Pure energy: The fast-paced business of marketing and moving hydrocarbons

ConocoPhillips employees are experts at safely finding and producing oil and natural gas, but the expertise doesn’t stop there. It extends beyond the wellhead, as those hydrocarbons must be marketed and transported. That’s where the roughly 250 employees in the company’s Commercial business unit come into play.

By Gus Morgan

Gulf Coast Crude Oil Scheduler Reese Nixon is always peering into the future, as ConocoPhillips sells its crude oil one to two months ahead of its actual production.

“We work on monthly cycles,” said Nixon, who primarily handles the company’s Eagle Ford crude scheduling.

For crude oil schedulers like Nixon, the goal is to move equity barrels with maximum efficiency.  

“I make sure it gets from point A to point B,” she said, “and that we get the best value for our barrels.”

Nixon is among the 250 employees who work in Commercial, a business unit that manages the company’s commodity portfolio, a mix of natural gas, crude oil, natural gas liquids (NGLs), liquified natural gas (LNG), bitumen and power.

Within Commercial, you’ll find numerous functional teams, including Gas & Power Marketing; Lower 48 Gas & Water Midstream (L48 GWM); Crude Oil & NGLs Marketing; LNG Marketing; LNG Technology & Licensing; Risk Management & Regulatory Affairs; and Finance. Commercial and the L48 GWM teams work very closely with other functional groups such as Commercial Legal, Commercial Compliance and Global Credit.

While Commercial employees market the equity production produced by the company’s exploration and production (E&P) business units, equity production is just one piece of Commercial’s portfolio. The Commercial team also markets third-party volumes, better positioning the company to satisfy customer demand while maximizing its transportation and storage capacity.

While Nixon works on the trade floor at ConocoPhillips Center in Houston — a bustling mix of traders, marketers, schedulers and analysts — Commercial also has offices in Calgary, London, Singapore, Tokyo and Beijing.

“I love the energy of the trade floor and the Commercial group,” said Nixon, who coordinates with the traders she supports, as well as keeping in touch with external counterparties, such as pipeline companies and customers.

Each morning, Nixon starts her day by analyzing spreadsheets, tracking volumes and nominations, and determining if everything is going according to plan. And she’s always checking to see if production is coming in on schedule.

“We have a great reputation within the industry,” she said. “We've earned that by being transparent, fair and ethical in all we do.”

‘Where the rubber meets the road’

U.S. Crude Oil & NGL Operations Manager Kali Alvarez, whose scheduling team includes Nixon, said Commercial’s scheduling operations are “where the rubber meets the road,” noting that while traders make the deals, delivery remains a vital part of the fulfillment process.

“My team is super focused on making sure our deliveries happen, and we are always keeping an eye out for where we can capture savings on transport,” she said. “We want to make sure we capture the best netback for our shareholders and deliver a great product for our customers.”

Alvarez’s team collaborates with the E&P business units to manage and monitor production, watching for any deviations in the production forecasts, adjusting plans if necessary. The priority is customer service, and Commercial is known for its reliability and first-rate customer care.

For Alvarez, working in such a fast-paced, dynamic environment is part of the appeal.

“We are a high-energy group,” she said. “It’s not for the faint of heart. But it’s a fun place to be. You’re never going to be bored in Commercial. We all depend on each other for success, and we work together every day to that end.”

Marketing Alaska North Slope Crude

Just a stone's throw away from Alvarez's desk, Alaska North Slope (ANS) Crude Marketing Director Cherie Hancock is busy conversing with ANS Crude Oil Scheduler Vladimir Babikov, discussing field production.

Hancock markets the company’s crude oil production out of Alaska, primarily selling it to refineries in the Pacific Northwest and California, with occasional shipments going to Hawaii, and even Asia.

“My primary role is to achieve the highest netback for the company’s shareholders,” said Hancock, who spends much of her day trying to decipher market dynamics. This means understanding what crudes are available and how much they're selling for in the marketplace. 

