COP - ConocoPhillips
55.99 +0.03 (0.05%)
After hours: 5:13PM EDT
| Previous Close | 53.95 |
| Open | 54.25 |
| Bid | 55.96 x 1000 |
| Ask | 55.99 x 1300 |
| Day's Range | 54.08 - 56.11 |
| 52 Week Range | 50.13 - 72.77 |
| Volume | 6,550,579 |
| Avg. Volume | 6,646,209 |
| Market Cap | 61.463B |
| Beta (3Y Monthly) | 0.82 |
| PE Ratio (TTM) | 9.03 |
| EPS (TTM) | 6.20 |
| Earnings Date | Oct. 29, 2019 |
| Forward Dividend & Yield | 1.68 (3.11%) |
| Ex-Dividend Date | 2019-07-19 |
| 1y Target Est | 72.79 |
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Oil & Gas Stock Roundup: ConocoPhillips' Australia Asset Sale, Phillips 66's Buyback & More
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ConocoPhillips Inks Deal to Sell $1.4B Australia-West Assets
ConocoPhillips (COP) plans to focus on other projects that are likely to generate significant returns for shareholders in the long run.
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Santos Targets Asia LNG Growth With $1.4 Billion Conoco Deal
(Bloomberg) -- Santos Ltd. agreed to buy ConocoPhillips’ northern Australia business for $1.4 billion in a deal that will boost the Adelaide-based oil and gas producer’s position in the growing Asian liquefied natural gas market.The transaction may allow Santos to become the country’s largest independent energy producer and capitalize on a push by Asian consumers, including China, to switch to cleaner burning natural gas away from coal. Conoco is selling its operating interests in the Darwin LNG processing plant and the Bayu-Undan, Barossa and Poseidon gas fields.“The acquisition of these assets fully aligns with Santos’ growth strategy to build on existing infrastructure positions, while advancing our aim to be a leading regional LNG supplier,” Santos Chief Executive Officer Kevin Gallagher said in a statement.Santos has been expanding its position in the Australian oil and gas market having acquired Quadrant Energy for about $2.15 billion in 2018. Its latest deal could help it become Australia’s top independent energy producer: Santos and Conoco’s northern Australia assets produced about 94 million barrels of oil equivalent last year, compared to Woodside Petroleum Ltd.’s 91.4 million.Sanford C. Bernstein & Co. analysts said Conoco’s northern Australia business has a net asset value of about $1.8 billion, citing Rystad Energy AS. The deal has “compelling strategic merit,” RBC energy analyst Ben Wilson said in a note to clients, adding that the price looked reasonable based on RBC’s valuation of the assets at around $1.63 billion.Santos, which posted its biggest share gain this year, said it would fund the acquisition from existing cash and $750 million in new two-year debt. Conoco will receive a further $75 million once Barossa enters final investment decision.Conoco is the second U.S. energy major to announce plans to sell down its interests in Australia after Exxon Mobil Corp. in September said it would start a process to find a buyer for its Bass Strait producing assets off the coast of southeast Australia. Conoco completed the sale of its stake in the Greater Sunrise field to Timor-Leste’s government for $350 million earlier this year, and the Santos deal will free up capital to invest in U.S. shale and return cash to shareholders, two of its priorities in recent years.Conoco is also operator of the Australia Pacific LNG export facility in Queensland, which is not part of the Santos deal.Advanced TalksSantos plans to sell 25% of Conoco’s interest in the Darwin LNG export plant to South Korean firm SK E&S as part of the agreement. The company is also in talks with the facility’s joint venture partners, which include Inpex Corp, Tokyo Gas Co. Ltd., Jera Co. and Italy’s Eni SpA, to sell equity in the Barossa field, which has been earmarked to back-fill the Darwin plant once Bayu-Undan reserves run dry around the end of 2022. Santos will target ownership stakes in both the assets of 40%-50%.“What we’re seeking is alignment,” said Gallagher on a media call. “What we’re looking for is people to be balanced on both sides of the joint venture,” he added, referring to partners having stakes in both Darwin LNG and Barossa.Gallagher said the company is in advanced discussions with LNG buyers for gas off-take from Barossa, including with an existing partner in Darwin LNG, and was looking to contract 60%-80% of gas volumes for the project prior to taking a FID, which is expected in early 2020.As an upstream, brownfield project, Barossa was “low risk” compared to new greenfield LNG projects around the world, “and because of that it’s got a very competitive cost of supply,” said Gallagher. Its location close to Asian markets also meant that shipping costs were less than from other competing projects. “It’s got very robust economics, even in this soft market that we find ourselves in today.”Santos has ambitious plans to grow DLNG capacity by up to 10 million tons per annum, compared to 3.7 mtpa currently. Over the longer term, the potentially huge onshore gas shale reserves in the Beetaloo and McArthur Basins could be processed through DLNG, Gallagher said.Santos’s shares ended 5.7% higher in Sydney trading Monday, having risen as much as 7.7% at one point.Following the SK sell-down, Santos’ holding in Darwin LNG is expected to be 43.4%, with SK at 25%, Inpex at 11.4%, Eni at 11%, Jera at 6.1% and Tokyo Gas at 3.1%. Santos will hold 62.5% in Barossa, with SK owning the remaining 37.5%.(Updates share price in sixth and penultimate paragraphs)\--With assistance from Dan Murtaugh.To contact the reporter on this story: James Thornhill in Sydney at jthornhill3@bloomberg.netTo contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Aaron Clark, Jasmine NgFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Business Wire
