Natural Gas Weakness
ConocoPhillips offered its view on how the current natural gas pricing doldrums is shaping its decision-making.The company said that its spending plan for 2012 doesn't allocate much to new gas drilling, totaling no more than a few hundred millions of dollars (that's versus a total capital spending plan of $15.5 billion). And even at this relatively low level of spending, ConocoPhillips is "pretty closely looking at" whether it makes sense given the recent pricing developments, said Jeffrey Wayne Sheets, ConocoPhillip's chief financial officer, during the earnings conference call. That should tell you something about the economics of natural gas drilling -- right now, it's a losing proposition. Sheets said that production shutdowns, like those announced by Chesapeake and EQT (EQT), may be coming. ConocoPhillips' fourth-quarter natural gas production in Canada and the lower 48 states was around 2.5 bcf (billion cubic feet) a day. Across that portfolio, roughly two-thirds of the drilling activity and economics are driven by liquids production and not natural gas prices, and that's good news since it's not going to make sense to shut in this production. This would imply 1.5 bcf of the 2.5 bcf total won't be impacted by current natural gas pricing. On the remaining production, ConocoPhillips has production partners, and those partners have different views about shut-ins. One of the key issues related to the Chesapeake shut-in announcement was whether the rest of the industry
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