When she’s not marketing, she’s managing day-to-day business, checking on the company’s five Polar Tankers, making sure deliveries are running on time. She’s also checking with what’s happening in the company’s North Slope fields and if the production forecasts are meeting expectations.

During the trading cycle, Hancock negotiates with counterparties, arranging transactions that would deliver ConocoPhillips crude to them via one of the company’s five Polar Tankers, double-hulled vessels that are loaded at a terminal in Valdez, Alaska.

Asked why customers choose to do business with ConocoPhillips, Hancock said: “We have a great reputation. We are reliable, flexible and known for our safety.”

Adding value uplift: Commercial Finance

At the opposite end of the trade floor from Hancock's desk, you'll find Commercial Finance Manager Laurie Werth, who manages a team that delivers crucial analysis on business performance, building on the work produced by Commercial Accounting.

Werth’s job role gives her a holistic view of Commercial’s business activities. Her global team, which supports Asia, the United Kingdom and Canada, accounts for transactions, manages payables and receivables, and closes the books along with Commercial Services in Houston. In addition, they provide Finance & Performance Analysis support for the business by analyzing activities from a financial perspective and producing performance reports in support of business activities. 

“My team helps to tell the story of the business,” said Werth, who savors the energetic atmosphere and high-performance mindset prevalent in Commercial. “It’s one of the most integrated, collaborative businesses I've worked in."

The Commercial organization is unique in that ConocoPhillips isn't just producing hydrocarbons, Werth said, but taking those commodities and marketing and selling them, allowing for flexibility and value uplift compared to companies that don't have a Commercial organization.

ConocoPhillips' access to different markets gives it a competitive advantage, Werth said, enabling the company to move hydrocarbons to markets that deliver the most value.

"We are one of the largest natural gas marketers in North America," she said. "Not only do we manage the sales of some of our equity production for ConocoPhillips, but we have a significant footprint with third-party marketing as well." 

Having pushed our technical levers to the max to reduce cost of supply, for me the value that Commercial brings is now our critical advantage.

Providing essential back-office support: Commercial Services

Adjacent the bustling trade floor, you’ll find Joseph Thomas, who manages Commercial Services, an organization within Finance that provides the back-office support for the Commercial trade floor, focusing on activities involving the Lower 48, Canada and Alaska business units. 

Thomas oversees a team of around 60 employees and contractors, an age-diverse group consisting of early-career professionals to employees with 30-plus years of experience.

“We're an essential part of the Commercial organization, just on the back end of it,” Thomas said. “What back-office support really translates to is the accounting. We're closing the books as well as settling with counterparties because Commercial is doing the buying and selling. This is in addition to the contract and confirmation work done by the Commercial Integration team. We're making sure the cash comes in and goes out the door timely and accurately.”

Thomas' team includes Commercial Integration, a group that manages contracts/agreements and handles confirmations. 

“This is going to be a really big year for us,” he said. “We are supporting our new crude strategy and new LNG activities, but we're also heavily involved in nxtgenERP as well as replacing some of our optical character recognition software. So that's going to be a big lift on the team. The business is changing and the tools we use on the back end are changing. But the team is up to the challenge.”

Managing risks and regulations

By its nature, trading involves risk.

This is where Commercial Risk, Data, Regulatory and Market Analysis Manager Tori Kuykendall’s team comes into play.

Kuykendall’s group ensures Commercial employees understand where and how they are creating risk and profit margin, enabling them to optimize their activities. Transparency is vital.

Working as a control function, separate of the marketers and traders, Kuykendall's team handles various tasks, including open/closed position reporting, price/data feed management, value at risk processing/reporting and daily trading profit/loss statements. This team also protects ConocoPhillips’ regulatory rights for commercial activities, such as monitoring pipeline markets to ensure fair shipping rates.

While Kuykendall wears many hats in her job role, she’s especially fond of helping young professionals in Commercial develop their analytical and marketing skills, with the goal of creating a pipeline of intellectual talent.