ConocoPhillips Announces Agreement to Sell Interests in Australia-West for $1.39 Billion
ConocoPhillips (COP) today announced it has entered into an agreement to sell the subsidiaries that hold its Australia-West assets and operations to Santos for $1.39 billion, plus customary closing adjustments. In addition, the company will also receive a payment of $75 million upon final investment decision of the Barossa development project. The subsidiaries hold the company’s 37.5 percent interest in the Barossa project and Caldita Field, its 56.9 percent interest in the Darwin LNG facility and Bayu-Undan Field, its 40 percent interest in the Poseidon Field, and its 50 percent interest in the Athena Field.
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America’s Great Shale Oil Boom Is Nearly Over
(Bloomberg Opinion) -- America’s second shale boom is running out of steam. But don’t panic just yet, a third one may be coming over the horizon.The U.S. Energy Information Administration published its latest short-term energy outlook last week and has cut its forecast of oil production by the end of 2020 for the fourth straight month. It now expects American output to rise by just 370,000 barrels a day over the course of next year. That will be the slowest growth in four years and is yet another indicator that the latest period of rapid shale expansion is faltering.The number of rigs drilling for oil in the U.S. has fallen in each of the last 10 months, dropping by a total of 20% since November. And productivity gains are waning. Drilling in the Permian, the most prolific of the shale basins, fell by 11% in the nine months to August, according to the EIA.The development of the U.S. shale patch is a bit like that of a person. During the first growth spurt in the four years to 2014 the industry was in the toddler phase. Everything was new and exciting, the toddlers stuck their fingers (or in this case their drill bits) into everything, just to see what would happen, and they pushed the boundaries in every direction. The toddler developed quickly, but the outside world taught it a hard lesson with a crash in the oil price in 2014.The second boom from 2016 has been more like the adolescent phase. After picking themselves up and learning to live in their changed world, the young adults developed their muscles and concentrated only on the things that interested them (the sweet spots in the shale deposits) to the exclusion of everything else. This focus has brought bigger output gains than the first boom. In the three years between December 2016 and December 2019 output is expected to have increased by 4.2 million barrels a day, compared with 3.9 million barrels a day between December 2010 and December 2014.The biggest challenges of the second shale boom have been identifying and exploiting those sweet spots, consolidating acreage to enable the use of longer wells, and building infrastructure to move the gas and liquids to markets (including overseas).But with a WTI oil price of about $50 a barrel, some in the shale patch are struggling. Shale companies are being forced to produce more to service their high debts, but they aren’t making any surplus profit to cut their borrowing or pay shareholders. Now those investors are starting to demand more of a return.With the crude price seemingly stuck close to where it is — despite the tensions in the Persian Gulf region which flared up again on Friday — the next round of discussions between the shale producers and their lenders could be difficult. Some mergers may follow.Yet fans of U.S. oil shouldn’t be disconsolate. The end of the second shale boom will usher in a third: the period of young adulthood. This will bring a range of new skills, but production will grow at a more measured pace.This third boom will be driven by the international oil majors and will be characterized by a focus on better extraction, rather than rapid output growth. The application of enhanced oil recovery techniques, consolidation of ownership, automation of drilling, and rationalizing of supply chains will increase the volume of oil extracted over the lifetime of a well and reduce costs. But it won’t deliver the same pace of growth as seen recently.The recovery rate of oil from shale deposits is typically about 5%-10%, but ConocoPhillips has pushed recovery as high as 20% in some parts of the Eagle Ford shale play in Texas, and it could reach 40% under the right circumstances. The upside to the lifetime recovery rate from Eagle Ford would be huge, potentially extending higher production rates for longer.The third shale boom is coming. Just don’t expect it to look like the first two.To contact the author of this story: Julian Lee at jlee1627@bloomberg.netTo contact the editor responsible for this story: James Boxell at jboxell@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Julian Lee is an oil strategist for Bloomberg. Previously he worked as a senior analyst at the Centre for Global Energy Studies.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
