Conoco Phillips (NYSE:COP) plans a 15% increase in spending on exploration and production activities in 2012, and will devote a higher proportion of these funds to North American oil and gas plays. The company also expects to complete its previously announced split into separate upstream and downstream entities.
Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.
2012 Capital Spending
Conoco Phillips announced a capital spending program for 2012 totaling $15.5 billion, with $14 billion of that total allocated to exploration and production activities. In 2011, Conoco Phillips budgeted $13.5 billion in capital spending across the entire company, with 90%, or $12.15 billion devoted to exploration and production.
In July 2011, Conoco Phillips announced that the company would split into two separate public companies. Conoco Phillips is retaining the upstream oil and gas operations of the company, while Phillips 66 will hold the refining and other downstream assets of Conoco Phillips.
Conoco Phillips plans to pay a special dividend of Phillips 66 stock, with shareholders receiving one share of the new company for every two shares owned of Conoco Phillips. The company expects the reorganization to be complete by the end of the first quarter of 2012. (For related reading, see Which Is Better: A Cash Dividend Or A Stock Dividend?)
Conoco Phillips was not the only company to split up in 2011, as this reorganization trend has spread quickly in the energy sector over the last few years. Marathon Oil (NYSE:MRO) and Marathon Petroleum Company (NYSE:MPC) started 2011 as part of the same company, but separated midyear through a stock dividend.
Conoco Phillips estimates that 60% of the $14 billion exploration and production capital program in 2012 will be spent in the United States and Canada, and it will be used towards oil and gas areas that produce the highest returns. The company has identified these plays as the Eagle Ford Shale and Permian Basins in Texas, the Bakken formation in the Williston Basin and oil sands projects in Western Canada.
Conoco Phillips will also continue to divest properties that the company considers to be non-strategic. This asset divestiture program is expected to total $15 billion to $20 billion over the 2010 to 2012 period and has yielded $8 billion in proceeds through September 2011. The most recent divestiture involved the sale of pipeline assets to Enbridge (NYSE:ENB) and several other companies for $2 billion.
The major integrated oil and gas companies are known for large share repurchase programs and Conoco Phillips plans to continue this in 2012. The company estimates that it will purchase 11% of its outstanding common stock in 2011, and it just authorized another $10 billion in purchases when the current authorization expires. Exxon Mobil (NYSE:XOM) also has a large share repurchase plan and spent $16.6 billion during the first nine months of 2011 to buy back shares.
The Bottom Line
Conoco Phillips will start 2011 as a major integrated oil and gas company, but it will shed its downstream assets in the early part of 2012. The company also plans a double-digit increase in spending on exploration and production activities during the year. (For related reading, see A Guide To Investing In Oil Markets.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.
SavingsSocial entrepreneurs recruit "skeptics" to team green, by providing economically efficient products and services that minimize consumers' carbon footprint.
InvestingMany global Investment banks are highly involved in the energy industry, but there are also some smaller banks and boutiques that are strong players.
Stock AnalysisThese three stocks are resilient, fundamentally sound and also pay generous dividends.
Investing NewsAre stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
Investing NewsHere are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
Investing NewsHere are three resilient, dividend-paying companies that may mitigate some worry in an uncertain investing environment.
Stock AnalysisIf you're not sure where Ford and General Motors are going, you might want to look at this auto investment option instead.
Stock AnalysisLearn about the top energy companies in Russia, a country that holds some of the largest reserves of oil, natural gas and coal in the world.
Mutual Funds & ETFsExplore detailed analyses of the top buy-and-hold exchange traded funds, and learn about their characteristics, statistics and suitability.
Stock AnalysisExamine the current state of Netflix Inc., and learn about three of the major fundamental risks that the company is currently facing.
The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>