Conoco Adds to Alaska Assets as State Opens Up for New Exploration

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National Petroleum Reserve Alaska – Image via Wikipedia

ConocoPhillips (NYSE:COP) increased its holdings in Alaska’s Northern Slope in state and federal oil lease sales held recently. [1] The oil major acquired leases in both state and federal land and its successful bids were situated close  to its existing CD-5 prospect in the National Petroleum Reserve A (NPRA). It also acquired approximately 30 tracts near south of competitor BP‘s (NYSE:BP) Badami fields which are located 35 KM east of Prudhoe Bay – North America’s largest oil field. [2] We have a $80 price estimate for ConocoPhillips which is at a 15% premium to its current market price.

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Arctic exploration

The NPRA is a 23 million acre area located in the northern slope of Alaska and holds substantial oil and gas reserves. ConocoPhillips is one of the most significant players in the NPRA area having worked on 19 of the total 29 wells drilled in the region between 2000 and 2009. [3] Federal officials said that the industry has expressed renewed interest in exploring the region further and that commercial development in the CD-5 prospect could increase the interest in the region.

ConocoPhillips is the largest oil and gas producer in Alaska with ownership interest in both the Prudhoe Bay and Kuparuk – two of the largest fields in the continent. [2] The state is looking to lease out new land for development to prop up declining production rates and officials have expressed hope that the the latest sale will help attract new investment. Players such as the Royal Dutch Shell are also looking to get government approval to begin offshore and onshore exploration in the Northern Slope over the next couple of years. Exploration in the Arctic could help ConocoPhillips increase its production rates which have seen a fall in the recent past.

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Notes:
  1. Shell, Conoco, Repsol increase Alaska oil holdings, Reuters []
  2. About ConocoPhillips Alaska, ConocoPhillips [] []
  3. Exploration Activity -Wells Drilled- in the National Petroleum Reserve-Alaska, BLM []