Conoco reports Q4 results - bumps capex and dividends, not production

Melissa Kopka/iStock Editorial via Getty Images

Following the acquisition of Shell's (NYSE:SHEL) Permian assets late last year, the market has been looking forward to an updated capital allocation plan from Conoco (NYSE:COP). Pre-market Conoco provided a balanced update, while announcing a Q4 earnings beat:

• Adjusted earnings per share of $2.27 beat estimates of $2.19 for Q4.
• Additional $1b to be allocated to shareholder returns in 2022 for a total of $8b (~7% of current market cap).
• Includes a $0.46 base dividend (unchanged) and a Q2 special dividend of $0.30.
• Bumped the capex plan to $7.2b versus 2021 spend of $5.3b.
• Expects to produce 1.8mb/d in 2022 versus 2021 production of 1.6mb/d, and Q4 production of ~1.8mb/d (pro-forma).

On the back of a major acquisition, the additional $2b of capex appears measured. And with management flagging pro-forma Q4 production at nearly the same level as 2022 guidance, COP clearly isn't over-allocating to volume over value. Though with Chevron (NYSE:CVX) and Exxon (NYSE:XOM) growing 10% and 25% in the Permian, more details are needed on the COP guidance following a major Permian acquisition.

The total shareholder payout at COP is comparable to Exxon and COP is guiding to similar upstream volume growth (flat). So the market may want to see the benefits of integration at COP (Permian, APLNG, etc.) before rewarding management with a higher share price.

Comments

[Blue Blood]

OPEC also has enough cash to fund peace in the Middle East, Venezuela and Africa, now foolishly investing in a local vaccine for CV19, while SSA members addicted to aid prolong a perennial fighting season. with ongoing ethnic conflict, dispute, offensive, insurgency, coup, riot, revolution, battle, civil war, rebellion and ousting rulers.

[LivefromDaGutter]

"Though with Chevron (NYSE:CVX) and Exxon (NYSE:XOM) growing 10% and 25% in the Permian, more details are needed on the COP guidance following a major Permian acquisition."

I keep seeing this quoted, it ignores for one that CVX guided 2022 total company production DOWN 1-3% vs 2021.

Havent dug into XOM yet but could show something similar.

[secorewb]

@LivefromDaGutter I would not be surprised that overall production is down a few points.o

[Westexr]

Reading through the posts, I see a lot of dividend complainers.

About a year ago, the Saudis drove the oil price to negative $40 per barrel. And yes, I know it was the futures market. The effect was the same. And, on any given day, at any given time, the Saudis could do a repeat. They have proved it beyond any shadow of a doubt.

Since then, the COP share price is up about 350%. Sort of overshadows any dividend.

But, if a dividend is your most important criteria, I suggest XOM. Exxon Mobil proved, beyond any shadow of a doubt, they can reliably pay a fat dividend. Even when the Saudis drive the price of oil negative.

Thanks, Conoco Phillips, for creating a whole bunch of jobs in the safest, and most cost effective, place on planet Earth to produce oil, natural gas, and petrochemical plant feedstocks: The Texas Permian Basin.

Long DVN, SM, and Apache. And a flock of smaller gold, silver, platinum, rhodium, copper, and rare earths mining companies in Texas, Nevada, Montana, and the Yukon.

[LivefromDaGutter]

@Westexr If you like platinum and rhodium check out $SBSW

[Westexr]

@LivefromDaGutter Thanks. I have SBSW. I also have Group Ten Metals - PGEZF - that explores in the Stillwater area.

The Stillwater mine and recycle facility is, I think, very critical for the US petrochemical industry.

[Rex Rode]

Domestic Big Oil loves OPEC+ and continue to restrict rig count and production. As of this month, domestic producers are producing 12% less than in early 2020. They are equally to blame for your high gas prices. Since I bought COP at $29 per share, I don't really care about paying a little more at the pump but it's only fair to include Big Oil on why you're getting fleeced at the pump. Of course, the Green movement, Biden's energy policies, and global anti-oil financing is not helping either. The Saudis want/need Brent crude to be at $75 to maintain their Kingdom. Russia loves it too and of course so does Domestic Big Oil. The world is awash in oil, these players are just restricting supply to increase the price. When is everyone going to wake up?!? Long term inflation is an economic killer. If they produced 30% more, Oil would be back down in the $50's. Inflation would ease but frankly none of them care as long as they're making money. For people to think this is all because of Biden just illustrates the ignorance in the world.

[Mmarrkk]

@Rex Rode You do realize that oil companies have to make a profit, don’t you? And drilling wells in an “over-supplied” market that you referred to in different words is a stupid business move. Plus, getting permits and adhering to stupid gov’t regulations makes it crazy. So no, I’m not blaming prices on big oil…no reason to accelerate drilling.

[Orion1963]

@Rex Rode 2021 had the lowest new oil discoveries since records have been kept. You may wish to look up global oil demand vs oil discoveries. Oil discoveries have been on a steady decline since the late 80s/90s. Oil use (worldwide) is exploding higher for the next 30 years...

[amessb]

@Rex Rode Do you realise that the average deep well field has a natural production decline of ca 6% per year. Fracking fields have a much higher rate. Thus doing nothing for 2020 and most of 2021 has significantly narrowed the 'awash'. Moreover, it takes a number of years and lotsa capex to bring new fields on. So far few companies have ramped up their 2022 programmes. Look for the current tightness to remain or even get worse if the Covid impairments no longer suppresses consumer activity.

[LeadAlpha]

Whoop da fricken do! WITH the .30 “special dividend” they will yield 2.31%. Have they looked at what XOM and CVX are yielding??!? Dumbasses!

[bigbenorr]

@LeadAlpha my yield on cost is 6%. You just mad you missed the boat.

[Rex Rode]

@LeadAlpha Yet COP has completely outperformed them in the last year. So if U wanted a bigger dividend you would have lost out on COP lapping the field. Can't have it both ways.

[Mmarrkk]

@LeadAlpha Do you realize that COP is not at all a similar business to Exxon and Chevron??? Both of them are INTEGRATED companies with Upstram and Downstream operations which allow them to make money in both high and low oil price environments. COP, on the other hand, is an UPSTREAM ONLY company and when oil prices fall, their revenue is negatively impacted and continuing to pay a high divvy is ludicrous! So quit comparing COP to Exxon and Chevron. Compare them to EOG!!

Now, I do agree that a temporary divvy increase is warranted when prices are high