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ConocoPhillips Boosts Montney Footprint With $375M Acquisition

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ConocoPhillips (COP - Free Report) recently agreed to acquire liquid-rich Montney acreage in British Columbia, Canada, from Kelt Exploration Ltd. for $375 million in cash. The acreage under consideration is adjacent to ConocoPhillips’ Montney assets. Moreover, the U.S. upstream energy major has agreed to assume around $30 million in financial obligations related to some of the infrastructure at the site.

With the acquisition of 140,000 net acres, the company’s acreage holding in the region will likely rise to 295,000 net acres, wherein it holds 100% working interest. The move adds more than 1 billion barrels of oil equivalent to its resource base. It has a cost of supply in mid-$30s on a West Texas Intermediate crude price basis. The move will likely add more than 1,000 high-quality well locations to the company’s portfolio.

The deal, which is expected to close in third-quarter 2020, will boost the company’s footprint in the core of the liquids-rich Montney acreage. The effective transaction date of the deal is Jul 1, 2020. The company stated that the acquired acreage has a production capacity of 15,000 barrels of oil equivalent per day (Boe/d). ConocoPhillips commenced production from the Montney development in the March quarter.

Notably, ConocoPhillips divested a chunk of Canadian assets three years back to Cenovus Energy Inc. (CVE - Free Report) . The upstream major reduced production at its Surmont Canadian site last April as oil prices tumbled to historic lows. The region is expected to witness a rise in production in the third quarter.

The company’s second-quarter production volumes are expected within 960-980 thousand Boe/d, indicating a decline from the year-ago period’s 1,290 thousand Boe/d (unadjusted). Combined with low oil prices, the curtailed production volumes are expected to have resulted in a decline in second-quarter profit levels.

Price Performance

The company’s shares have gained 13.3% in the past three months compared with 17.4% rise of the industry it belongs to.

Zacks Rank & Stocks to Consider

The company currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include NGL Energy Partners LP (NGL - Free Report) and Centennial Resource Development, Inc. , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NGL Energy Partners’ bottom line for second-quarter 2020 is expected to rise 92.7% year over year.

Centennial Resource’s second-quarter earnings estimates have improved over the past 30 days, with two upward estimate revisions and no downward movement.

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