ConocoPhillips (COP) has set a capital budget of $15.5 billion for the year 2012. Approximately 90% of this amount will be allocated toward exploration and production (E&P). This includes $2.2 billion for worldwide exploration, $0.4 billion of capitalized interest and $0.7 billion for the company’s contributions to the FCCL business venture and loans to other affiliates.
Approximately 60% of the upstream expenditure is directed at the oil sands in Canada and liquids-rich plays in the Lower 48 like the Eagle Ford shale and in the Permian, Bakken and Barnett fields.
Simultaneously, ConocoPhillips will be lowering its capital spending in Alaska from the 2011 levels with deeper focus on its existing fields at Prudhoe Bay and Kuparuk, besides fields on the Western North Slope.
The remaining 40% of the upstream expenditure will be directed toward Europe, Asia Pacific and Africa wth funds being used for further development of the coal bed methane to the LNG project being developed by Australia Pacific LNG and for the development of new fields offshore Malaysia and Indonesia.
In the North Sea region, ConocoPhillips will spend on existing and new opportunities in the Greater Ekofish area, the Greater Britannia fields and on the development of the Jasmine and Clair Ridge projects.
Evaluation of the Poseidon discovery in the Browse Basin, offshore Australia, and the Tiber and Shenandoah discoveries in the Gulf of Mexico are also on the cards for 2012. Plus, the company plans to explore new prospects in the Gulf of Mexico and Kazakhstan.
ConocoPhillips will expend around $1.2 billion for its refining and marketing segment with more than 80% directed toward U.S.businesses, with the remaining $0.2 billion allocated for international operations.
The company maintained its asset divestiture program of $15–$20 billion through 2010-2012. Of this, approximately $10.5 billion will be raised by the end of 2011.
For 2011, the company plans to repurchase 11% of its outstanding shares for $11 billion. The company also received an approval of its board of directors to fund a $10 billion share repurchase program from proceeds of next year’s asset sales.
ConocoPhillips holds a Zacks #3 Rank, equivalent to a Hold rating for a period of one to three months. For the long term, we maintain a Neutral rating on the company. Unlike ConocoPhillips which has separated its downstream business to unlock value, companies like ExxonMobil Corporation (XOM) and Chevron Corporation (CVX) continue to operate as a single unit.
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