Integrated energy company ConocoPhillips (COP) intends to expand its asset disposal program in order to fund its $10 billion share buyback agenda and make capital investments.
ConocoPhillips intends to buyback a total of $11 billion in shares through 2012.
Houston, Texas-based ConocoPhillips plans to sell an additional $5 billion to $10 billion worth of non-core resources by the end of 2012 as it looks for more oil and gas production and exploration by streamlining the business and improving shareholder returns. Although the company did not specify any properties, it mentioned that matured, costly projects, probably in the North Sea and North America, will be the key focus.
In October 2009, ConocoPhillips announced a $10 billion divestiture program over two years, aimed at increasing investors’ returns by means of share repurchase, debt reduction, as well as double-digit increases in dividends. The company already sold oabout $7.1 billion of assets last year as part of it. In 2010, Conoco generated $15.4 billion of proceeds in total, including $8.3 billion from its sale of Lukoil shares.
In February 2011, ConocoPhillips announced a capital budget program of $13.5 billion for 2011, 90% of which will be burnt up in exploration and development. The primary emphasis will be on the Eagle Ford Shale along with the Permian, Bakken and Barnett Fields.
Further expenditures will be directed toward Canada (SAGD oil sands projects and Western Canada gas basins) and Alaska (Prudhoe Bay and Kuparuk Fields). Conoco plans to invest $14 billion to $15 billion per year from 2012 to 2015. Internationally, the primary emphasis will be Australia followed by China and Poland.
The Refining and Marketing segment of ConocoPhillips has been allotted approximately $1.2 billion of the total 2011 spending, with a maximum of $1.0 billion to be utilized on domestic grounds. The cash will be primarily exhausted on operations associated with sustaining and improving the existing business, with focus on safety, regulatory compliance, efficiency and reliability.
The third-largest U.S. oil company by market value, ConocoPhillips, after ExxonMobil Corp. (XOM) and Chevron Corp. (CVX), said it expects its hydrocarbon production to be 1.7 MMBoe, excluding the impact of any additional asset sale. However, for the long term, Conoco expects output to grow 2% to 3% a year.
We maintain our long-term “Neutral” recommendation for the company. Conoco currently retains a Zacks #3 Rank, equivalent to a short-term ‘Hold’ rating.
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