“My team is an important component of our Commercial new hire program, allowing recent university graduates to learn the building blocks of the business and make key contributions through their analytical efforts," she said. "The formal and informal leaders in these groups have a unique opportunity to shape our future schedulers, marketers and traders.”

Developing intellectual capital

Commercial is brimming with analytical minds such as Jenna Mossbarger, who has held numerous roles within Commercial since joining ConocoPhillips in 2012 after graduating from Southwestern University in Georgetown, Texas.

After two years of working as a risk analyst, she recently transitioned to a new role as a gas scheduler.

Mossbarger, who studied business and economics in college, relishes the problem-solving aspect of Commercial, each day bringing a fresh challenge. Her career path exemplifies Commercial’s priority on employee development, as intellectual capital provides ConocoPhillips with a competitive advantage over its peers.

If Mossbarger has a question about something, help is merely steps away, as the trade floor is an open-concept environment where traders and schedulers work side by side, enabling fast communications and fostering knowledge sharing.

“We also have such a wealth of knowledge across the trade floor in people who are so willing to talk to you and provide information and make the story make sense even when the numbers are daunting,” she said.

‘Attached at the hip’ with Lower 48

A key contributor to Commercial's success, the L48 GWM team occupies a unique functional niche, serving as a bridge to connect wellhead activities to Commercial activities.

L48 GWM Manager Garrett Rychlik’s team functions as a liaison between the Lower 48 business segment and Commercial Gas and NGL Marketing, his group securing gas-and-water gathering/processing capacity to provide flow assurance.

The team, consisting of 27 employees, aligns those gathering-and-processing commitments to production forecasts.

“Even though we are Commercial,” he said, “we are attached at the hip with Lower 48. We have to be hand-in-glove with Lower 48 to ensure flow assurance for the gas and get the highest netback price.”

The L48 GWM team, which also handles water disposal, works with just about every group in the company, including commercial, technical, operations, engineering, financial, accounting, legal, credit, land, regulatory, environmental, tax and royalty.  

“We are not the experts in these areas,” he said, “but we have to be knowledgeable about them to get the best possible outcome for the company.” 

From minimizing curtailments and gas flaring, to handling contracts and daily operational activities, Rychlik’s team focuses on adding value and reducing risk. 

“The work is challenging and rewarding because we have to be problem solvers for many things,” Rychlik said, “and a lot of times when no one knows where to go they come to us to fill in the white space between the business unit and the customers.” 

Commercial Legal and Commercial Compliance

Led by Deputy General Counsel Mark Cowan, Commercial Legal helps with commercial matters, negotiations, structuring transactions and resolving disputes. Cowan's Houston-based team consists of five other lawyers and one paralegal. This team works closely with lawyers situated in ConocoPhillips’ foreign offices in Calgary, London and Singapore.

The lawyers working in the Commercial area support all the trading and marketing deals for Commercial and L48 GWM across all commodities and jurisdictions worldwide in which ConocoPhillips is active, including gas, crude, natural gas liquids, bitumen, power and LNG. As part of this support, the lawyers negotiate pipeline, rail, truck and marine agreements with companies to deliver these commodities to the desired delivery points. Commercial Legal also provides support for the LNG Technology & Licensing team.

In addition to Commercial Legal, there is a team of compliance professionals who support the Commercial business. This team, led by John Doran and Robert Bonner, consists of seven professionals in Houston and two professionals in London, with assistance from other professionals in Calgary and Singapore.

The Houston-based Commercial Compliance team provides a variety of services to the Commercial business around the world, including trade monitoring and surveillance, client screening and regulatory support. They also provide training programs for Commercial employees to facilitate an understanding and compliance with the ever-changing laws, rules and regulations impacting the commodity business. In addition, this team handles the regulatory filings with U.S. regulators, agencies and exchanges on behalf of ConocoPhillips and its affiliates that are required in connection with the Commercial business. This group also provides support to offices making regulatory filings triggered by Commercial activities in Canada, the UK and the EU.

