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ConocoPhillips Weighs Alaska's Oil Asset Development Offer

ConocoPhillips COP is appraising an offer from Alaska's Department of Natural Resources that would facilitate it to develop an existing North Slope oil field into an area in the vicinity of big discoveries.

The offer is subject to the company agreeing to the development steps that incorporates drilling of a well by next June and making a payment of $7 million to the state. The payment is intended to restore revenue that Alaska might have made had it auctioned the Tofkat area in a competitive lease sale. The state has discarded plans of holding a lease sell as it would unnecessarily delay the entire process. The state is desperately trying to close a deficit of $2.5 billion.

Following months of discussions between the company and the state over drilling rights on the Tofkat area, ConocoPhillips was offered to add acreage to its Colville River unit.

However, if ConocoPhillips accepts the state’s terms but is unable to complete drilling in time, it might lose the Tofkat area leases. The area includes about 9,000 acres, located a few miles northeast of Nuiqsut village and extending south from ConocoPhillips' existing Colville River Unit.

Per sources, the primary aim is to get the area into production in a secure way so the state can collect a royalty portion of the oil produced.

ConocoPhillips holds acres in various prolific plays, of which the ones in Eagle Ford shale and Permian basin are noteworthy as they are rich in oil. The company is now focusing on these resources and has added more rigs in the play compared with 2016. Here, we need to mention that there are significant opportunities left for the company in the Eagle Ford shale where it owns about 3,500 undrilled locations that could lend access to almost 2.4 billion barrels of oil equivalent estimated potential reserves.

Shares of ConocoPhillips have declined 3.7% in the last three months, while the industry declined 3.6% in the same time span.

ConocoPhillips currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space include Global Partners LP GLP, Braskem S.A. BAK and TransCanada Corp. TRP. All of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Global Partners delivered a positive earnings surprise of 1200.00% in the preceding quarter. The company beat estimates in three of the trailing four quarters with an average positive earnings surprise of 415.30%.

Braskem delivered a positive earnings surprise of 107.79% in the quarter ending September 2016.

TransCanada delivered a positive earnings surprise of 12.00% in the preceding quarter. It surpassed estimates in two of the trailing four quarters with an average positive earnings surprise of 4.06%.

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