Conoco Phillips (NYSE:COP) is making a large bet on the development of various oil sands projects in Canada over the next decade as the company looks to grow production. The company estimates that production from these projects will quadruple by the end of this decade.
TUTORIAL: Economic Indicators To Know

Conoco Phillips has approximately one million acres of properties in Alberta with bitumen deposits and has interests in many different oil sands projects. The company reported just over 50,000 barrels of oil equivalent (BOE) per day of production in 2010.

In 2011, Conoco Phillips will spend $1.2 billion of its $12 billion upstream capital budget to advance these projects further. The company's goal is to increase production by a 15% compound annual growth rate through 2020, reaching close to 300,000 BOE per day of production by 2020.

Conoco Phillips uses the steam assisted gravity drainage (SAGD) method of extracting the bitumen from the ground. This involves the injection of steam into the ground, which liquefies the bitumen so it can be pumped to the surface, and processed further.

Joint Venture
Conoco Phillips is involved in a joint venture as a non-operated partner with Cenovus Energy (NYSE:CVE) to develop various oil sands projects in Canada. The partnership was originally part of EnCana (NYSE:ECA), but was included with Cenovus Energy when EnCana conducted its reorganization.

The Foster Creek project is already producing from five phases and the partnership is currently working on Phase F, G and H. Foster Creek was producing approximately 120,000 gross BOE per day in February 2011, and the three expansions will increase capacity here to 200,000 BOE per day when Phase H comes on line in 2017.

Christina Lake
Christina Lake is also being jointly developed by the two companies, and is currently producing from two phases. Gross production from Christina Lake was 20,000 BOE per day in January 2011.

The partnership has expansions coming on line in 2011 and 2013, which will each add gross production of 40,000 BOE per day. Three more expansions are planned through 2017, with gross production reaching 200,000 BOE per day.

One area planned for future development by the partnership is at Narrows Lake, a three phase project with peak gross capacity of 130,000 BOE per day. Phase one of Narrows Lake is expected to come on line in 2016.

Conoco Phillips is working in another partnership with Total (NYSE:TOT) to develop the Surmont project in Alberta. Phase one at Surmont started production in 2007, and the project is currently producing 19,000 BOE per day. The second phase of the project is coming on line in 2015 and gross production will eventually reach 100,000 BOE per day by 2017.

Conoco Phillips also has other properties in Alberta that will fuel development past 2017. These include the Thornbury, Clyden and Saleski properties. The company has a 100% working interest in these areas.

Bottom Line
Conoco Phillips is dependent on the successful development of multiple projects in the oil sands of Canada as it seeks to grow production for the balance of the decade. (For related reading, also take a look at How Does Crude Oil Affect Gas Prices?)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Tickers in this Article: COP, CVE, TOT, ECA

comments powered by Disqus

Trading Center