ConocoPhillips: A Strategy Shift And Asset Sales Come High On Agenda
Richard Zeits • 16 Comments
Richard Zeits • 16 Comments
Today, 9:59 AM
- ConocoPhillips (COP +1.5%) opens higher despite reporting a bigger than expected Q2 loss, the company's fifth straight quarterly loss, and a 36% Y/Y revenue decline to $5.58B.
- COP cuts its 2016 capital spending budget for the third time this year, to $5.5M from a previously stated $5.7M; COP had lowered its guidance in each of the last two quarters.
- Q2 production fell by 49K boe/day to 1.546M boe/day, due to normal field decline, dispositions, planned downtime and the impact of the wildfires in Canada; COP increased its full-year production guidance to 1.57M boe/day from 1,54M.
- COP's total realized price was $27.79/boe, down from $39.06 in the year-ago period.
- COP says it cut operating expenses by 19% to $1.8B in the quarter from $2.2B in the same period last year.
- COP says it completed $200M of divestitures during Q2, bringing the H1 total to $400M; COP cut its debt by $800M in the quarter, and says it remains on track toward $1B of asset sale proceeds.
Thu, Jun. 16, 10:02 AM
- Nearly 300 employees on oil and gas drilling rigs off Norway could go on strike unless a labor deal is agreed by June 22, the country's state-appointed mediator says.
- Rowan's (RDC -2.9%) Viking and Gorilla rigs would be affected, according to one of the unions involved in the wage talks; it is not clear if other rigs would be affected.
- The Gorilla rig works for ConocoPhillips (COP -2.8%), which says the rig is engaged in the plugging of abandoned wells on its Ekofisk field in the North Sea and that oil output would be unaffected by a strike; the Viking does work for Swedish oil firm Lundin (OTCPK:LNDNF).
Wed, Jun. 8, 2:24 PM
- The wildfires in Alberta are again affecting crude oil production, as Cenovus Energy (CVE -2.8%) and Canadian Natural Resources (CNQ -3.2%) evacuate oil facilities near Pelican Lake.
- Flames advanced yesterday to within 1 km of CVE's main Pelican Lake complex, forcing the company to shut down its heavy oil plant and evacuate 118 staff; the site produced ~23K bbl/day of heavy oil during Q1.
- CNQ also temporarily halted some production at its 49K bbl/day Pelican Lake operations and evacuated non-essential staff.
- Further north, oil sands producers have begun restarting operations after the fires forced last month's shutdown of more than 1M bbl/day of production in the Fort McMurray region; ConocoPhillips (COP +0.2%) says 10% of its wells have been activated at its 60K bbl/day Surmont project, with most of its ~700 employees expected onsite by the end of this week.
Thu, Jun. 2, 11:45 AM
- ConocoPhillips (COP +0.3%) is BofA Merrill Lynch analyst Doug Leggate's "top free cash yield idea" in the oil and gas E&P group, despite COP's reduced dividend yield after the dividend cut earlier this year, as he shifts focus from top dividend payers such as Exxon Mobil (XOM -1.5%) - which the analyst downgraded to Neutral from Buy - to yield plays.
- Leggate says COP is well positioned to deliver outsize returns to shareholders via buybacks, while “potentially supporting competitive ‘growth per share’ that bridges the gap between the majors and the E&Ps.”
- Because of under-investment in both short and long cycle oil and gas projects, the analyst believes "the commodity discussion is poised for a shift towards one of undersupply and increased risk that oil prices overshoot to the upside. In that scenario, Big Oil would likely lag more levered peers, further positioning COP as our preferred major oil name.”
- BofA maintains a Buy rating for COP with a $71 price target.
Mon, May 16, 2:36 PM
- ConocoPhillips (COP +3.1%) is an “underappreciated and attractive” way to a crude oil price recovery, Deutsche Bank analyst Ryan Todd says in maintaining a Buy recommendation for the company and a $62 price target.
- While COP’s oil leverage is largely understood, the company has not been able to shed its reputation as a high cost producer, but with cash outlays per barrel reduced by ~53% ($53/boe vs. $25/boe) from the 2014 peak, Todd sees COP with the lowest cash breakeven ($43-$45/bbl) of anyone in his coverage from 2017 forward.
- The analyst also notes COP's stable multi-year production outlook, peer-leading free cash flow sensitivity to a moderate recovery in crude, and a strong commitment to return excess cash to shareholders.
- Now read ConocoPhillips dividend still not completely safe
Tue, May 10, 3:59 PM
- ConocoPhillips (COP +2.8%) CEO Ryan Lance says the company has looked at using derivatives to lock in oil prices in the volatile market but says it is too big to hedge all of its output, Reuters reports.
- Lance also said at COP's annual shareholder meeting that the company's diverse portfolio around the globe means it sells output against a handful of different oil and gas price benchmarks, providing it with some "natural" hedging.
- Two proposals put forth by shareholders at the meeting failed, one requiring COP to be more forthcoming about political lobbying, especially on climate change issues, and another curbing the role that reserves growth plays in executive bonuses.
