ConocoPhillips (NYSE:COP) announced a large increase in its 2011 exploration and production budget as it moves to harvest its large property base in the United States and abroad. The company also boosted its quarterly dividend and authorized a new share buyback program. Let's take a look at how this oil company is looking for 2011.
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Conoco's 2011 Capital Budget
ConocoPhillips set a total capital budget of $13.5 billion for 2011, with $12 billion devoted to the upstream segment of the company. The company is putting approximately 50% of this total into its North American operations, and like many other companies is targeting various oil and liquids plays in its portfolio.
COP's North American Production
The Eagle Ford Shale is one of these areas, and ConocoPhillips has assembled 254,000 net acres in this trend, with 90% of the acreage in the oil or wet gas area of the play. The company plans a major effort here in 2011 and will increase its rig count to 13 in the first quarter of 2011. ConocoPhillips has also allocated capital to develop prospective properties for the Bakken and Barnett Shale formations. The company expects these three areas to grow production by a 10-18% compound annual growth rate (CAGR) through 2014.
In Canada, ConocoPhillips will focus on continued investment in oil sands projects and also plans exploration in the Horn River Basin shale play in Western Canada. ConocoPhillips expects production to grow here at a CAGR of between 10% and 15% through 2014.
ConocoPhillips' International Exposure
The other 50% of the exploration and production budget will be allocated internationally among various projects in the North Sea, Australia, Southeast Asia and Africa. The company will also continue to develop its operations in the Kashagan Field, where it has an 8.4% ownership share.
ConocoPhillips announced a quarterly dividend of 66 cents per share beginning with the first quarter of 2011. This is a 20% increase from the previous dividend of 55 cents and gives the stock a yield of 3.6%. This yield is higher than that of many of its competitors, including Exxon Mobil (NYSE:XOM), which has a yield of 2.14%. BP (NYSE:BP) just reinstituted paying a dividend on its common stock after halting it in 2010 due to uncertainty regarding its liability for the oil spill in the Gulf of Mexico. (Find more great dividend stocks in Top Dividend Plays For 2011.)
ConocoPhillips also authorized a $10 billion program to repurchase company stock. The company already has an existing $5 billion program and has $1 billion left under that program, which dates from early 2010.
Stock repurchase programs are popular at major integrated oil and gas companies, which typically produce billions in excess cash flows. Chevron (NYSE:CVX) also has a multibillion dollar buyback program and targets the repurchase of between $500 million and $1 billion worth of stock per quarter. The company repurchased $750 million in the final quarter of 2010.
The Bottom Line
ConocoPhillips announced an increase in its 2011 exploration and production budget and will use the funds to generate growth from its domestic and international properties. The company is also proving to be shareholder friendly with its dividend raise and authorization of a new multibillion stock repurchase program. (For related reading, see Oil And Gas Industry Primer)
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