The remainder of the assets will be sold in 2011, the company said. A portion of the proceeds will be used to reduce debt to targeted levels.
"We are focused on creating and delivering value to our [image-nocss] shareholders," said Jim Mulva, chairman and CEO of the Houston-based company. "We are taking decisive action to sell assets, reduce debt, build on our record of shareholder distributions and improve returns while growing production and reserves per share."
Potential 2010 dispositions include the company's ownership interest in Syncrude and the Rex Pipeline, 10% of its Lower 48 and Western Canada portfolio, as well as the aforementioned U.S. marketing assets. It said it expects that 60% to 80% of the proceeds generated will come from the Exploration and Production (E&P) segment.
In aggregate, these sales are expected to create financial gains. It said it expects significant cash flow to be generated from operating activities, the sale of 10% of LUKOIL and asset sales over the next two years. After funding its capital program and dividends, the company expects to use a portion of the remaining free cash flow to fund a 10% increase in dividends, continuing the practice of annual dividend increases since the formation of ConocoPhillips eight years ago. Lastly, additional distributions to shareholders will come through a $5 billion share repurchase program.
In addition to announcing plans to halve its equity ownership in LUKOIL, ConocoPhillips also provided details on how it intends to grow production per share and convert 10 billion barrels of oil equivalent (BOE) of resources into reserves over the next 10 years.
As for refining, Mulva said ConocoPhillips continues to look at options for reducing the company's capacity, perhaps by selling plants or forming joint ventures to share ownership, said the Chronicle. But he predicts the market for doing such deals will be better in two years, once the economic recovery takes hold, boosts fuel demand and lifts values of facilities. Although he doubts the company would ever exit the refining business entirely, he added its goal is to link refining assets more closely to individual oil and gas projects that call for them, like processing heavy Canadian crude oils. "We'll be in the business. The question is how much?" he said.
Brian Youngberg, oil analyst with Edward Jones, said ConocoPhillips' efforts to narrow the gap with rivals will be a "slow and gradual" process, but investors are beginning to notice. This year, he noted, ConocoPhillips is the only oil major whose stock price has risen. "I think some of that is due to the realization that the company is finally taking some actions to fix some of their problems," he told the newspaper.
(Click here and click here for previous CSP Daily News coverage on ConocoPhillips' retail divestment.)
(Click here for previous coverage on ConocoPhillips' $10 billion asset sale.)
(Andclick here for previous coverage on refiners, including ConocoPhillips, assessing downstream businesses as demand slumps. And for more on how refinery losses and shutdowns may affect fuel pricing along the supply chain, watch for the April issue of CSP magazine.)
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