Liam Denning is a Bloomberg Gadfly columnist covering energy, mining and commodities. He previously was the editor of the Wall Street Journal's "Heard on the Street" column. Before that, he wrote for the Financial Times' Lex column. He has also worked as an investment banker and consultant.

The CEO of Royal Dutch Shell Plc raised more than a few eyebrows on Thursday morning when he said the oil major has adopted a "lower-forever mindset" on oil prices. He even wants to get himself an electric car (presumably, he'll keep the fuel-burning private jet handy).

Another company hailing from the other side of the Atlantic has been living that mantra for a while: ConocoPhillips. CEO Ryan Lance hasn't been spotted at any Tesla showrooms as far as I know, but the company's cash flow certainly doesn't betray any expectation of a big rebound in the crude-oil market.

Reporting results on Thursday, Conoco tapped the brakes -- to borrow Halliburton Co.'s phrase of the week -- on spending, similar to other E&P companies looking at sub-$50 oil. Also like them, though, lower spending doesn't mean lower productivity: Guidance of 1.34 to 1.37 million barrels of oil equivalent per day of production for 2017 is still above analyst expectations.

You can see how much more bang Conoco has been getting for its buck if you compare capital expenditure to output:

Capped Capex
ConocoPhillips has slashed investment per barrel in the downturn
Source: Bloomberg, the company

Full-year guidance for 2017 implies capex per barrel will rise from 2016's very low level, but still remain under $10:

Steady Seventeen
ConocoPhillips' guidance for the full year keeps a lid on capex per barrel
Source: Bloomberg, the company
Note: Data for 2017 implied by the midpoint of company guidance.

Conoco's strategy has, for some time now, been focused on cutting debt and protecting a dividend it was forced to cut in early 2016, at the trough of the oil market. It has, like several other oil majors, sold off most of its Canadian oil-sands resources, which represent the longest of long-term bets on oil demand and high prices. Judging from what's happened to the buyer since then, it looks like Conoco got the better end of that deal. By year-end, Conoco expects debt to have dropped below $20 billion, down from almost $30 billion at the start of last year.

Above all, though, Conoco has been living within its means, having just generated enough cash flow from operations to cover both its capex and dividends for the fourth quarter in a row:

ConocoPhillips has generated about $1.1 billion of free cash flow over the past four quarters, after both capex and dividends
Source: Bloomberg, the company

All of the excess free cash flow has been returned to shareholders in the form of stock buybacks, a rarity these days among oil majors after years of being defined by them. Lower forever may sound like pessimism, but accepting it can bring its own rewards.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Liam Denning in New York at

To contact the editor responsible for this story:
Mark Gongloff at