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ConocoPhillips sets $16.7-billion capital budget for 2014, affirms production growth target

HOUSTON -- ConocoPhillips today announced a 2014 capital expenditures budget of $16.7 billion for continuing operations. Investments during 2014 will target the company’s diverse portfolio of global opportunities. Approximately 55% of the budget is allocated toward North America, and 45% toward Europe, Asia-Pacific and other international businesses. Highlights of the company’s 2014 investment program include:

• Increased investment in the company’s development drilling programs in the Eagle Ford, Bakken and Permian plays.
• Higher allocation of capital to Alaska compared to 2013, reflecting increased spending on the CD-5 development and higher activity resulting from improved fiscal terms from the passage of the More Alaska Production Act (SB21).
• Peak spending at the Australia Pacific LNG (APLNG) project and ongoing high levels of spend at Surmont Phase 2 in anticipation of first production from both projects in 2015.
• Increased exploration and appraisal activity in several North American unconventional plays, including the Permian, Niobrara and Duvernay.
• Ramp-up in operated conventional exploration drilling programs in the deepwater Gulf of Mexico and Angola.

The company also announced it is on track to achieve its previously stated 2014 annual average production target of approximately 1,600 Mboed from continuing operations, including 50 Mboed from Libya. The company expects to achieve growth in its Lower 48, Canada, Europe and Asia-Pacific regions. Key sources of growth in 2014 include:

• Ramp-up of major project startups at Christina Lake Phase E, Ekofisk South, Jasmine, Siakap North-Petai and Gumusut.
• Ongoing production increases from development drilling programs in the Eagle Ford, Bakken and conventional Permian plays.

The capital budget includes funding for base maintenance, development drilling programs, major projects, and exploration and appraisal spending, as well as corporate expenditures. The allocations to these categories are generally consistent with the company’s long-term guidance. The key categories of capital spending are as follows:

Base Maintenance

Approximately 13% of the capital budget is allocated for maintenance of the company’s high-quality legacy base portfolio, including 2014 planned turnarounds.

Development Drilling Programs

Approximately 39% of the capital budget is allocated to the company’s high-margin development drilling programs, with approximately 90% targeted toward North America. Growth from these development drilling programs should account for 600 Mboed of production by 2017, and offsets normal field decline from the company’s producing assets.

• Approximately two-thirds of development drilling program funds will be spent in the Lower 48, primarily targeting development in the liquids-rich, unconventional plays in the Eagle Ford, Bakken and Niobrara, as well as conventional and unconventional plays in the Permian.
• The remaining one-third is targeted toward other conventional and unconventional opportunities, mainly in Alaska, Canada, Norway and Western Australia.

Major Projects

Approximately 35% of the capital budget is focused on the company’s sanctioned major growth projects globally. In line with company expectations, 2014 reflects peak spending for the APLNG project in Australia and ongoing high levels of spend at Surmont Phase 2. Sanctioned major projects are expected to account for 400 Mboed of production by 2017.

• In Canada, activity will continue at Surmont Phase 2, with first production expected in 2015. Through the FCCL business venture there will be ongoing expansion at Foster Creek at phases F, G and H; and Christina Lake Phase F.
• In Europe, investments will focus on Eldfisk II in the Norwegian North Sea, as well as the Britannia Long-term Compression and Clair Ridge developments in the U.K.
• In the Asia-Pacific region, capital will primarily be allocated to the APLNG joint venture, which will see peak spending in 2014 in preparation for first LNG expected in mid-2015. Funding will also target offshore developments in Malaysia, including construction at the Kebabangan and Malikai projects.

Exploration and Appraisal

Approximately 13% of the capital budget is allocated toward the company’s exploration and appraisal program. Approximately 60% is allocated toward conventional exploration, with the remaining 40% targeting unconventional opportunities.

• In conventional exploration, funding will support an operated drilling program in the Gulf of Mexico, as well as continuing appraisal of several discoveries at Coronado, Shenandoah and Tiber. Internationally, ConocoPhillips will begin its operated drilling program offshore Angola, where a four-well program is scheduled to begin in 2014. Drilling is also scheduled to commence offshore Senegal by mid-2014. Additional conventional activity is planned for appraisal drilling in the U.K. at Clair and at Australia’s Browse basin.
• In unconventional exploration, capital will be targeted toward liquids-rich shale plays in the Lower 48 and Canada. Exploration and appraisal activity will focus on the Niobrara and Permian in the Lower 48, and the Canol, Duvernay and Montney plays in Canada.  Internationally, unconventional exploration spending will be directed toward Colombia, Poland and China.



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