"The goal of the Commercial Legal and Commercial Compliance teams is to provide client service to advance the company’s Commercial business around the world by bringing a problem-solving approach to the challenges presented," Cowan said, "consistent with applicable laws and consistent with ConocoPhillips' corporate values."

Global Credit, helping the business run smoothly and profitably 

Playing a crucial role in Commercial's financial health, Global Credit is responsible for mitigating counterparty credit risk. This team consists of evaluations and reporting analysts who sit in the Treasury department, and relationship analysts who sit on the trade floor to provide timely support to the traders. This group also provides Credit support in London, Calgary and Singapore to manage regional commercial needs. 

"When an opportunity arises with a potential new counterparty, we are engaged early in the process to assess financial strength and identify potential red flags," said Global Credit Manager Michelle Gu. "We are also active participants during the negotiation phase to ensure adequate credit protection is built into the contract."

Each counterparty undergoes the credit evaluation process at least annually, Gu said, where the team analyzes the most recent financials and allocates an appropriate credit limit. And credit exposure is monitored routinely through daily rating changes notifications, monthly portfolio reviews and quarterly deep dives.

"What I am most proud of is the partnership and collaboration we have with various functions within Commercial," she said, "coming up with creative solutions to minimize losses while maximizing value to our customers, helping to build long-lasting relationships."

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ConocoPhillips’ Commercial business unit includes the following functions:

• Gas & Power Marketing – A customer-driven business organization that provides numerous commercial services for natural gas, including volume management, asset management, risk management/hedging, scheduling and back-office services. One of the top five marketers in U.S. gas sales since 2002, this marketing team manages more than 10 BCFD in global gas sales. The Power Marketing team is a top 50 marketer of electricity, providing service to ConocoPhillips’ office buildings and field operations while also delivering energy management services and other products to power plants and key customers across the U.S. ConocoPhillips has been transacting in the deregulated North American electricity markets since 2002. 
• Lower 48 Gas & Water Midstream (GWM) - GWM handles gas gathering/processing and produced water gathering/disposal. It serves as the company’s primary voice to the external midstream sector.

  

• Crude Oil & NGLs Marketing – Operates as a marketing service provider for ConocoPhillips’ various E&P business units. This team ensures offtake and improves netbacks though commercial deal development, infrastructure agreements and commercial asset optimization. Currently, the team is responsible for marketing over 1.4 MMBPD of liquids globally.
• LNG Marketing – Operating as a marketing service provider for the E&P business units, LNG Marketing is tasked with optimizing and growing the company’s global equity LNG portfolio while supporting the company’s joint venture projects in Qatar and Australia. 
• LNG Technology & Licensing – This group markets the company’s Optimized Cascade® natural gas liquefaction technology.
• Risk Management & Regulatory Affairs – This group includes position control, price/data feed management, Value at risk (VaR) processing/reporting and daily trading gain/loss and open/closed position reporting. It also protects ConocoPhillips’ regulatory rights for commercial activities.
• Finance – Members of this functional group, located in every one of the company’s global Commercial offices, account for transactions, manage payables and receivables, analyze financial activities, produce performance reports and close the books.
• Commercial Legal – Supports trading and marketing deals for Commercial and L48 GWM across all commodities and jurisdictions worldwide. The lawyers on this team negotiate pipeline, rail, truck, and marine agreements and support the LNG Technology & Licensing team.
• Commercial Compliance – Provides trade monitoring and surveillance, client screening, regulatory support and training programs for Commercial employees to facilitate an understanding and compliance with the laws, rules and regulations impacting the commodity business. 
• Global Credit – This group is responsible for mitigating counterparty credit risk. 
• Commercial Information Technology – The IT team is embedded within the business to ensure transaction flow, address system issues and manage software and hardware changes.

  Optimized Cascade® is a registered trademark of ConocoPhillips Company in the United States and certain other countries.