ConocoPhillips share price drops 5 percent
BY EDWARD KLUMP Bloomberg News
Friday, February 01, 2013
2/01/13 at 4:54 AM
ConocoPhillips says 2013 oil and natural gas production will hit a low point during a multiyear restructuring and asset sales program, prompting the company's share price to plunge more than 5 percent.
Daily output from continuing operations may decline to as little as 1.475 million barrels of oil equivalent this year because of production lost through asset sales, compared with 1.527 million barrels in 2012, Houston-based ConocoPhillips said in a statement late Wednesday.
When counting only the assets that will remain in ConocoPhillips' portfolio, last year's production was 1.497 million barrels a day.
By the end of the year, the company will see production growth from new projects and some North American programs, Chairman and CEO Ryan Lance told analysts on a conference call Thursday.
The company said it still expects to achieve a goal of boosting production by 3 percent to 5 percent compounded annually in future years.
"Production will decline in '13, and they will need to show as we move forward that they can grow off that 2013 base," said Brian Youngberg, an analyst with Edward Jones in St. Louis who has a buy rating on ConocoPhillips shares and owns none.
ConocoPhillips fell $3.09 to $58 at the close in New York.
The company is the largest U.S. oil and gas producer, based on market value, that doesn't have refineries or a chemical unit.
ConocoPhillips has been selling assets and remaking itself for more than three years as it seeks to boost returns for shareholders and focus on its most profitable holdings.
On Jan. 15, ConocoPhillips said it agreed to sell certain assets in North Dakota and Montana, bringing to about $12 billion the sales it's announced since the start of last year and surpassing a target of $8 billion to $10 billion for 2012 and 2013 combined.
The company said it may still look to reduce its holdings in oil sands and the Australia Pacific liquefied natural gas project.
Providing production forecasts has been tough because of uncertainty about which assets were going to be sold, Chief Financial Officer Jeff Sheets said in a telephone interview today.
The picture is clearer now, though the timing of some sales still isn't certain. ConocoPhillips now sees growth beginning toward the end of 2013, he said.
"This is the same message we've been talking about over the long term," Sheets said. "Our long-term production outlook has not changed."
The company believes its strategy for production growth is the right one, and it sees value in the diversification and size of its portfolio, Sheets said.
ConocoPhillips created a separate company, Phillips 66, by spinning off its refining, chemical and pipeline businesses April 30. Fourth-quarter net income at ConocoPhillips didn't include earnings from its former operations, though they were included in results a year earlier.
ConocoPhillips reported Wednesday that fourth-quarter profit fell after it lost the income of its refining business in last year's spinoff, and growing North American supplies of oil and gas pushed down prices.
Original Print Headline: New strategy hits Conoco stock price