One of what is consider super majors in the oil and gas industry, ConocoPhillips (NYSE:COP) has interests in the exploration and production, refining, marketing and distribution of petroleum products. Still considered the third largest US-based integrated energy company by market cap, the company does not fall too far behind (6th) the likes of Royal Dutch Shell (NYSE:RDS.A), Exxon Mobil (NYSE:XOM), Chevron (NYSE:CVX), BP (NYSE:BP), and Total (NYSE:TOT). The U.S. accounts for 66% of ConocoPhillips sales with the rest coming from operations in 40 countries, including those in Europe, Asia Pacific and the Middle East. Large chemical operations are handled through an equally owned joint venture with Chevron. I believe ConocoPhillips to be a great part of any portfolio. With over 100 years to get it right, this company is on a firm foundation managing and controlling where needed and selling assets that no longer fit in the overall plan.
ConocoPhillips is making things happen through creative measures whether that means spinoffs, acquisitions, or partnerships. For example, instead of sitting around waiting for domestic demand for gasoline to improve and the refinement sector to take off, the company is tearing off a part of itself. The day is finally arriving when the company will spin off its refining, transport and chemicals business into an altogether separate entity. May 1st, 2012 is the expected day that the newly formed company will be named after the company's popular retail brand, Phillips 66 (NYSE:PSX). The new Phillips 66 will focus on the pipeline and chemicals business aiming to reduce exposure to the refining business because of margins impacted by high crude prices and weak demand in the retail market. Current stockholders will get two stocks for the price of one from a tax-free spinoff, but The stock already started trading on April 12th on the New York Stock Exchange on a "when-issued" basis.
Although thought to be rumors just weeks ago, Oil Price Information Service reports that Delta Air Lines (NYSE:DAL) may close a deal on the purchase of ConocoPhillips Delaware County Trainer facility any day now for between $100 million and $125 million. Delta is the front runner to purchase the 185,000-barrel-per-day facility, and if it goes through, Delta could, using a pipeline owned jointly by ConocoPhillips and Sunoco, send jet fuel to its hubs at LaGuardia and JFK airports in New York. ConocoPhillips had closed that plant in January citing market pressure caused by government requirements, weak demand for gas, and imported products.
Last month, ConocoPhillips signed a deal with Oil and Natural Gas Corporation (ONGC.BO), headquartered in New Delhi, India, to look for opportunities in deepwater exploration and explore and develop shale gas assets. This appears to be a good matchup. Oil and Natural Gas Corporation Chairman Sudhir Vasudeva stated at the time, "India has a lot of potential in shale gas. We want to exploit that with the technical expertise of ConocoPhillips." ConocoPhillips is also in talks with another oil and gas producer, Oil India Ltd about purchasing a stake in shale gas assets in the U.S.
As another example of going after opportunities, ConocoPhillips is seeking exploration rights in six new deep-water gas blocks in the Bay of Bengal following a U.N. tribunal border ruling that will now allow for more offshore oil and gas exploration in the region. Having already completed the necessary seismic studies when the company was awarded two deep-sea blocks by Bangladesh four years ago, the company is hoping to proceed with exploration work soon.
ConocoPhillips increased its output from 1.54 million barrels of oil equivalent/day (MMBOE/d) in Q3 to 1.6 MMBOW/d in Q4 2011. The growth was a result of increased output from Alaska, the U.K., Norway and from the lower 48 states. The company expects to report first-quarter production of about 1.62 million barrels of oil equivalent a day, slightly ahead of its average daily forecast of 1.55 million to 1.6 million barrels projected for 2012.
Situations like the Bohay Bay suspension in China and the suspension of operations in Libya continue to impact production levels. The realized price per barrel of oil and Natural Gas Equivalents stood at $96.4 in Q4, pushing up upstream revenues. The company managed to earn a realized price of $5.2 /Million cubic feet of natural gas despite the supply glut in the U.S, and according to the ConocoPhillips' first quarter interim update, the company's first-quarter average production is anticipated to be approximately 1.62 million barrels of oil equivalent per day.
Even still the company expects to record an after-tax gain of approximately $940 million on the sale of its Vietnam business unit. This is part of its plan of continuing to execute its asset disposition program, targeting $10 billion in proceeds during 2012. More selling is expected including the shedding of assets in the North Sea and North American conventional natural gas assets. These are expected to close in the second and third quarters of 2012.
The company continues to mature providing steady results. In 2011, ConocoPhillips reported a dividend of 2.64 USD, representing a 22.79% increase over last year. The company reported 4th quarter 2011 earnings of 2.02 per share exceeding last year's 4th quarter results by 53.03%. It had 4th quarter 2011 revenues of $59.87 billion, 4.64% below the prior year's 4th quarter results, with revenues for the full year 2011 of $244.81 billion, 23.24% above the prior year's results. Based on the current stock price, ConocoPhillips provides a 3.58% dividend yield.
ConocoPhillips is one of those energy businesses that is easy to understand. It does whatever it takes to get to the gas and liquid products and bring them to market. That may mean selling off assets, drilling where the oil is, joint ventures, anything but staying still. This senior of the industry is a definite keeper for the long haul.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.