) expects its production for the upcoming first quarter to be lower
than the year-earlier period as expressed in its interim
The U.S. major now projects hydrocarbon production of
approximately 1.62 million barrels of oil equivalent per day
(MMBoe/d), down almost 5% from the year-ago level of 1.70 MMBoe/d.
However, the anticipated figure exceeds its forecast for full-year
average output of 1.55 MMBoe to 1.60 MMBoe, on a daily basis. This
year-over-year downfall mainly confirms the company's $10 billion
asset sale venture that will likely hit the 2012 output.
Earlier, the company had disclosed that it expects production
growth to average between 3% and 5% in the next five years, as it
focuses on liquid-rich ventures primarily in the U.S. and
ConocoPhillips is in the midst of a three-year strategic
operation that includes an asset sale program, large-scale share
buybacks and the spin-off of its refining unit. The company has
already received approval for the spin-off of its refinery unit,
Phillips 66, which will likely start trading on or about April
The company is on track with its first initiative, having
already divested $20.2 billion of non-strategic assets last year
and plans to further offload $10 billion worth of properties this
year. From 2013, ConocoPhillips may continue to divest $1 billion
to $2 billion of mature assets per year.
The company already wrapped up its divestiture agreement for its
Vietnam business operation and expects to record an after-tax
profit of approximately $940 million during the quarter. North Sea
and North American conventional natural gas assets are on the asset
sale contracts, which are slated to close in the second and third
quarters of 2012.
The U.S. oil company intends to use the proceeds from the sale
for its share repurchase program, under which Conoco repurchased
155 million shares for $11.1 billion last year. For 2012, the
company aims to buy back shares up to an additional $10 billion,
with $1.9 billion targeted for the first quarter.
Moreover, the company pointed out that its first quarter 2012
refinery margins will likely be adversely affected by extensively
weaker crude differentials and secondary product margins owing to
higher crude prices.
Although we remain positive on the outlook for the new
ConocoPhillips post-split, as it holds the promise of unlocking
significant value, we remain on the sidelines considering its
sensitivity to changes in the crude oil price, as well as
geopolitical risks associated with international operations and
operational challenges. Hence, we believe that ConocoPhillips
shares will perform in line with the broader market and maintain
our long-term Neutral recommendation.
The third biggest U.S. integrated oil company, following
), holds a Zacks #3 Rank (short-term Hold rating).
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