ConocoPhillips (COP), the largest U.S. independent oil and natural gas producer by market value, may use cash, debt and asset sales to fund spending and dividends as it waits for production to rise.
ConocoPhillips expects capital spending of about $16 billion a year from 2013 to 2017, according to presentation slides for the company’s analyst meeting today. ConocoPhillips spent more than $3 billion last year on its dividend, and the company said today it’s targeting “consistent” dividend increases.
ConocoPhillips, which plans spending that may outstrip its cash flow, said its balance sheet provides flexibility as the company looks to fund its growth program. The Houston-based company ended 2012 with $4.4 billion in total cash. In 2013, the company expects to get $9.6 billion from asset sales it has announced.
“We got cash from operations, we got asset sales proceeds, we got cash on the balance sheet already, and we got debt capacity,” Chief Financial Officer Jeff Sheets said at the meeting today. “So there really shouldn’t be any doubt that through a series of price environments that we can fund the capital and fund the dividend.”
Assets that will be part of continuing operations generated a little less than $15 billion in cash flow last year, Sheets said. The company’s investments will create $6 billion to $7 billion of cash flow in the future, he said. That means cash flow may be about $22 billion by 2017 if prices are similar to last year, Sheets said.
The company is seeking compound annual production and margin growth of 3 percent to 5 percent in coming years. Output may climb to about 1.9 million barrels of oil equivalent a day in 2017, compared with about 1.5 million barrels a day from continuing operations last year.
ConocoPhillips became an independent producer last year with the spinoff of refining, chemical and pipeline businesses to form a separate company known as Phillips 66. Independent oil companies don’t have refineries or a chemical unit.
“We’re about running the business really well, we know how to do it,” Chairman and Chief Executive Officer Ryan Lance said in a telephone interview today. “We have a compelling dividend, and the growth in production and margin is coming and we’re focused on returns.”
ConocoPhillips also said it continues to look at possibly reducing its stakes in Canadian oil-sands holdings and in the Australia Pacific liquefied natural gas project, which this month boosted cost estimates by 7 percent in Australian dollars.
ConocoPhillips fell 0.2 percent to $57.95 at the close in New York.
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