When it comes to energy exploration and production, positioning is everything. That's what allows ConocoPhillips (NYSE:COP) to stand apart from its competition. Since it spun off its refining unit, Phillips 66 (NYSE:PSX), and its midstream master limited partnership, Phillips 66 Partners LP (NYSE:PSXP), ConocoPhillips is now an exclusively independent oil and gas exploration and production company. It advises investors to expect strong long-term growth as a result of its key geographic focus, particularly in North America, and it's hard to argue with management's confidence.

Geographic focus is a winning strategy
ConocoPhillips no longer has a diversified business model after releasing its refining and midstream assets over the past couple of years. Now that Phillips 66 and Phillips 66 Partners are publicly traded entities all on their own, ConocoPhillips can't afford to make ill-advised upstream investments that don't pan out. That makes finding the best oil and gas production opportunities absolutely imperative, and fortunately for investors, ConocoPhillips has a management team that is more than up to the task.

In the United States, ConocoPhillips has set its sights on a select few regions that should produce years of strong growth. To paraphrase the company's own words, ConocoPhillips maintains a diverse asset base with scope and scale, and is positioned in key resource trends. Its major areas of investment in the United States include the Permian Basin, Bakken shale, and Eagle Ford plays. An understanding of the massive potential of these areas reveals ConocoPhillips' promising future ahead.

The Permian Basin is located in West Texas and eastern New Mexico. The U.S. Energy Information Administration reports that total production at the Permian Basin hit one million barrels per day in 2011, making the region one of the select few in the United States to reach that level of daily production. ConocoPhillips plans $3 billion worth of investments in the Permian Basin, which should add 40,000 barrels of oil equivalents per day to its production totals by 2017.

The Energy Information Information's findings of the Eagle Ford formation are equally impressive. Total production at Eagle Ford reached 1 million barrels per day in August, and is poised to grow even further in the months ahead. The rapid acceleration of production is astounding, since Eagle Ford did not even have significant oil drilling until just three years ago.

The Eagle Ford formation represents ConocoPhillips' biggest locale of the three in terms of total investment. The company will spend $8 billion over five years to produce 130,000 barrels of oil equivalent per day by 2017. Production growth should reach 16% compounded annually over that time frame.

Meanwhile, the EIA reports that the Bakken region now accounts for a little over 10% of total U.S. oil production, and is expected to reach the 1 million barrel per day marker very soon. Interestingly, the government finds that rig counts have actually declined in the Bakken field, but soaring output per rig is what accounts for the increase in total production.

ConocoPhillips' operations in the Bakken area include 626 million net acres that hold more than 1,400 identified drilling locations. ConocoPhillips is allocating $4 billion to the region over a five-year time frame, where production will grow by 18% compounded annually through 2017.

More than enough production to fuel ConocoPhillips' dividend
ConocoPhillips takes its capital allocation program very seriously. It prides itself on having the highest dividend yield of any independent exploration and production company in its direct peer group. To fund its hefty payout, it's critical for ConocoPhillips to focus only on the best production opportunities going forward. The company considers its dividend to be its highest priority use of cash flow.

As a result, investors can take comfort in knowing how seriously management takes its commitment to returning cash to shareholders. And, thanks to its focus on the geographic areas of the United States that hold the highest potential, which include the Permian, Bakken, and Eagle Ford plays, ConocoPhillips will be able to keep pumping out strong dividends for many years to come.


Bob Ciura has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.