- Now read Selling ConocoPhillips with 30% gains will be a mistake
Mon, May 9, 3:19 PM
- Crude oil prices erased all of Friday's gains and more, as June futures ended the pit session 2.7% lower to $43.55/barrel even as the massive wildfires in the heart of Canada's oil sands continue to spread, albeit more slowly.
- But positioning in the oil market is very stretched, and analysts say speculators already hold the largest number of wagers for a rise in WTI futures since last summer and near-record high bullish bets on Brent, so the scope for further gains was limited without more clarity on the extent of damage to oil facilities or supply outages.
- The sacking of Ali al-Naimi as head of Saudi Arabia’s oil ministry also may be a reason why oil prices failed to maintain early gains, as successor Khalid al-Falih, the former head of Aramco, is expected to follow the strategy of protecting the country’s market share.
- Yesterday, Cnooc’s Nexen (NYSE:CEO) operations to the south of Fort McMurray reportedly suffered minor damage, while Suncor (NYSE:SU) says its facilities have not been damaged and is beginning to implement a plan for a return to operations.
- Other relevant tickers: RDS.A, RDS.B, XOM, IMO, COP, OTCPK:HUSKF, OTCPK:ATHOF, CNQ, CVE, OTCPK:MEGEF, ENB, OTCPK:IPPLF, OTC:KEYUF, TRP, PSX, STO
- ETFs: USO, OIL, UWTI, UCO, DWTI, SCO, BNO, DBO, DTO, UGA, USL, DNO, OLO, UHN, SZO, OLEM
- Now read Fort McMurray situation getting better - oil markets daily
Fri, Apr. 22, 12:42 PM
- ConocoPhillips (COP +2.5%) says it plans to drill additional wells and other infrastructure to boost production at its CD5 site in the Alpine field in Alaska's National Petroleum Reserve.
- COP estimates the cost of the new project at ~$190M and says the additional wells and infrastructure will bring the site to its full design and permit capacity.
- The site is the first commercial oil development on Alaska Native lands within the reserve; it began producing oil in October, with first oil from the next phase of drilling expected in Q3 2017.
- Now read Don't let ConocoPhillips' well-deserved rally fool you
Tue, Mar. 29, 11:21 AM
- ConocoPhillips (COP -2.4%) reportedly is planning to shut down its Lincolnshire gas pipeline and Theddlethorpe gas terminal in the North Sea, which would cut the U.K.'s gas capacity by ~10%.
- Lincolnshire is one of the 15 largest gas pipeline networks in the U.K. section of the North Sea, and shuttering the operation would impact at least 10 oil fields that are dependent on the Lincolnshire infrastructure.
- COP says it is in talks with North Sea regulators about its plans.
Fri, Feb. 26, 1:10 PM
- Chevron's (CVX -0.1%) Aa1 credit rating is placed on review for a downgrade at Moody's, which predicts negative free cash flow this year and next, and possibly even into 2018.
- Moody’s expects CVX's negative free cash flow exceeding $15B in 2016, despite the company's planned 25% capex cut, after recording negative free cash flow of ~$16B in 2015.
- Newly downgraded at Moody's: Occidental Petroleum (OXY +1.2%) to A3, EOG Resources (EOG -2.3%) to Baa1, ConocoPhillips (COP +4.5%) to Baa2, Apache (APA +5.1%) to Baa3, Marathon Oil (MRO +5.5%) to Ba1, Devon Energy (DVN +4.6%) to Ba2 and EnLink Midstream Partners (ENLK +4.9%) to Ba2.
- Earlier: Exxon's AAA rating affirmed by Moody's but outlook turns negative (Feb. 25)
Wed, Feb. 24, 10:58 AM
- Oil and gas companies must plan for a "worst case" scenario if oil prices stay lower for longer, ConocoPhillips (COP -2%) Chairman/CEO Ryan Lance told attendees at the IHS CERAWeek Conference.
- Lance says he has withstood six industry downturns and that the market will recover, but he also believes CEOs cannot run their companies based on the idea of oil prices recovering at year-end.
- Companies will need to ensure they maintain the technical capability to run major projects once oil prices recover, and the industry cannot lose its current focus on margins when prices recover, Lance also says.
- ETFs: XLE, VDE, ERX, OIH, XOP, ERY, FCG, DIG, GASL, DUG, XES, BGR, IYE, IEO, IEZ, FENY, PXE, FIF, PXJ, RYE, NDP, FXN, DDG
Mon, Feb. 22, 3:21 PM
- Bernstein analyst Bob Brackett tags Chesapeake Energy (CHK +17%) and Encana (ECA +5.6%) as the E&P stocks that could cause the most pain for investors going forward.
- CHK already has suffered plenty, but Brackett writes thinks it has the highest risk of bankruptcy in his coverage universe, and the current stock price "essentially shuts it out of the equity market,” while ECA is most likely to issue equity and see its credit rating cut to junk status.
