ConocoPhillips Gives Up Claims from Green Dragon for $40M - Analyst Blog


ConocoPhillips ( COP ) has entered into a settlement with coalbed methane gas producer Green Dragon Gas Ltd. Per the agreement, ConocoPhillips would receive $40 million as the final settlement to renounce all claims from Green Dragon on various proceedings in multiple jurisdictions.

The payment will be made using Green Dragon's existing cash resources. Its appeal hearing scheduled for Nov 2014, has been withdrawn, bringing the matter to a closure.

In Aug 2009, Green Dragon had received $42.6 million from ConocoPhillips under a farm-out agreement. The funds were used for further reserve development and drilling of gas production wells on the Shizhuang South block, and exploration activities within the Shizhuang North and Qinyuan blocks.

ConocoPhillips holds leading positions in both natural gas and heavy crude oil acreages in North America, as well as a legacy position in the North Sea and growing exposure to lucrative international regions. The Houston, TX-based company thus looks forward to replacing reserves and sustaining production growth over the long term.

ConocoPhillips' initiatives toward liquids-rich plays are gaining momentum through the Eagle Ford, Bakken and Permian plays. The company is also poised to benefit from a pipeline of projects in the Gulf of Mexico, Malaysia, the liquefied natural gas project in Australia, the U.K., Norway, and the Canadian oil sands, apart from the US Lower 48 liquids-rich plays. Oil sands expansion projects are also on track.

Since Apr 2012, when ConocoPhillips divested its refining operations to Phillips 66 ( PSX ), it has delivered total shareholder returns of 22%. ConocoPhillips' complete shift of focus to upstream operations and thus oil and gas prices play a major role in determining its performance. The company plans to expand production by maintaining its growth focus on reserves, through global drilling programs in legacy assets, unconventional assets and major projects.

ConocoPhillips' margin growth would also be aided by its shift of production mix to higher-value products. The company expects to spend $16 billion on average annually and allocate 95% of its capital to investments that deliver above-average margins. The recent activity targets offshore prospects in Australia, Angola and Senegal, conventional exploration in Norway and Indonesia, and unconventional exploration in North America, Poland and Colombia.

Currently, ConocoPhillips holds a Zacks Rank #3 (Hold). Investors can consider top-ranked stocks in the oil and gas sector such as Weatherford International plc ( WFT ) and Sunoco Logistics Partners L.P ( SXL ), all sporting a Zacks Rank #1 (Strong Buy).

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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, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: WFT , COP , SXL , PSX

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