An integrated energy company, ConocoPhillips (COP) is on track in its $10 billion divestiture program with completion of the sale of its 50% partnership interest in a truck stop joint venture (CFJ Properties) to Pilot Travel Centers for $626 million. In addition, Conoco also negotiated a long-term fuel supply deal with Pilot.
CFJ Properties, a 50:50 joint venture between ConocoPhillips and Flying J Inc., owns and operates about 100 travel truck plazas. With approximately 170 travel plazas, Flying J is a leading truck-stop operator throughout the U.S. and Canada.
This transaction is a part of the company’s U.S. marketing strategy to minimize its ownership of motor-fuel stations while securing long-term markets for the oil company’s refined products.
ConocoPhillips is in the midst of its two-year $10 billion asset disposition program designed to reduce debt and improving return on capital employed (ROCE). The sale illustrates the company’s endeavor to improve shareholder return through constant focus on disciplined capital investment, strengthening financial position and higher return on capital.
Recently, Conoco also completed the sale of its 9.03% interest in a Canadian oil sands project (Syncrude) for $4.65 billion to Sinopec International Petroleum and Production Co. We believe Conoco’s ability to generate free cash flow from its fundamental portfolio and recent developments in the divestiture program will move the needle positively for shareholders.
However, with the uncertainty related to the fate of the ongoing divestiture, we choose to remain on the sidelines as the company may see a downtrend in its reserves at the end of 2010 or 2011. Consequently, our Neutral recommendation remains unchanged at this stage.
Read the full analyst report on “COP”
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