Conoco to Offload Russian Stake - Analyst Blog

By Zacks.com August 23, 2012, 02:33:22 PM EDT

Oil and gas explorer ConocoPhillips ( COP ) has announced the sale of its 30% indirect stake in NaryanMarNefteGaz to co-owner Lukoil Holdings. Although the financial terms of the agreement were not disclosed by the companies, ConocoPhillips anticipates an after-tax gain of $400 million from the deal.

This latest deal is in sync with the company's ongoing three-year strategic plan to reposition the company. ConocoPhillips focuses on improving portfolio returns and increasing value and distributions for shareholders.

Back in 2004, ConocoPhillips entered into a joint venture with Lukoil to set up NaryanMarNefteGaz for the development of oil and natural gas resources in the northern part of the country's Timan-Pechora province. The Russian joint venture has seven licenses with production from five fields.

ConocoPhillips intends to sell $8 billion to $10 billion worth of assets over the coming years. This plan also includes the divestment of $15 billion to $20 billion of assets in total, with large-scale share buybacks and the spin-off of its refining arm earlier this year.

In May 2012, ConocoPhillips completed the spin-off of its refining/sales business into a separate, independent and publicly traded company Phillips 66 ( PSX ). The idea behind the spin-off was to create value for shareholders who like the volatility in the refining business.

Houston, Texas-based ConocoPhillips is a major global exploration and production (E&P) company with operations and activities in 30 countries that mainly include the U.S., Canada, UK/Norway, China, Australia, offshore Timor-Leste, Indonesia, Libya, Nigeria, Algeria, Russia and Qatar.

However, we remain cautious about the company's weak production volume, which experienced a 6.1% downfall in the second quarter from the year-ago period. The decline was mainly due to the impact of divestitures and maintenance downtime, accompanied by reductions in North American conventional natural gas.

We maintain an Underperform recommendation on ConocoPhillips for the long term.


 
CONOCOPHILLIPS (COP): Free Stock Analysis Report
 
PHILLIPS 66 (PSX): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.


This article appears in: Investing, Business, Stocks

Referenced Stocks: COP, PSX



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