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ConocoPhillips Inks MoU in Alaska to Boost North Slope LNG


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ConocoPhillips (COP - Analyst Report) recently inked a memorandum of understanding with the State of Alaska to form a joint venture (JV) to buy and sell liquefied natural gas from North Slope to global markets.

Per Alaska's Gasline Development Corp. (“AGDC”), the JV’s focus would also be on marketing North Slope gas and gaining support of other major North Slope producers in the formation. To this end, ConocoPhillips and the State of Alaska are trying to rope in two other major North Slope gas owners – ExxonMobil Corporation (XOM - Analyst Report) and BP plc (BP - Analyst Report) – into the JV.

The Governor of Alaska has long been supporting the need for marketing and lining up of buyers for the North Slope gas to better project the natural gas prospect in Alaska and discuss the project the state has studied in recent years with the three energy behemoths.

ConocoPhillips has played an important role in building the Alaska’s reserves. The company boasts the longest contract in LNG history as it has been shipping LNG from Nikiski to Japan markets for over four decades. The JV will further help to develop the state’s LNG resources for the global market.

The statement issued by AGDC, if the JV is formed, it will likely include activities like seeking federal tax exemption for a state-led project, looking for low-cost financing and investor options for a project that has so far been financed by the state and the producers, finding an engineering company interested in contributing and assuming a big part of the construction risk, obtaining a gas supply contract from oil producers who have said they will sell their gas to the state at reasonable terms, and reviewing prospects for sales in the global LNG marketplace.

For years, massive amounts of North Slope gas have been yielded and re-inserted underground to pressurize reservoirs and boost oil production. However, the state and partners perceive a new role for that gas, going ahead. However, the isolated location would calls for the construction of an 800-mile gas line.

Per a recent study, the Alaska LNG project was found to be uncompetitive on a global scale. This stimulated the state’s struggle to look for a tax exemption and lower costs in other ways.

The objective of the MoU finalized between the state and ConocoPhillips is somewhat increasing market awareness about North Slope gas.

The agreement, which was signed by AGDC, would not provide a copy.

A revised appraisal that was concluded this summer estimates the construction cost at $45 billion. Exports of about 20 million tons per year have been sanctioned by the U.S. Department of Energy.

ConocoPhillips currently carries a Zacks Rank #3 (Hold). Another better-ranked players from the energy sector is EQT Midstream Partners, LP (EQM - Snapshot Report) . It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the last reported quarter, EQT Midstream delivered a positive earnings surprise of 6.72%. Coming to the earnings surprise history, EQT Midstream beat estimates in three of the last four quarters.

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