As usual, the scribes
began with
ConocoPhillips ' (NYSE: COP) profit slide for
the third quarter. But to my way of thinking, that's not the
way we should be looking at the company's results. Rather, we
should focus on planned asset sales, along with a
restructuring of the company.
But to satisfy those for whom financial metrics are
all-important, the nation's third-largest integrated oil and
gas
company, after
ExxonMobil (NYSE: XOM) and
Chevron (NYSE: CVX), earned $1.5 billion, or
$1.00 per share. Last year's numbers were $5.2 billion, or
$3.39 per share, when oil and gas prices were much
higher.
At the same time, Conoco's exploration and production
climbed more than 5% year over year. Year-to-date total
production, including its portion from
LUKOIL -- the Russian company in which Conoco
holds a 20% interest -- was 2.2 million barrels of oil
equivalent per day.
As CEO Jim Mulva noted, however, "Although we operated
well, we were adversely affected by low North American
natural gas prices and worldwide refining margins." As a
result, the company curtailed gas production and lowered its
refinery runs. "Operating well" obviously includes Conoco's
participation with
BP (NYSE: BP) and
Petrobras (NYSE: PBR) in the giant Tiber
prospect in the deep waters of the Gulf of Mexico.
Perhaps most important for the company was that it
confirmed that it will divest about $10 billion in assets
during the next couple of years and lower its capital
spending by 12% to $11 billion in 2010. About 90% of the
capital spending will be directed to exploration and
production.
Mulva also said the company could legitimately be charged
with "shrinking to grow." And as to specific properties that
may be on the block, Mulva was noncommittal. While many had
assumed that they would include its LUKOIL stake, he denied
that was the case and pointed to some nonspecific exploration
and production operations, along with some North American
pipelines and terminals and selected southern North Sea
properties.
Also for sale is Conoco's Syncrude oilsands interest. The
project is located in Canada, and
Murphy Oil (NYSE: MUR)
is its only otherU.S.-based owner.
The coming changes for ConocoPhillips will be intriguing.
In the meantime, my inclination is to stop at observing the
company. There appear to be better buys in,
for instance, BP.
BP has been rated a five-star company by
Motley Fool's
CAPSplayers. Why not poke around
its CAPS
pageand learn more about it?
This article was originally published as
Conoco Shrinking to Get Biggeron
Fool.com
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