ConocoPhillips (COP - Analyst Report) has entered into an agreement with leading Canadian exploration and production company, Oando Energy Resources, to extend the date of closing the proposed divestment of its Nigerian Upstream Oil and Gas business. The new agreement extended the date for completion of the transaction to Jul 31, 2014. Earlier the parties had expected the transaction to be completed by Jun 2014.
The divestment proposal has already received the consent of the Minister of Petroleum Resources of Nigeria. The purchase consideration to be dished out by Oando Energy would be $1.65 billion in cash.
ConocoPhillips’ recent performance was driven by a continued portfolio shift to liquids and higher production from new development programs, as well as upstream ventures in key projects. However, this was partially offset by lower oil realizations. ConocoPhillips is progressing on other North American shale plays, including several emerging areas.
With leading positions in both natural gas and heavy crude oil in North America, as well as a legacy presence in the North Sea and growing exposure to lucrative international regions, ConocoPhillips expects to replace reserves and sustain production growth over the long term.
ConocoPhillips’ focus on liquids-rich plays are gaining momentum through the Eagle Ford, Bakken and Permian plays. The company is also poised to benefit from a pipeline of projects in the Gulf of Mexico (GoM), Malaysia, the liquefied natural gas (LNG) project in Australia, the U.K., Norway, and the Canadian oil sands, apart from the U.S. Lower 48 liquids-rich plays. Oil sands expansion projects are also on track.
Ever since the company spun off its refining operations to Phillips 66 (PSX - Analyst Report), in Apr 2012, it has delivered total shareholder returns of 22%. With the spin-off, ConocoPhillips shifted its total focus to upstream operations. Oil and gas prices thus play a major role in determining its performance. The company plans to expand production by maintaining its growth focus on reserves, through global drilling programs in legacy assets, unconventional assets and major projects.
ConocoPhillips’ margin growth would also be aided by the addition of higher-value products in its production mix. The company expects to spend $16 billion on average annually and will allocate 95% of its capital to investments that deliver above-average margins. The company’s recent activity targets offshore prospects in Australia, Angola and Senegal, conventional exploration in Norway and Indonesia, and unconventional exploration in North America, Poland and Colombia.
ConocoPhillips currently holds a Zacks Rank #2 (Buy). Better-ranked stocks in the oil and gas sector include Encana Corp. (ECA - Analyst Report) and Matrix Service Co. (MTRX - Snapshot Report). Both sport a Zacks Rank #1 (Strong Buy).