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UPDATE: ConocoPhillips to Spend $15.8 Billion on Capital Projects in 2013

Date : 12/08/2012 @ 3:43AM
Source : Dow Jones News
Stock : Conocophillips (COP)
Quote : 81.22  0.56 (0.69%) @ 5:30AM
Conocophillips share price Chart

UPDATE: ConocoPhillips to Spend $15.8 Billion on Capital Projects in 2013

Conocophillips (NYSE:COP)
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--ConocoPhillips sets capital expenditure budget of $15.8 billion, about the same as 2012 spending

--60% of the capital expenditure budget will be spend in North America

--Asset sales will help fund the company's spending

(Adds analyst comments and details beginning in second paragraph)

 
   By Alison Sider and Kristin Jones 
 

HOUSTON--ConocoPhillips (COP) said it plans to spend $15.8 billion on capital projects in 2013, with the bulk of it directed toward continuing oil and gas production in North America.

The Houston-based energy company said that its budget is roughly flat compared to its expected capital spending in 2012--a spending level buoyed in part by billions of dollars worth of asset sales the company has completed in its first year as a stand-alone exploration and production company.

"Similar to 2012, next year's investments will be directed predominantly toward high-quality growth projects and programs that are already in execution mode, as well as exploration opportunities to build inventory for the future," said Chief Executive Ryan Lance.

ConocoPhillips had originally said it would spend $15 billion in 2012, but in July it said it expected to spend an extra $1 billion this year as it pushed back the timing of planned sales for some of its assets.

Raymond James analyst Stacey Hudson said the plans for 2013 were "pretty robust," as the company has gotten closer to its goal of selling $8 billion to $10 billion in assets by the end of 2013, which will generate much of the cash to pay for the large amount of capital investment.

ConocoPhillips is in the midst of a three-year repositioning aimed at improving its balance sheet and focusing on more profitable, less risky unconventional fields in North America, where it will direct about 60% of its 2013 capital expenditure budget. The other 40% will be directed toward Europe, the Asia-Pacific and other international businesses.

The company's North American focus is "a common trend," Ms. Hudson said. Other independent oil and gas producers, including Marathon Oil Corp. (MRO) and Noble Energy Inc. (NBL), also said this week that they will allocate the majority of their capital budgets to U.S. oil shale operations next year.

ConocoPhillips said it plans to allocate more than $4 billion to drilling and building infrastructure in unconventional formations in the continental U.S. including the Eagle Ford and Barnett shales in Texas; the Bakken shale in North Dakota; and the Niobrara in Colorado. Dry gas plays will receive minimal funding, the energy company said, reflecting rock-bottom natural-gas prices that have prompted many oil and gas producers to shift focus toward oil.

ConocoPhillips is currently one of the leading producers in Texas's Eagle Ford play, and has said it expects production to reach 100,000 barrels of oil equivalent per day there during 2012's fourth quarter. Last quarter, its Eagle Ford production peaked at a company record of 86,000 barrels of oil equivalent per day.

Another 35% of the budget--$5.53 billion--will be spent on major projects geared toward future production, including the FCCL joint venture and Surmont oil sands projects in Canada, expansion projects in Norway's North Sea, and offshore developments in Malaysia.

ConocoPhillips has sold or plans to sell more than $7 billion in assets in 2012, including a $5 billion sale of its stake in Kazakhstan's Kashagan field in the Caspian Sea announced last week. The company spun off its refining arm earlier this year to Phillips 66 (PSX).

ConocoPhillips has said it is considering selling a stake in its Canadian tar sands assets. Chief Financial Officer Jeff Sheets said in October that the company had received significant interest from national oil companies but hadn't made any decisions.

Though he didn't comment specifically on that sale, Mr. Lance said Friday that the company will continue its program of divestitures in 2013, and expects to deliver on long-term annual growth rate targets of 3% to 5% on volumes and margins, with a "compelling" dividend.

Exploration and appraisal accounts for around 15% of the budget, including drilling in the Gulf of Mexico and appraising oil and natural gas liquids-rich shale plays in North America.

"Our 2013 capital budget provides funding for the key growth projects and programs in our portfolio and provides flexibility to capture new opportunities that may arise," said Mr. Lance.

Shares closed up 59 cents to $57.94. The stock is up 4.1% so far this year.

Write to Alison Sider at alison.sider@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires




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