An integrated oil company, ConocoPhillips (COP) intends to shed 50% interest in six of its Canadian oil sands holdings. Currently, the properties yield 12,000 barrels a day from an estimated 30 billion barrels of bitumen in place. The assets have a capability to produce in excess of half a million barrels a day in due course of time.
ConocoPhillips has booked Scotia Waterous to search for a partner for its Alberta properties. With a total acreage of 715,000 acres, ConocoPhillips is seeking a partner for its properties of Thornbury, Clyden, Saleski, Crow Lake, McMillan Lake assets, along with the one in Surmont.
One of the properties situated in the south of the oil sands hub of Fort McMurray, Alberta, in Surmont is in joint venture with France-based Total SA (TOT). The project generates around 25,000 barrels a day (bpd) and is run on steam-basis. Commencing from 2015, the partners are trying to increase the capacity to 136,000 bpd.
ConocoPhillips believes that there is an increased interest for Canadian energy assets, in particular from the Asian region. To take full advantage of this boom, the company wants to sell a part of its holdings in oil sands at a time when investments in oil sands are growing.
This deal is not the first for ConocoPhillips. In 2010, the company sold a part of its interest in the Syncrude Canada oil sands mining venture to China Petroleum & Chemical Corp or Sinopec (SNP) for $4.7 billion.
We appreciate ConocoPhillips’ emphasis on creating shareholder value through operational excellence, strong project execution, dividend payout and utilization of its excess cash flow to repurchase shares. Furthermore, strong proceeds from asset sales, disposal of low-profit generating properties and cancellation of potentially less profitable projects adds to the company’s drive to sustain its growth trajectory.
ConocoPhillips holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. We maintain a Neutral recommendation on the stock for the long term.
CONOCOPHILLIPS (COP): Free Stock Analysis Report
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