ConocoPhillips For The New Year

| About: ConocoPhillips (COP)
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ConocoPhillips (NYSE:COP) recently announced an agreement with Sinopec to study shale gas development in the Sichuan basin in Southwestern China. Sichuan gas is hot: Just before Christmas, Shell acquired Ivanhoe Energy's stake in the Zitong tight gas block. The ConocoPhillips-Sinopec agreement is just for 2 years, and is in line with China's five-year plan for gas development and the exploration focus of Chinese gas activity.

This will likely mean some profits lie in the years ahead for COP as China has both huge shale potential and high gas demand but lacks technical expertise (see a good analysis here). Analysts say this might eat into the country's liquefied natural gas (LNG) demand in the longer term, and it seems ConocoPhillips is already having some preparation for it. It is trying to sell part of its stake in the Australian Pacific LNG project in Queensland. Without a high enough LNG price in East Asia, backed by strong demand, high cost Australian gas would have a hard time competing with Qatar and American gas.

The year 2012 was a major one for ConocoPhillips in terms of reorienting its assets to accommodate the latest trends in energy markets. It divested its Nigerian assets, which garnered positive reactions from the market for the stock. It also has major positions in liquids-rich plays, namely Eagle Ford, Bakken and also Permian, as well as some interest in Canada's SAGD projects, according to its recent update.

Many transportation infrastructure projects are expected to come online in the near future, such as TransCanada's Keystone and Enbridge and Enterprise Products Partners' Seaway pipelines as well as BNSF's major expansion of its Bakken capacity in 2012. In 2013, ConocoPhillips plans to have $15.8 billion capex, more than half of which will be spent on North America's strategic assets. This will be backed by the approximately $10 billion sale of its less profitable assets.

Conoco is well-poised for a successful 2013. The stock is currently trading at the low end of its 52-week range ($50.62 - $76.29) and has been steadily increasing its dividends over the past six years.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.