ConocoPhillips: A Strategy Shift And Asset Sales Come High On Agenda
Richard Zeits • 16 Comments
Richard Zeits • 16 Comments
Thu, Dec. 1, 10:21 AM
- The price of oil pushed through $50 per barrel today, and is currently posting a 2.9% advance on the session at $50.91.
- The S&P 500 is flat and Nasdaq is down 0.45%, but the XLE has tacked on another 1.8% to yesterday's big rise.
- Mid-cap movers: Enerplus (ERF +8.2%), Southwestern Energy (SWN +7.9%), Range Resources (RRC +5.3%), Weatherford (WFT +7.1%), Ensco (ESV +8.2%), Crescent Point (CPG +6.3%).
- Among the large players: Exxon (XOM +1.1%), Chevron (CVX +2%), Shell (RDS.A +2.2%), (RDS.B +2.3%), BP (BP +2.4%), ConocoPhillips (COP +2%), Marathon (MRO +3.1%), Halliburton (HAL +2.3%)
Wed, Nov. 30, 2:30 PM
- Oil and gas names continue to surge following the news that OPEC will cut production.
- Among the 36 energy stocks in the benchmark SPDR Energy ETF, 13 are up by at least 10%: MRO +21.6%, RIG +19.6%, MUR +15.7%, DVN +15.2%, NFX +15.2%, HES +14.8%, APC +13.6%, HAL +13.6%, CXO +11.3%, XEC +10.9%, EOG +10.5%, COP +10.4%, CHK +10%.
- Continental Resources (CLR +23.6%) soars to a 52-week high, making founder and CEO Harold Hamm, already the wealthiest U.S. energy billionaire, another $3B richer.
- Offshore drillers are broadly sporting double-digit gains: ESV +24.8%, ATW +20.6%, RIGP +18.7%, SDRL +16.5%, DO +15.7%, RDC +15%.
- "For all E&P stocks, this is a bullish call for sure, because price is directly correlated with cash flow," says Luana Siegfried, energy equity research associate at Raymond James, which sees U.S. crude reaching $60/bbl by year-end.
- MarketWatch's Philip van Doorn writes that pending earnings estimate increases from analysts ought to set a floor under the energy sector and support even higher prices for oil stocks.
Wed, Nov. 30, 9:50 AM
- Shares of energy companies surge at the open, as hopes for an OPEC deal to cut production send crude oil futures soaring.
- Reports say Saudi Arabia is prepared to accept "a big hit" to production and agree to Iran freezing output at pre-sanctions levels.
- In early trading: XOM +2.2%, CVX +2.3%, RDS.A +3.6%, BP +3.4%, TOT +1.7%, STO +5.1%, PBR +8.1%, COP +7.2%, MRO +12.1%, APC +8%, DVN +12.7%, HES +9.5%, ENB +2.1%, PSX +0.8%, SLB +4.2%, HAL +8.3%, BHI +4.3%, KMI +4.8%, EPD +2.7%, ETP +3.8%, WMB +5.4%, RIG +11.3%, SE +2.2%, CHK +9.4%.
- ETFs: XLE, VDE, ERX, OIH, XOP, FCG, ERY, GASL, DIG, DUG, BGR, XES, IYE, IEO, FENY, IEZ, PXE, GASX, PXI, FIF, PXJ, RYE, NDP, GUSH, PSCE, DRIP, DDG, FXN, CRAK
Tue, Nov. 29, 10:20 AM
- Crude oil continues to slide - WTI now -3.8% at $45.27/bbl, and Brent -3.8% at $46.40/bbl - dragging oil and gas equities (XLE -2.1%) down with it.
- Iran's oil minister says he is not prepared to reduce supply, and Saudi Arabia says it would not participate in a production deal without Iran and Iraq.
- Reuters reports that Iran has written to OPEC saying Saudi Arabia needs to cut oil output to 9.5M bbl/day; Saudi has said it was prepared to reduce its production only by 500K bbl/day from current levels of 10.5M.
- In early trading: XOM -1%, CVX -1.7%, RDS.A -1.4%, BP -1%, TOT -0.3%, STO -1.8%, PBR -3.7%, COP -2.9%, MRO -4%, APC -2.8%, DVN -2.7%, HES -3.6%, ENB -2.3%, PSX -1.2%, MPC -0.8%, SLB -2.2%, HAL -2.3%, BHI -2.1%, KMI -1.4%, EPD -2%, ETP -2.2%, WMB -2.4%, SE -2.3%, CHK -2.6%.
