ConocoPhillips reports 2020 losses in its Alaska oil production

ConocoPhillips is running in the red in Alaska this year. The company reported an unaudited net loss of $76 million for the first three quarters of 2020 and a $16 million loss in the third quarter, it said in a statement issued Oct. 29.

During the year ConocoPhillips has also paid substantial sums to the state of Alaska in royalties and taxes.

For the first three quarters the company paid the state $442 million in production taxes, royalties, property tax and state income tax. For the third quarter the company paid $136 million to the state.

Since 2007 ConocoPhillips has paid Alaska $30 billion in taxes and royalties.

The company’s announcement, part of its routine financial reporting during the year, comes just days before the Nov. 3 election, when Alaskans will vote on a ballot proposition that would more than double the state’s oil production tax on major producing fields.

Proponents of the ballot measure claim the large North Slope fields are still profitable even at low oil prices. However, critics of the proposal say this considers the fields on a stand-alone financial basis that considers only costs for that field. When other expenses on the slope are included, such as large investments ConocoPhillips is making this year in exploration and construction of new fields, the apparent profits fall sharply.

Basically, profits from the large fields help pay for new exploration and development, and ConocoPhillips has made several new discoveries in recent years that are now in construction or advanced planning.

These include GMT-2, a billion-dollar project now half-built that will start production in 2021. Willow, a new multi-billion-dollar project, is close to receiving its federal permits.

If construction proceeds, Willow could be producing in 2026, ConocoPhillips has said.

Low oil prices are a big drag on activity, however. Drilling and other North Slope activity was shut down earlier this year after a sharp decrease in crude oil prices. If the ballot measure is passed it’s likely that suspension will remain despite gradually improving prices.

“Low prices and (oil) demand destruction have shut down almost all drilling, and for the first time since (the) Prudhoe, Alpine and Kuparuk (oil fields) have all been in production, no rigs are running in these fields,” Joe Marushak, president of ConocoPhillips Alaska, told the Alaska State Chamber of Commerce in September.

Marushack said a restart of drilling is unlikely to resume in 2021 if Ballot Measure 1 is passed, increasing taxes.