ConocoPhillips COP gave a detailed outline of its financial priorities and operating plan at its Analyst and Investor Meeting that was recently held in New York.
The company reiterated its aims to offer attractive annual returns to shareholders through a compelling dividend, predictable growth and with importance on margins and financial returns. By the end of 2016 ConocoPhillips expects to lower operating costs by $1 billion from that in 2014. Lower lifting costs, improvements and standardization of processes, and lower general and administrative expenses will contribute to cost reduction.
ConocoPhillips gave details of a three-year investment plan, wherein capital expenses will be about $11.5 billion annually. Per this plan, the company projects to increase capital for development programs by about 50%, mainly in the North American unconventionals. This is in keeping with the view that the major project spending is likely to decline by about 45%.
In 2015, the volume is likely to grow by 2–3% and is anticipated to reach 1.7 million barrels of oil equivalent per day by 2017. The production growth during this period is expected from the company’s Asia Pacific and Middle East, Canada and Lower 48 segments. However, the company’s outlook for production excludes Libya. Production from the Alaska and Europe segments is estimated to remain comparatively flat.
At the meeting, the company also provided details of its captured resource base of 44 billion barrels of oil equivalent, which are mainly low cost of supply resources in OECD countries. These resources provide a wide range of long-term growth opportunities.
Recently, ConocoPhillips cut the number of its Canadian personnel by 7% or about 200 employees. It also announced that the annual capital expenditures for 2015 have been reduced to about $11.5 billion from $16 billion planned earlier. The falling oil price, which has witnessed a 60% slide since Jun 2014, has compelled energy companies to resort to job cuts. This is expected to help them reduce their capex and adjust to lower cash flows.
ConocoPhillips currently carries a Zacks Rank #3 (Hold). Better-ranked stocks from the oil and gas sector include Phillips 66 Partners L.P. PSXP, Western Gas Equity Partners, L.P WGP and Hallador Energy Company HNRG. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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