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Conoco and Saudi Aramco Know What You Want
(Bloomberg Opinion) -- Discretion won't get you anywhere with oil investors these days. They want pledges, not plans.ConocoPhillips is bumping up its dividend by 38%. The company also issued guidance for buybacks next year of $3 billion, down from this year’s expected $3.5 billion. The dividend increase is roughly the size of that $500 million difference. It seems to be worth more, though: Conoco was one of only a few large-cap oil stocks to close up on Monday, adding about $1.7 billion of market cap relative to the sector.(1)Dividends, like stock buybacks, are technically discretionary, but boards are loath to cut them except in dire circumstances. Conoco has a history here, having come unstuck in early 2016 when oil prices troughed. Even after the latest raise, the new dividend is still 43% lower than back then. Buybacks have helped make up that gap in cash terms, albeit with something of an out if things turned sour again. So Conoco effectively taking $500 million from the prospective buyback column and putting it in the dividend pledge signals confidence in its ability to weather any storm – which isn’t nothing, given how ugly 2020 might be. Similarly, a certain ginormous national oil company with its eye on an IPO has gone all out to convince investors that future dividends are as good as in their pockets. Saudi Arabian Oil Co. issued guidance last week of a “base dividend” of $75 billion in 2020, albeit “at the board's discretion.” As I wrote here, even Saudi Aramco’s prodigious profits may not necessarily cover that if Brent crude averages $60 rather than $70.As it turns out, Aramco’s website now hosts an updated presentation with a whole new slide on its “dividend prioritisation mechanism,” which is a fancy way of saying it will guarantee a minimum payment to minority shareholders for five years; like a temporary preferred stock. They would get a minimum of their pro-rata share of a $75 billion dividend regardless of whether Aramco actually paid that in total, while the government would just get their portion of whatever actual amount was declared. In other words, if investors end up buying 5% in an IPO, they would get a collective payout of at least $3.75 billion a year through 2024, come what may.The cost to the government in terms of potentially foregone payments looks negligible. Even if Aramco’s crude oil output averaged just 9.5 million barrels a day and Brent averaged just $55 a barrel, Riyadh would forego an aggregate $5 billion in payments spread across five years (using my numbers and assuming a 5% free float).Even so, the sudden switch from the “board’s discretion” to we’ll-pay-come-what-may is striking. It fits with the recently announced change in Aramco’s royalty rates, which effectively negate any gains for investors if oil spikes above $100 but boost the capacity to pay dividends at today’s levels. Aramco’s owner wants this IPO done at a high valuation and appears to recognize nobody’s buying oil companies today because of what oil might do in the future; rather, they’ll consider it if there’s a steady check guaranteed upfront.While oil companies compete in terms of free cash flow yields, they’re all fighting for attention in a stock market that has become largely indifferent to the sector. Conoco has actually been an exemplar of prioritizing payouts and cutting costs since 2016, yet its stock has languished so far this year. The dividend bump, coming a month before a strategy update, feels like an attempt to reset things, taking Conoco’s yield above 3% to a wider relative yield premium – or valuation discount – versus the market. French oil major Total SA also announced a dividend hike a couple of weeks ago, essentially promising to pay out every cent of an anticipated $5 billion increase in projected cash flows through 2025. Exxon Mobil Corp., meanwhile, continues its long track record of raising its dividend but finds its stock now yields north of 5% anyway, close to its highest levels ever since the merger with Mobil. That may reflect the long absence of buybacks, which, for this company, were once regarded as a given. However, it may have more to do with the fact that Exxon is effectively borrowing to pay its current dividend.Buybacks remain useful window displays for company management; certainly, Chevron Corp.’s resumption of them has helped put Exxon in the shade. Yet, as Dan Pickering, chief investment officer at Pickering Energy Partners, puts it: “A dividend is a promise and share repurchase is a goal.” Dividends offer a surer constraint on capex budgets and more of an obligation to pay out cash sooner rather than later in a sector grappling with intimations of mortality. Investor decks emphasize resilience against adversity rather than dangling the prospect of a windfall. Even Aramco has had to take the extraordinary step of guaranteeing a payout, which doesn’t exactly scream bullishness on oil.Markets are often said to be driven by just two emotions: fear and greed. The majors’ shifting payout priorities appear to be a perfect synthesis of the two.(1) Conoco's stock was up 2.1% versus the Energy Select Sector SPDR Fund's 0.9% decline.To contact the author of this story: Liam Denning at ldenning1@bloomberg.netTo contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
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