Major global integrated oil company ConocoPhillips (COP) announced a capital budget program of $13.5 billion for 2011.
The lion’s share of this financial plan, about $12.0 billion or 90%, will be expended toward exploration & production. Approximately $6.0 billion will be burnt up in developing and expanding the liquids-rich resource plays of North America.
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).
Spending on capital projects in Europe, Asia Pacific and Africa will add up to the remaining $6.0 billion. The funds will be apportioned between the various existing projects and new finds in the North Sea region, development of onshore activities in Africa, Caspian Sea ventures and different endeavors in the Asia Pacific section.
The Refining and Marketing segment of ConocoPhillips has been allotted approximately $1.2 billion, 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.
Of the total capital program, about $300 million has been assigned to global information systems and corporate facilities.
ConocoPhillips’ 2011 capital budget is significantly higher than the expenditure of $10.7 billion incurred during 2010. The program, however, is in line with the company’s strategy of supporting operations with high-yielding returns and strengthening upstream business profile.
We remain optimistic on ConocoPhillips, given its leading positions in both natural gas and heavy crude oil in North America, new exploration efforts and growing exposure to lucrative international regions.
However, we maintain our Neutral rating on the stock on account of unstable oil and gas fundamentals and a volatile macro backdrop. ConocoPhillips, which competes with peers, such as, BP plc (BP) and Exxon Mobil Corp. (XOM) currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.
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