- Meanwhile, Brackett thinks EOG Resources (EOG +3.8%) is the safest play due largely to a returns-oriented culture and relative conservatism in the early part of this cycle, while ConocoPhillips (COP +4.4%) and Devon Resources (DVN +9%) already have made their big moves - a big dividend cut and an equity raise, respectively - which relieves the pressure on management to take further drastic steps.
Fri, Feb. 5, 10:38 AM
- ConocoPhillips (COP -5.5%) continues its slide following yesterday's dividend cut decision just two months after the company said the “dividend remains the highest priority use of our cash.”
- Scotia Howard Weil downgrades COP to Sector Perform from Sector Outperform with a $40 price target, lowered from $55, seeing a near-term window where the story will screen poorly relative to other options in the energy space.
- RBC Capital cuts its price target to $50 from $61, expecting investors to remain on the sidelines for now with the dividend more or less in line with its E&P peers (Briefing.com).
- UBS cuts its price target to $38 from $42, noting that COP materially lags Chevron in production growth as well as dividend yield while trading at a ~2x premium.
- Barclays maintains an Overweight rating with a $50 price target, expecting shares to recover over the following couple of weeks and outperform peers.
Thu, Feb. 4, 8:19 AM
- ConocoPhillips (NYSE:COP) -5.8% premarket after missing Q4 earnings estimates and cutting its dividend by 66%.
- COP lowers its guidance for 2016 capex by 17% to $6.4B from a December outlook for $7.7B, primarily driven by reduced activity in the continental U.S., and guidance for 2016 operating costs by 9% to $7B from $7.7B.
- "While we don't know how far commodity prices will fall, or the duration of the downturn, we believe it's prudent to plan for lower prices for a longer period of time," says Chairman/CEO Ryan Lance.
- COP says Q4 production 1,599 MBOED, an increase of 32 MBOED Y/Y, primarily due to new production from major projects and development programs, as well as improved well performance; the total realized price was $28.54/boe, vs. $52.88/boe in the year-ago quarter.
- COP also revised its FY 2016 production guidance to be essentially flat with 2015 production of 1,525 MBOED, and sees Q1 production at 1,540-1,580 MBOED.
Mon, Jan. 25, 2:58 PM
- ConocoPhillips (COP -7.1%) has a "slightly more than 50% probability" that it will need to cut its dividend "over the next couple of quarters," unable to sustain one of the industry's most generous payouts in the face of plummeting crude oil prices and an $5.5B-$6B cash burn cash in 2015, Barclays analysts say.
- The firm also believes COP should act when the company reports Q4 results in early February and that it should reduce the dividend by at least 75%.
- Barclays thinks such a cut would dramatically improve COP’s long-term competitive position, as the company would become one of the sector’s lowest breakeven cost producers, and its improved flexibility would allow the company to grow production, cash flow and the dividend on a sustainable basis from the new baseline, even at oil prices as low as $45-$50/bbl.
Thu, Jan. 21, 3:49 PM
- Crude oil futures settled more than 4% higher on the back of perceived oversold conditions, despite a higher than expected inventory build; March WTI jumped 4.2% to settle at $29.53/bbl after trading as high as $30.25, while Brent surged 4.9% to $29.25.
- Crude prices were supported by the inventory increase in this morning's EIA report, which was less than the API’s report released on Wednesday, says Phil Flynn, senior market analyst at Price Futures Group; also, reports of Libyan oil tanks on fire eased speculation that Libya would be exporting more oil soon.
- Also supportive for prices, oil production in the lower 48 states edged lower for the first time in seven weeks, “which is at least ‘less bearish’ for the extremely oversupplied global oil market,” says Tyler Richey of The 7:00’s Report.
- The energy sector is bouncing after hitting a multiyear low yesterday: XOM +1.4%, CVX +2.7%, RDS.A +3.8%, BP +3.7%, TOT +2.3%, STO +4.5%, COP +6.2%, MRO +12.2%, APC +10.3%, OXY +2.1%, EOG +6.4%, PXD +2.7%, APA +8.2%, HES +7%, KMI +15.5%, EPD +3.3%, ETP +6.8%.
- ETFs: UNG, USO, OIL, XLE, UGAZ, UCO, DGAZ, UWTI, VDE, ERX, OIH, SCO, XOP, BNO, BOIL, GAZ, DBO, DWTI, ERY, FCG, DIG, GASL, DTO, DUG, KOLD, BGR, USL, XES, IYE, IEO, UNL, IEZ, DNO, FENY, PXE, PXI, FIF, PXJ, OLO, SZO, NDP, RYE, DCNG, FXN, OLEM, DDG
ConocoPhillips is an independent exploration and production company. It operates through six segments: Alaska, Lower 48 and Latin America, Canada, Europe, Asia Pacific and Middle East, and Other International. The Alaska segment primarily explores for, produces, transports and markets crude oil,... More
Sector: Basic Materials
Industry: Oil & Gas Drilling & Exploration
Country: United States
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