3 Questions that Will Determine ConocoPhillips’ Future

Photo credit: ConocoPhillips  

ConocoPhillips (NYSE: COP  ) is expected to hold its annual Analyst Meeting this Thursday, April 10. That event is always well worth an investor's time and I'd highly recommend tuning into the webcast. With that event in mind, here are three questions I'm hoping we'll see the company address as its answers will really give investors a better idea which direction the company plans to head through the end of the decade.

What's the future of Alaska?
ConocoPhillips is one of a number of companies that is increasing Alaskan oil production thanks to some new tax laws. Not only is the company looking to increase conventional oil production, but ConocoPhillips is part of the venture looking to join the state in exporting natural gas. On top of that the company could one day join Royal Dutch Shell plc (NYSE: RDS-A  ) (NYSE: RDS-B  ) in its pursuit of oil in the Arctic waters off of Alaska.


Photo credit: Anadarko Petroleum 

Those Arctic drilling plans in the Chuckchi Sea will likely remain on hold for a while as Shell's drilling plans were put on pause again after a court ruling in favor of environmental and native groups halted the drilling. However, that doesn't mean that Alaska won't become an important growth driver for ConocoPhillips. That's why investors should see what the company has to say about rig counts in the state as well as its future plans for growth. Further, anything it says about its plans in the Chuckchi Sea will help to clear up the current uncertainty about the company's production growth plans through the end of the decade.

When can we expect oil to flow out of the Gulf of Mexico?
Last year was a great year for ConocoPhillips in the Gulf of Mexico. The company and its partners which include companies like Anadarko Petroleum Corporation (NYSE: APC  ) made a number of large oil discoveries including Shenandoah and Coronado. We'll likely see more discoveries in the future as ConocoPhillips has amassed 2.2 million net acres in the deepwater of the Gulf that it'll be exploring in the years ahead. 

At this point the Gulf of Mexico represents one major opportunity for the company. However, it hasn't yet announced when investors will see the Gulf fuel any value as the company isn't yet producing from the region. Investors will want to see if ConocoPhillips and Anadarko have any firm plans to begin turning these prospects into production.

What's the next big area of growth?
As the following map from a recent investor presentation details, ConocoPhillips has a number of both conventional and unconventional exploration opportunities within its current portfolio.

Source: ConocoPhillips Investor Presentation (link opens a PDF)

We know that the Gulf of Mexico should be a big future production growth driver for the company. What I'm interested in is to see what ConocoPhillips sees as the next big driver. The company has talked about its unconventional prospects in the Permian Basin of Texas as well as the Niobrara in the Rockies. Beyond that we know that the company is actively exploring international opportunities in Canada, Colombia, Poland, the Barents Sea, offshore Angola and offshore Senegal. What I'd like to know is if any of these areas are emerging to the point where we'll see any production before the end of the decade. For example, it will be interesting to see if the recent problems with energy rich Russia could push Poland to really focus on unlocking its own shale plays and what role ConocoPhillips might play in the country's future. 

Investor takeaway
ConocoPhillips is still in the early stages of its five year plan to grow production and margins by 3%-5% annually through 2017. However, as a long-term investor I'm curious what the company has planned beyond 2017. That's why I'm really interested to see how the company answers these three key questions at its analyst day later this week. 

OPEC is absolutely terrified of this game-changer
Imagine a company that rents a very specific and valuable piece of machinery for $41,000... per hour (that's almost as much as the average American makes in a year!). And Warren Buffett is so confident in this company's can't-live-without-it business model, he just loaded up on 8.8 million shares. An exclusive, brand-new Motley Fool report reveals the company we're calling OPEC's Worst Nightmare. Just click HERE to uncover the name of this industry-leading stock... and join Buffett in his quest for a veritable LANDSLIDE of profits!


Read/Post Comments (3) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 10, 2014, at 12:18 AM, HoerthCM wrote:

    Thanks for the article, Matt.

    Personally I'm excited about the Niobrara and Permian exploration, as well as the Montney and Duverney in Canada. The Gulf Of Mexico continues to yield good discoveries in deepwater. All of these are good, all of these are within Conoco's expertise.

    But here's what I really don't like. Australia: Nobody should be exploring in Australia right now. The Aussie dollar continues its ascent. Australian government is so green-obsessed and insistent on handouts to Aboriginals from the oil companies. Worst of all, labor costs in Australia are the highest in the world for energy.

    Conoco is exploring in Azerbaijan. OK. Didn't Conoco just leave nearby Kashagan? What makes Azerbaijan's prospects better?

    As for the Chuchki, Barents and North Sea: What can Conoco offer in these regions that Exxon cannot?

    And places like Poland, Bangladesh, and Sichuan? Really? To me, all three locales seem like a waste of time if Conoco can explore here in the states, Canada or the Gulf. Like yourself, I am awaiting analyst day.

  • Report this Comment On April 10, 2014, at 12:20 AM, HoerthCM wrote:

    For example, why not put exploration resources into the Tuscaloosa Marine Shale in Louisiana? If I had a few billion for exploration, I would much rather spend it on exploring the Tuscaloosa rather than exotic locations that will never come to fruition, such as Sichuan or Bangladesh.

  • Report this Comment On April 10, 2014, at 10:51 AM, TMFmd19 wrote:

    Yeah, I agree for the most part. It doesn't sound like these are big bets, its almost like its spreading around a bunch of small bets hoping for one to hit big.

    You mentioned Australia, one US company sees its shale being the next big one:

    It doesn't sound like COP wants to follow most of its independent peers and just focus on North America. It probably realizes that it'll need international growth once the shale boom dies down in a decade or so.


Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2904753, ~/Articles/ArticleHandler.aspx, 9/5/2015 10:23:18 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Matt DiLallo

Matthew is a Senior Energy and Materials Specialist with The Motley Fool. He graduated from the Liberty University with a degree in Biblical Studies and a Masters of Business Administration. You can follow him on Twitter for the latest news and analysis of the energy and materials industries:

Today's Market

updated 13 hours ago Sponsored by:
DOW 16,102.38 -272.38 -1.66%
S&P 500 1,921.22 -29.91 -1.53%
NASD 4,683.92 -49.58 -1.05%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/4/2015 4:00 PM
COP $47.20 Down -0.98 -2.03%
ConocoPhillips CAPS Rating: *****
APC $68.34 Down -0.90 -1.30%
Anadarko Petroleum… CAPS Rating: ***
RDS-A $49.51 Down -1.29 -2.54%
Royal Dutch Shell… CAPS Rating: ****
RDS-B $49.39 Down -1.40 -2.76%
Royal Dutch Shell CAPS Rating: ****