ConocoPhillips slashes capex, plans to raise up to $8 billion from asset sales

Houston-based energy giant and LNG player ConocoPhillips plans to further reduce capital expenditure and to sell up to $8 billion in natural gas assets.

ConocoPhillips on Thursday revealed a $3 billion share repurchase program and the initiation of a $5 to $8 billion divestiture program, which will focus primarily on North American natural gas.

These moves are part of the company’s plans to better position itself in a “lower, more volatile price environment.”

“We believe our plan offers a differentiated strategy within the E&P sector that is focused on free cash flow generation and improving returns to shareholders. We have positioned ConocoPhillips to deliver double-digit shareholder returns across a range of commodity prices through a combination of peer-leading shareholder distributions and high-return investments,” Ryan Lance, chairman and chief executive officer said in the statement.

The actions announced Thursday will allow ConocoPhillips “to achieve our value proposition priorities at Brent prices of about $50 per barrel,” Lance said.

“These priorities include a debt target of $20 billion, a 20 to 30 percent payout of operating cash flows to shareholders, and modest production growth to drive margin and cash flow expansion. In setting out these priorities, our goal is to have strong resilience to low commodity prices with the ability to capture upside during periods of higher prices.”

The company’s 2017 operating plan includes capital expenditures guidance of $5 billion, a decrease of 4 percent compared with 2016 guidance of $5.2 billion and more than 50 percent lower than 2015 capital expenditures and investments of $10.1 billion.

Spending in 2017 will focus primarily on “flexible unconventional development programs in the Lower 48, conventional projects in Europe, Asia Pacific and Alaska, and base asset maintenance,” the statement said.

Approximately $0.6 billion is included for exploration, which is primarily focused on unconventionals, appraisal of the Barossa discovery, and the closeout of deepwater Gulf of Mexico and Nova Scotia drilling obligations.

Full-year 2017 production is expected to be 1,540 to 1,570 thousand barrels of oil equivalent per day (MBOED), which results in flat to 2 percent growth compared with expected full-year 2016 production of approximately 1,540 MBOED when adjusted for 2016 expected dispositions, the statement reads.

“Growth is expected to come primarily from ramp up at APLNG in Australia, Surmont 2 in Canada and Kebabangan in Malaysia, as well as increased activity in the Lower 48 unconventionals, partly offset by normal field decline. The company’s production outlook excludes Libya.”

Guidance for 2017 production and operating expenses is approximately $5.2 billion, which results in adjusted operating cost guidance of $6 billion, a 9 percent improvement compared with 2016.

LNG World News Staff