Conoco Sells Syncrude Stake – Analyst Blog

ConocoPhillips (COP) has entered into a definitive agreement with Sinopec (SNP) to sell its 9.03% interest in the Canadian Syncrude operations for $4.65 billion. The deal is subject to both Canadian and Chinese government approvals and is expected to be closed in the third quarter.

The announcement of its plans had come at its annual analyst meeting in New York late last month. The company had said that it will sell approximately $10 billion of assets in 2010 and 2011, including its interest in Syncrude.

 

Apart from the interest in Syncrude, Conoco also intends to sell its interest in Rex Pipeline, 10% of its Lower 48 and Western Canada portfolio and its remaining U.S. marketing assets.

 

The sale of exploration and production (E&P) assets will have a negative impact on its overall production over the next few years. While the company’s proved reserves increased slightly at the end of 2009 from the end of 2008 (10.3 billion barrels of oil equivalent or BOE vs. 10.2 billion BOE), this deal also negatively impacts the proved reserves for this year and the next.

 

Despite this, Conoco anticipates per share production growth of 3% in 2010 and 2011 and 3−5% in the following years.

 

Though debt reduction is a major reason behind these asset sales, the company also wants to raise shareholder value by increasing dividend and new share buyback program.Price of ConocoPhillips shares rose 1.16% to $55.96 at Monday’s closing.