COP To Increase CAPEX Significantly In 2018 -- December 5, 2017

We posted the link to this story earlier today, but did not provide any data points from the article. This is a big, big story. COP is a major player in the Bakken through its subsidiary, Burlington Resources (BR).

From the article over at RBN Energy:

As a volatile 2017 nears the finish line, the big question for U.S. exploration and production companies is whether they will throttle back their capital expenditures in 2018, cruise on at the same pace or step on the accelerator. We won’t have all the answers for a couple of months, but early guidance issued along with third-quarter 2017 earnings results indicates a solid 14% increase in investment by seven oil-weighted and diversified producers.

The big story among this handful of announcements is a 22% gain in planned 2018 capex by giant ConocoPhillips, which had been slashing investment since 2014. The company’s $2 billion capex boost includes doubling spending on its North American unconventional portfolio. 

Preliminary guidance for the natural gas producers, on the other hand, tells a different and less interesting story. Six companies, two-thirds of the nine gas-weighted E&Ps we’ve been tracking, indicate their 2018 investment will be relatively flat with the preceding year. So today, we focus on the 2018 plans of the oil producers and take an in-depth look at the ConocoPhillips budgeting process and the company’s noteworthy investment increase.

Let's see if the Bakken is mentioned. Not yet:

We will note here that $3.5 billion of [COP's] capital budget is to maintain current production, while $2 billion is targeting growing production and cash flow.

And more:

The first priority has two prongs: to sustain current production and to maintain its current dividend. By shedding high-cost Canadian oil sands and conventional North American gas assets, ConocoPhillips significantly reduced its cost of supply. The company says it now can generate $5 billion in free cash flow at a $40/bbl oil price for an investment of just $3.5 billion in maintenance capital. The company also believes it can deliver its second priority — at least modest annual dividend growth — even at a sustained $40/bbl oil price. Assuming oil prices stay above $40/bbl, ConocoPhillips also has fully funded its third priority (reducing debt from $21 billion to $15 billion by 2019) and its fourth priority (repurchasing $1.5 billion per year in company shares through 2020) through asset-sale proceeds and cash at hand.

Ah, here it is:

With the first four priorities met, ConocoPhillips can finally turn to what it calls disciplined growth to generate significant cash flow expansion and reserve replacement. The company is allocating $2 billion in annual growth investment in 2018-20, raising its total 2018 capital investment to $5.5 billion — 22% higher than 2017. The company plans to invest 60% of that growth capital ($1.2 billion annually) to more than double the rig count in its three major unconventional plays — the Permian’s Delaware Basin, the Eagle Ford Shale and the Bakken Shale — to deliver 22% compound annual production growth in 2018-20 and generate more than $2 billion in cumulative cash flow.