ConocoPhillips Closes Australian Asset Divestment to Santos

ConocoPhillips COP recently completed the divestment of northern Australia and Timor-Leste assets to Australian oil and gas company Santos under a revised deal. ConocoPhillips intends to use the proceeds from the transaction for general corporate purposes.

The acquirer will now pay to ConocoPhillips $1.265 billion, which is a discount to the $1.390 billion price announced last October. The discounted selling price of the assets was a result of low energy demand stemming from coronavirus-induced lockdowns and reduced commodity prices. However, the contingent payment has risen from $75 million to $200 million, subject to a final investment decision on the Barossa gas field development. However, the total consideration of the deal remains unchanged.

Santos funded the transaction with available cash balance and a $750-million two-year acquisition debt facility. Production from the divested assets averaged 46,000 barrels of oil equivalent per day (Boe/d) in first-quarter 2020. At 2019-end, proved reserves associated with the divested assets were around 17 million Boe. 

ConocoPhillips will maintain strategic presence in the country while focusing on the Australia Pacific LNG project and exploration activities. The company has invested more than $20 billion in the country since 2004 and created in excess of 4,000 direct jobs.

The divestment will enable ConocoPhillips to focus on more promising areas in its portfolio such as the bulk of acres that it holds in the three big unconventional plays including Eagle Ford shale, Delaware basin and Bakken shale. These assets are rich in oil. The company has long-term plans for these major fields, which are expected to ramp up production from more than 400,000 barrels a day to 900,000 barrels or more by the end of the decade.

Price Performance

The company’s shares have lost 28.5% in the past year compared with 44% decline of the industry it belongs to.

Zacks Rank & Stocks to Consider

ConocoPhillips currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Chesapeake Energy Corporation CHK, CNX Resources Corporation CNX and Comstock Resources, Inc. CRK, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Chesapeake Energy delivered an average positive earnings surprise of 42.8% in the last four quarters.

CNX Resources beat earnings estimates thrice and met once in the last four quarters, with average positive surprise of 111.5%.

Comstock Resources’ 2020 sales are expected to gain 32.7% year over year.

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