautious.

“The environment remained volatile over the quarter and continued to impact quarterly earnings across the sector,” BP Chief Financial Officer Brian Gilvary said on Tuesday

Unlike Conoco, BP made money, but it’s earnings last quarter were roughly half what they were in the same quarter last year.

The third major oil company in Alaska, Exxon, told a similar story. Its earnings were down 38 percent compared to the third quarter of last year.

Two years ago, oil prices took a plunge and the industry is still grappling with the result.

But this quarter’s news wasn’t all bad for the companies. Conoco is the only major that lays out specific Alaska numbers in their results, and they reported a $65 million profit in the state this quarter. But because oil prices were so low earlier this year, the company is still down $10 million in Alaska so far in 2016.

The company is spending a lot of money in Alaska — it’s beginning construction on a $900 million project in the North Slope’s National Petroleum Reserve this winter, for example.

Conoco spokeswoman Natalie Lowman said slightly higher oil prices and federal tax credits helped with third-quarter profits.

“Oil prices this quarter averaged about $43 a barrel, so that helps a little bit,” Lowman said. “We’ve also cut some costs because we’re trying work more efficiently.”

Analysts said the effort to cut costs is a trend worth noticing. Belt-tightening across the industry has helped improve the outlook for oil majors. BP, for example, performed better than financial experts expected.

“I have noticed a little bit more optimism within the third quarter calls — not just these companies but other companies, as well — looking forward and seeing a little more stability and a little bit better view of what the future might hold,” Matti Teittinen said. He’s an energy company analyst at IHS Markit in Norwalk, Conn.

Teittinen said cutting costs has helped companies offset low oil prices to some extent.

But forecasters like the U.S. Energy Information Administration don’t expect oil prices to bounce back to 2014 levels anytime soon.

Elizabeth Harball is a reporter with Alaska's Energy Desk, covering Alaska’s oil and gas industry and environmental policy. She is a contributor to the Energy Desk’s Midnight Oil podcast series. Before moving to Alaska in 2016, Harball worked at E&E News in Washington, D.C., where she covered federal and state climate change policy. Originally from Kalispell, Montana, Harball is a graduate of Columbia University Graduate School of Journalism.

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