- ETFs: XLE, VDE, ERX, OIH, XOP, FCG, ERY, GASL, DIG, DUG, BGR, XES, IYE, IEO, FENY, IEZ, PXE, GASX, FIF, PXJ, RYE, NDP, GUSH, DRIP, DDG, FXN, CRAK
Mon, Nov. 28, 9:38 AM
- ConocoPhillips (COP +1.6%) opens higher, outpacing other big energy names, as Goldman Sachs adds the stock to its Conviction List, upgrading its rating to Buy from Neutral with a $54 price target on valuation.
- Goldman says COP offers the most attractive free cash flow yield among large cap U.S. oil majors and E&Ps, as it expects capex to stay low and 2017-20 oil prices to normalize to above $50/bbl WTI, and it sees a solid capital allocation story, with COP growing the dividend, reducing its share count and paying down debt, partly through asset sale proceeds.
- COP underperformed in 2016, largely on the back of its 66% dividend cut, but the firm expects capital returns to grow again in 2017-18, with 5%-10% annual dividend growth and a $1B/year buyback.
Fri, Nov. 18, 2:27 PM
- ConocoPhillips (COP +2.9%) says it is in the process of selling its Kenai liquefied natural gas export terminal in Alaska, and will open a "data room" associated with the sale in January.
- COP says its current focus is on North Slope operations; COP has a nearly $1B capital budget for Alaska in 2016, and has accepted delivery of two new drilling rigs this year.
- COP says it has not exported any gas so far in 2016 because of market conditions, but the Kenai plant remains operational and ready to resume exports.
Tue, Nov. 15, 3:48 PM
- CLSA upgrades Chevron (CVX +2.3%) and EOG Resources (EOG +2%) while downgrading BP (BP +1.8%) and ConocoPhillips (COP +2.4%) following Q3 group earnings results that were better than expected, mainly benefiting from self-help initiatives.
- The firm upgrades CVX to Buy from Outperform with a $127 price target, believing the company’s strategic shift towards its short-cycle upstream business is a game changer and that the Permian update in its Q3 conference call is "just the beginning."
- CLSA upgrades EOG to Outperform from Underperform with a $105 target, as the Yates transaction in September creates a platform with 6K premium locations, and sees significant further upside underpinned by EOG’s technical innovation and operational excellence.
- However, BP is downgraded to Outperform from Buy with a $37 target, as BP has done a remarkable job in positioning for long-term growth with cash breakeven at $50-55/bbl, but the firm awaits clarity on a Lower 48 strategy.
- Finally, COP is cut to Underperform from Outperform with a $47 target, as the lack of meaningful Delaware/Midland Basin shale exposure is a key negative vs. other large-cap E&P peers.
- Oil and gas stocks are broadly higher today in a very strong session for crude oil.
Fri, Nov. 11, 5:25 PM
- ConocoPhillips’ (NYSE:COP) plan to sell “stranded” assets was the one big surprise from the company’s investor update yesterday, Citigroup analysts say, as they continue to rate the shares a Buy.
- Citi says the core elements of COP’s strategy update had by and large been flagged to the market through the course of this year - rebalancing to a lower oil price, boosting profitability, and a promise to increase returns to shareholders - but "one key, new, and different element" is the promise to sell $5B-$8B of North American gas assets - which the firm says the market regards as stranded with essentially no value - and return $3B of the capital to shareholders.
- COP is looking to demonstrate that there is some value in its stranded portfolio, targeting North American gas where there are buyers who believe in price recovery, which Citi says suggests that the majority of the $5B-$8B in deals is close to being concluded.
Thu, Nov. 10, 3:33 PM
- ConocoPhillips (COP -1.8%) is lower after saying it expects to increase production by no more than 2% next year, in a sign of how many companies are only cautiously stepping up activity following a stabilization in oil prices.
- In an investor presentation highlighting its plans for the coming year, which includes 4% lower capex Y/Y to $5B and a goal of $5B-$8B in asset sales, COP emphasizes that its priorities - in order - are maintaining production, paying a growing dividend, cutting its debts, buying back shares and only then investing for growth.
- CEO Ryan Lance says he expects a world of “lower, more volatile prices," and that COP has “shifted our mindsets to be a business that is managed for free cash flow," making it more resilient to downturns in the cycle, and that “You can’t count on rising commodity prices to bail out your business model. You have to position your business for the cycle.”
- Lance says COP’s plans would allow it to achieve its priorities at $50/bbl crude, including cutting its debts, which will total ~$27B at year-end, to $20B by the end of 2019.
- COP's focus is smaller than earlier this decade, whenit operated in more than 28 locations around the world; today it operates in 14, a smaller portfolio that executives say will further help focus capital.
Thu, Nov. 10, 7:08 AM
- The asset sale program will be focused primarily on North American gas assets.
