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COP Unsure of Alaska Plant Revival

Zacks Equity Research

The Houston-based global exploration and production company ConocoPhillips (COP) has been requested by the state of Alaska to reopen its abandoned Kenai Peninsula liquefied natural gas (LNG) plant.

The revival of the plant is likely to encourage other petroleum companies to explore and invest in Cook Inlet, which borders Kenai Peninsula.

Early this month, the Texas-based company received a letter from the acting Natural Resources Commissioner inviting it to apply for a three-year federal LNG export license for the plant at Nikiski, around 70 miles southwest of Anchorage.

However, the request relating to an extension of its export license was turned down by ConocoPhillips in March. The company said that it would mull over seeking a new license if local gas market needs were met and provided there was adequate gas to export.

Per the acting Natural Resources Commissioner, the local utility demands are well supported through current contracts till 2018, but concerns over future exploration exist. Given the dearth of market opportunities for gas discoveries, companies lack the motivation to invest in continued exploration activities.

The Cook Inlet is estimated to hold trillions of cubic feet of gas, according to the U.S. Geological Survey. ConocoPhillips along with other interested parties is pondering over evaluating the basin to find out the feasibility of resuming LNG export

The acting Natural Resources Commissioner has also asked ConocoPhillips to set up equipment that could be used to carry LNG throughout Alaska. The plant could back up plans for supplying North Slope natural gas to Fairbanks and other interior Alaska communities.

ConocoPhillips carries a Zacks Rank #3 (Hold). However, Zacks Ranked #1 (Strong Buy) stocks – China Petroleum & Chemical Corp. (SNP), SM Energy Company (SM) and Range Resources Corp. (RRC) – are good buying options for the short term.

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