Replies to post #1979 on The Rising Influence of Rising Affluence

[DewDiligence]

COP Reports Higher Earnings, Lower Production in 4Q10

[COP had a decent quarter while it continued to execute on the radical change in strategy announced in Mar 2010, which calls for $10B of cumulative divestitures to be applied to increasing dividends and share buybacks (#msg-48227811). In 4Q10, refining operations showed the biggest YoY improvement, swinging back to profitability after having lost money in 4Q09. 4Q10 non-GAAP EPS was $1.32 and production was 1.73 boe/d, down 5% from 4Q09 due to divestitures, changes in PSA’s due to higher oil prices, and natural aging of fields. In 4Q10, 26% of COP’s production came from North American NG.

COP’s equity stake in Lukoil was down to 2% at 12/31/10 and is expected to become zero by the end of 1Q11. (In according with GAAP, when COP’s Lukoil stake fell below 20%, COP stopped reporting a pro rata share of Lukoil’s earning on COP’s own income statement, which reduced EPS.)

Despite the aggressive divestment program, COP still has a heavy debt load comprising about 25% of total capital. The high financial leverage means that COP will probably move more sharply in response to changes in oil and gas prices than such companies as XOM and CVX, which is one of the attractions of the stock for some investors. However, one can achieve a similar risk profile to COP by owning such stocks as XOM or CVX using a modest amount of margin leverage, so I find it hard to make a case for being long COP. For a higher-risk name that is more strongly tied to E&P, I much prefer HES.

COP’s own 4Q10 PR is at http://finance.yahoo.com/news/ConocoPhillips-Reports-bw-560632735.html?x=0&.v=1 .]

http://www.reuters.com/article/idUSN2627878320110126?feedType=RSS&feedName=rbssEnergyNews&rpc=43

›Wed Jan 26, 2011 9:02am EST

HOUSTON, Jan 26 (Reuters) - ConocoPhillips (COP), the third-largest U.S. oil company, reported a 54 percent increase in quarterly profit on Wednesday as proceeds from asset sales and higher crude prices and refining margins boosted results.

Conoco has an ongoing program to shed assets it believes are better suited for others as the oil company focuses on improving returns by cutting debt and buying back shares. As expected, those sales have hit the Houston company's oil and gas output and reserve growth.

Profit in the fourth quarter was $2 billion, or $1.39 per share, compared with $1.3 billion, or 86 cents per share, a year earlier. Fourth-quarter 2010 adjusted earnings were $1.9 billion, or $1.32 per share, compared with of $1.8 billion, or $1.20 per share a year ago. Analysts on average had expected a profit of $1.32 per share, according to Thomson Reuters I/B/E/S.

Oil and gas output in the quarter was 1.73 million barrels of oil equivalent (BOE) per day, down from 1.83 million BOE per day in the same period in 2009.

Revenue was $53.2 billion, up from $43.7 billion a year ago.

Conoco said a significant portion of its $10.4 billion in cash and short-term investments will be used for more share repurchases.‹

[DewDiligence]

COP Budgets $13.5B for 2011 Cap-Ex, 90% in E&P

http://finance.yahoo.com/news/ConocoPhillips-Approves-2011-bw-975918118.html?x=0&.v=1

›February 11, 2011, 11:15 am EST

HOUSTON--(BUSINESS WIRE)-- ConocoPhillips [NYSE:COP] today approved a 2011 capital program of $13.5 billion, representing a significant increase in Exploration and Production (E&P) segment expenditures. Almost 90 percent of the capital program will be in support of E&P, while the Refining and Marketing (R&M) segment represents about 9 percent of this year’s spending. The 2011 capital program is consistent with the company’s plan to enhance returns on equity through shifting capital to higher returning investments, maintaining capital discipline and funding growth in shareholder distributions.

“This year’s capital budget reflects our emphasis on building the upstream business,” said Jim Mulva, chairman and chief executive officer. “We expect competitive returns from our increased investments in North American and Australian unconventional resource projects. In addition, we are pursuing organic reserve and production growth by converting our existing resource base to proven reserves, participating in high-impact exploration wells and building acreage positions for future development.”

“We look forward to discussing our 2011 capital, operating and financial plans in greater detail when we meet with the financial community in March,” added Mulva.

Exploration and Production

The 2011 capital program for E&P is approximately $12.0 billion, including capitalized interest of $0.4 billion and $0.7 billion for the company’s contributions to the FCCL business venture and loans to other affiliates. This program also includes about $1.7 billion for worldwide exploration.

In North America, the capital program is expected to total approximately $6.0 billion. Spending in North America is increased, compared with prior years, with emphasis on liquids-rich resource plays and highest-return investments.

• In the U.S. Lower 48, capital funding will be focused on the Eagle Ford and other liquids-rich plays in the Permian, Bakken and Barnett Fields. The program also allows ongoing development in the San Juan Basin and the company’s contribution to the Marine Well Containment Company.

• Spending in Canada will focus on existing SAGD oil sands projects and selective programs in the Western Canada gas basins, primarily on high-graded resource plays and on maintaining a substantial position for future development.

• Spending in Alaska is expected to be directed toward development of the existing Prudhoe Bay and Kuparuk Fields, as well as the Western North Slope.

In Europe, Asia Pacific and Africa, the E&P capital program is expected to total about $6.0 billion.

• Within the Asia Pacific region, funds will be used for further development of the coalbed methane-to-LNG project associated with the Australia Pacific LNG joint venture, as well as for the development of new fields offshore Malaysia, Indonesia, and offshore Vietnam.

• In the North Sea region, spending is planned for existing and new opportunities in the Greater Ekofisk Area, the Greater Britannia Fields, various Southern North Sea assets, and the development of the Jasmine and Clair Ridge projects.

• Capital for the Africa region is expected to be in support of onshore developments in Nigeria, Algeria and Libya. [Good luck with the work in onshore Nugeria!]

• Spending in the Caspian Sea region is planned to be in support of continued development of the Kashagan Field.

The company will continue its focus on accessing, testing and appraising material opportunities in both conventional and non-conventional oil and gas plays. Exploration plans further appraisal of the Browse Basin Poseidon discovery and the Tiber and Shenandoah discoveries in the Gulf of Mexico. The company also plans to test material prospects in the Gulf of Mexico, Kazakhstan and the North Sea. Delineation of the company’s position in the Eagle Ford shale play will continue, as will pilot programs in the Canadian Horn River Basin shale play and Poland.

Refining and Marketing

The 2011 capital program for R&M is approximately $1.2 billion, with about $1.0 billion for its U.S. downstream businesses and the remaining $0.2 billion for international R&M. These funds will be used primarily for projects related to sustaining and improving the existing business with a focus on safety, regulatory compliance, efficiency and reliability.

Other

The 2011 capital program for Corporate and all other segments is approximately $0.3 billion, primarily for global information systems and corporate facilities.

Annual Analyst Meeting

ConocoPhillips will hold its annual analyst meeting on Wednesday, March 23, 2011 at 8:30 a.m. Eastern time in New York City. The meeting will feature presentations by ConocoPhillips executives, including Chairman and Chief Executive Officer Jim Mulva.‹