- Also targeted are debt reduction of $20B, a 20-30% payout ratio of operating cash flow to shareholders, and 2017 capex of $5B, down 4% from this year, and 50% lower than what was spent in 2015.
- Analyst and Investor meeting to begin at 9 ET.
- COP -0.1%
Wed, Nov. 9, 2:57 PM
- U.S. big energy stocks surge on Trump's victory, seeing an opportunity for more oil and gas production and to cut red tape that has held back billions of dollars of investment in new projects.
- The E&P industry is looking to Trump to "undo many of the onerous regulations that have plagued our industry throughout an Obama presidency," says Continental Resources (CLR +3.9%) CEO Harold Hamm, who adds that the government's reluctance to lease federal land for drilling is holding back E&P firms.
- Trump may be considering Hamm as a possible energy secretary, in what would be the first time the job has been filled from the oil and gas industry since the position was created in 1977.
- ExxonMobil (XOM +1.2%) says it hoped Trump's administration would use "sound science" on future regulations, and ConocoPhillips (COP +3.5%) says it plans to work with Trump to protect the environment but also produce oil and gas needed to grow the economy.
- Shares of companies focused primarily on U.S. shale patches, including Oasis Petroleum (OAS +7.6%) and Whiting Petroleum (WLL +5.9%), are sharply higher.
Mon, Nov. 7, 11:58 AM
- Chevron (CVX +2%) says it has started production at its Alder high-pressure, high-temperature natural gas condensate field off the Scottish coast in the North Sea.
- The project has a planned design capacity of 110M cf/day of natural gas and 14K bbl/day of condensate, and CVX says output is set to ramp up in the coming months.
- CVX says first gas at Alder represents a significant milestone for the company and shows its commitment to investing and developing resources in the U.K.
- CVX operates Alder with a 73.7% stake, with ConocoPhillips (COP +2.2%) holding 26.3%.
Wed, Nov. 2, 3:56 PM
- Oil prices and energy equities plunged sharply as the latest inventory data showed U.S. stockpiles posted the largest weekly surge in 34 years, after the consensus outlook had pointed to only a modest rise.
- WTI crude oil -2.9% to settle at $45.34/bbl, its lowest since Sept. 27, and Brent crude -2.7% to $46.86, also its lowest since late September.
- “You could easily make the argument it’s the most bearish report of all time,” says Bob Yawger, director of the futures division of Mizuho Securities USA. “There’s nothing to support the market.”
- WTI, which already was turning lower in recent days, has now fallen 12% in just two weeks since hitting a one-year high on Oct. 19 and marks the third retreat from $50/bbl toward $40 within five months.
- Among individual stocks: XOM -0.1%, CVX -0.9%, RDS.A -2%, BP -0.2%, TOT -2.4%, COP -0.6%, MRO -3.6%, HES -1.3%, PSX -2.3%, MPC -3.4%, VLO -1.9%, SLB -1%, HAL -0.5%.
- ETFs: USO, OIL, XLE, UWTI, UCO, VDE, ERX, DWTI, OIH, SCO, XOP, BNO, DBO, ERY, DIG, DTO, USL, DUG, BGR, IYE, IEO, FENY, DNO, PXE, FIF, OLO, PXJ, RYE, SZO, NDP, GUSH, DRIP, DDG, FXN, OLEM
Mon, Oct. 31, 12:49 PM
- ConocoPhillips' (COP -2.6%) subsidiary in Senegal agrees to sell its 35% stake in three exploration areas to Woodside Petroleum (OTCPK:WOPEF, OTCPK:WOPEY) for ~$350M.
- COP says the appraisal and exploration phase went well but that the move is part of its strategy of prioritizing assets away from deepwater exploration efforts; meanwhile, Woodside moves into oil basins in the region that are considered one of the more lucrative prospects in West Africa.
- The deal comes after COP's partner in the SNE deepwater oilfield, FAR Ltd., in August attempted to thwart a deal between COP and Woodside, claiming COP had breached their joint operating agreement.
Thu, Oct. 27, 8:39 AM
- ConocoPhillips (NYSE:COP) +0.7% premarket after reporting a smaller than expected Q3 loss and providing an upbeat full-year outlook.
- However, Q3 total revenue and other income fell 13% Y/Y to $6.52 billion, below analyst estimates for $6.82B.
- COP raised its production outlook for the second straight quarter, and now sees the midpoint of its FY 2016 production guidance to 1.565M boe/day, citing strong performance form the U.S., excluding Alaska, Europe and Asia Pacific; Q3 output reached 1.557M boe/day.
- COP also lowered its 2016 capex guidance to $5.2B from $5.5B; capex has been cut by nearly a third from the original 2016 forecast of $7.7B after $10.1B in capital spending for 2015.
Thu, Oct. 27, 7:03 AM