ConocoPhillips takes slow, steady route in race for oil profits

Thu Apr 20, 2017 1:17am EDT
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By Gary McWilliams

HOUSTON (Reuters) - ConocoPhillips (COP.N: Quote) has beaten its 2017 asset sales target less than four months into the year, after shedding $30.8 billion worth of energy assets in six years.

But instead of a chorus of cheers on Wall Street, Chief Executive Ryan Lance is facing investor skepticism that the company can deliver growth from remaining oil and gas fields.

ConocoPhillips' most recent sales of Canadian oil-sands properties and U.S. natural gas wells for a combined $16 billion will part with nearly 30 percent of its proved reserves in order to deliver near-term shareholder payouts and pare debt. For a graphic, click

Lance told Reuters the sales to Cenovus Energy (CVE.TO: Quote) and Hilcorp Energy Co will fulfill promises to reduce long-term debt by 42 percent to $15 billion, fund $6 billion in share purchases and help reshape the company for an era of low and volatile energy prices.

Drilling in two shale regions should help restore falling U.S. output by the fourth quarter.

"I don't worry about production and reserves in the company," he told Reuters in an interview, citing oil and gas fields that could be upgraded to proved reserves over time.

ConocoPhillips can achieve flat to 2 percent annual production growth on its properties, after adjustments for sales, and deliver shareholder payouts, he said.

But interviews with portfolio managers, former employees and industry analysts point to the frequent sales as a short-term fix. They worry ConocoPhillips' plan for modest production growth, flat capital spending and steady shareholder payouts pales in comparison to rivals that have retooled themselves to deliver sharply higher growth rates.   Continued...

FILE PHOTO: ConocoPhillips CEO Ryan Lance attends Gastech, the world's biggest expo for the gas industry, in Chiba, Japan on April 4, 2017.    REUTERS/Toru Hanai/File Photo