The divestiture program at
ConocoPhillips
(
COP
) continues. This time, the U.S. energy major has inked a deal
with the subsidiaries of Oando PLC to sell its Nigerian business
unit.
Per the deal, the company plans to offload its Nigerian business
component for approximately $1.79 billion. The properties up for
sale comprise 95% operational stakes in OML 131 (Chota Field),
and non-operated stakes of 20% in OPL 214 (Uge Field), 20% in
onshore OMLs 60-63 (NAOC joint venture), 20% in the Kwale-Okpai
Independent Power Plant and 17% in the Brass LNG project.
These assets generated about 43,000 barrels of oil equivalent per
day through October 2012 with approximately 60% natural gas and
40% liquids. With this transaction, which is expected to close by
the middle of 2013, ConocoPhillips makes its departure from the
African nation.
As part of ConocoPhillips' three-year strategic plan, this
Houston, Texas-based company plans to shed assets that do not fit
well within its business model. It has generated $2.1 billion in
proceeds from asset sales in the first nine months of 2012 and
has maintained a divestment target of $8-$10 billion through
2013.
Once completed, the latest sale will bring about $11 billion in
proceeds for the company during the year. The proceeds are
earmarked for portfolio optimization, debt reduction and
increasing shareholder distribution. ConocoPhillips said that the
net carrying value of its Nigerian assets was approximately $600
million at October 31, 2012.
With leading positions in both natural gas and heavy crude oil in
North America, as well as a legacy position in the North Sea and
growing exposure to lucrative international regions,
ConocoPhillips expects to replace reserves and sustain production
growth over the long term. ConocoPhillips' exploration
initiatives toward liquids-rich plays are gaining momentum
through the Eagle Ford, Bakken and North Barnett shale plays.
However, we remain cautious about the company's weak production
volume that experienced a downfall in the third quarter. The
decline was mainly due to the impact of divestitures. Again,
ConocoPhillips remains vulnerable to unstable movements in crude
oil and natural gas prices, as well as the volatile nature of the
macro backdrop.
We have a Zacks #3 Rank (short-term Hold rating) for the third
biggest U.S. integrated oil company - ConocoPhillips - following
ExxonMobil Corporation
(
XOM
) and
Chevron Corporation
(
CVX
).
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