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ConocoPhillips Warns 'Pass Ballot Initiative 1, We Stop Drilling In Alaska'

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   |    Thursday,October 29,2020

During its Q3 2020 earnings call, ConocoPhillips, the largest driller in Alaska, said it would stop drilling on the North Slope if voters approve a new tax on production at the polls next week.

COO Matthew Fox said "Passage of Ballot Initiative 1 would mean the company would not resume normal production of its Alpine, Prudhoe and Kuparuk fields in 2021 or beyond that."

The three fields on the North Slope generated 218 Mboe/day in 2019, or ~25% of Conoco's worldwide crude production.

The company also plans to sell down it a part of its position there. 

Fox added: "We didn't really say it was that the explicitly tie a Willow decision to sell down, but we're still anticipating that we will to sell down in Alaska. We just slowed the timing of that down until we get some of these uncertainties resolved. So it's still on the current so we'll make an adjustment to equity in Alaska. But we may still continue to proceed with the project. In the meantime -- so the timing of the project isn't contingent on the sell down, I guess, is what I'm saying."

Matt Fox's Comments in Full

"I mean this is a production tax. And what your tax more, you get less of. So, that should be expected, if those advocating for this. And voting for the proposal should understand that. And we've been pretty clear, so that we were to avoid any doubt in Alaska, that if the passes, drilling in the big three fields, the targets of the tax increase, it's not going to resume in 2021 and maybe beyond that.

So the Alaska jobs, contract labor, all the associated services are going to be adversely impacted by this change. And the contractors, the unions, all the other businesses up there understand this, and they've proposed the most part opposing the change in the tax regime. But it's now up to elector to decide and elections of consequences. So we're getting down with a wire here, and we really feel we have to be clear with the Alaska voters.

On the Willow project itself, we passed a big milestone earlier this week. We got a favorable record of decision from the BLM after it's more than two years of process. So that keeps us on track with our project timeline. And it's worth understanding that, that permit was received under the 2013 integrated activity plans. So the National Petroleum Reserve the rules that were set under the -- the administration. So they should stand up well to scrutiny under changing administration if that happens.

So we're working towards the concept selection and moving to feed by the end of this year, so just assumes the ballot measure fails and taxes are not increased. If it passes, we'll need to reconsider the timing because it will -- directly, targeted by the tax increases, there's going to be a knock-on effects in the oil fields because of the lack of available capital.

And then the last one is the federal land and permitting in Alaska. The more generally, if there's a change in administration, we would expect that to have a relatively limited impact on us. I mean although 65% of our acreage is on federal land only represents about 5% of our production. Now some coming production, GMT 2, in particular, is on federal land, but it's still underway.

First production will be at the end of next year. So we don't expect that it will be affected at all. Willows on federal land, of course and -- but neither Willow or GMT 1 or GMT 2, the federal land drill sites is anything other than conventional to simulation techniques. So if fish is about fracking there, they shouldn't be influenced by that.

So I guess, we've been clear with Alaska about the implications of Ballot Measure 1. We expect any implications of the change in administration in D.C. to have a relatively limited impact on us."

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