Conoco Phillips Loves North America In 2011

By Eric Fox | March 28, 2011 AAA

Conoco Phillips (NYSE:COP) is aggressively ramping up the development of its properties in the United States in 2011, as the company strives to meet the production growth promised to investors at a recent analyst meeting.

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2011 Capital Expenditures
In 2011, Conoco Phillips allocated $13.5 billion in capital spending, up from $10.7 billion in 2010. The company will put approximately 90% of this amount towards the exploration and development of its oil and gas properties across the globe, with $6 billion allocated to various plays in North America.

Conoco Phillips long-term capital plan calls for spending between $14 billion and $15 billion per year from 2012 to 2015. If Conoco Phillips is successful in executing its exploration and development program during that time, the company estimates that its production per share will grow at a 5% compound annual growth rate (CAGR) through 2015.

This production growth per share will be helped by the large share repurchase program underway at the company. Conoco Phillips spent nearly $4 billion in 2010 on its stock repurchase program, and in February 2011 authorized the spending of an additional $10 billion. On an absolute basis, the company estimates that production will grow by 2% to 3% annually.

Lower 48
In 2011, Conoco Phillips will spend $2.9 billion to develop oil and gas properties in the lower 48 states and western Canada. One major focus of this program will be the Eagle Ford Shale in Texas, where the company will spend $1.4 billion.

Conoco Phillips has 220,000 net acres under lease in the oil and wet gas areas of the play and expects to drill 144 gross wells in 2011. The company's last five wells had average production of 1,285 barrels of oil equivalent per day during the first thirty days.

The Eagle Ford Shale is one of the most active places for development over the last year. Anadarko Petroleum (NYSE:APC) recently signed a joint venture here with a Korean oil company.

Conoco Phillips is also putting $300 million into developing properties in the Barnett and Permian Basins in 2011 as it moves to increase oil and liquid production. The company has 460,000 net acres under lease prospective for the Bakken and plans to drill more wells during the year. Continental Resources (NYSE:CLR) is another major operator active in the Bakken; the company drilled 222 gross wells in 2011 on its North Dakota acreage.

In the Permian Basin, Conoco Phillips has more than one million acres under lease, and plans 141 gross wells in 2011. Estimates suggest that the average well here is composed of approximately 65% oil and other liquids.

The Permian Basin has also seen recent deal activity as companies look to expand holdings here. Clayton Williams Energy (Nasdaq:CWEI) recently signed an agreement with Chesapeake Energy (NYSE:CHK), and can earn up to a 75% interest in a 75,000 net acre position.

The Bottom Line
Conoco Phillips will drill hundreds of wells into various onshore plays in the United States as the company steps up its development here to achieve the growth in production that investors are expecting. (So you've finally decided to start investing. But what should you put in your portfolio? Check out How To Pick A Stock.)

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