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Texas-based ConocoPhillips (COP - Analyst Report) intends to allocate $15.8 billion on capital projects in 2013, almost same as the expected capital spending in 2012. The majority (or approximately 60%) of the company’s capital budget is aimed at the growing oil and gas output in North America, in keeping with the trend that has seen other independent oil and gas producers, including Marathon Oil Corp. (MRO - Analyst Report) and Noble Energy Inc. (NBL - Analyst Report) increasingly shift their concentration on the U.S. oil shale operations for 2013. The remaining 40% of ConocoPhillips’ spending will be directed toward Europe, Asia Pacific and other international businesses.

In line with 2012, investments in 2013 will be dominated by high-quality growth projects and programs that are currently in the implementation stage, as well as exploration prospects that will assist in growing its assets for the upcoming years.

ConocoPhillips is expected to allot its capital toward the maintenance of high-quality legacy base portfolio, highly profitable exploitation programs in its legacy asset base, approved major projects and on the worldwide exploration and appraisal program. The proportion of its spending on these activities is 10%, 40%, 35% and 15% respectively.

The maintenance activities will be mainly carried out in Alaska, the Lower 48, western Canada and the North Sea, with major turnaround activity expected in the Greater Kuparuk Area, Greater Ekofisk Area and various fields in the U.K. North Sea.

Under the company’s highly profitable exploitation programs, ConocoPhillips will continue drilling and building infrastructure in unconventional formations in the continental U.S. The assets comprise the Eagle Ford and Barnett shales in Texas; the Bakken shale in North Dakota; and the Niobrara in Colorado. Dry gas plays will get minimal support, due to the all-time low natural-gas prices that has impelled many oil and gas producers to move focus towards oil.

ConocoPhillips plans to allocate about 35% of its capital budget toward major projects — the FCCL joint venture and Surmont oil sands projects in Canada, expansion projects in Norway's North Sea, and offshore developments in Malaysia — that will help it in growing its future yield.

Another 15% of the budget will be directed toward exploration and appraisal activities. This includes drilling in the Gulf of Mexico along with evaluation of oil and gas rich shale plays in North America.

ConocoPhillips holds a Zacks #3 Rank (short-term Hold rating). Longer term, we maintain our Neutral recommendation.

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