5 Things ConocoPhillips' Management Wants You to Know

ConocoPhillips addressed five key points on its recent conference call that it wants its investors to know.

Aug 21, 2014 at 9:48AM

Conocophillips Ekofisk

Source: ConocoPhillips. 

ConocoPhillips' (NYSE:COP) management team, as it does every quarter, held a conference call with investors and analysts to discuss its latest results. The nearly hour-long call was filled with insights from management on the direction that the company is heading in the future. Here are the five biggest takeaways from that call.

No. 1: The dividend remains a top priority
CEO Ryan Lance ended his prepared remarks on the call by saying, "Finally, earlier this month, we approved a dividend increase of 5.8%. Giving back capital to our shareholders remains a top priority, and we believe an attractive dividend is the key part of our investment offering." With that raise, ConocoPhillips' dividend yield is 3.61% at current prices. That's a lot higher than most of its independent oil and gas peers; the next-best dividend is Occidental Petroleum (NYSE:OXY) with a yield of 2.9%. Most other independents have dividend yields around 1%, so when ConocoPhillips says its dividend is a priority, it really means it.

Conocophillip Ryan Lance

CEO Ryan Lance. Source: ConocoPhillips. 

No. 2: Production growth remains on track
Ever since spinning off its refining arm, ConocoPhillips has focused on delivering steady production growth. The company's five-year plan specifically calls for 3%-5% annual production growth. Despite bumps in the road along the way, the company remains on target to deliver its stated growth rate. In fact, in ending his comments on the call, Matt Fox, EVP of Exploration and Production, said, "The bottom line, is we expect to deliver 3% to 5% production growth this year, with strong momentum going into 2015." Needless to say, production growth remains on track in an industry that has had trouble delivering production growth in the past.

No. 3: Stock buybacks are on the back burner
Part of ConocoPhillips' transition to a growth-focused independent oil and gas company has been to sell low growth assets and use the proceeds to buy back stock and fund growth projects. After two years, ConocoPhillips has finally finished its disposition program. With asset sales complete, one of the analysts on the call asked if the company was considering any additional stock buybacks.

CEO Ryan Lance said the company's focus right now is to fund its investment program to explore and produce oil and gas. He noted that, "to the extent we fully fund all of our high-quality investment programs, we'd consider share buybacks at that point in time. But right now, it's being used to fund our dividend and our capital program." Bottom line, here, don't expect ConocoPhillips to buy back any more stock unless it's so cheap that it is a better investment than exploring for oil and gas.

No. 4: Diversification takes the worry away
ConocoPhillips has several major projects in development, and one of the analysts on the call wondered if problems at any one project could impact the company's production growth goals over the next year or so.

Matt Fox soothed these worries by saying:

No, I think that the range that we've given for both the third-quarter and the fourth-quarter captures the uncertainty that we see in the overall portfolio... But one of the advantages that we have as a diversified company is that... no single project is going to make a big difference in the overall scheme of things. And that diversification in the portfolio helps us to limit the exposure to individual project surprises.

It looks like investors can sleep soundly knowing that a big project delay won't have any noticeable impact on the company's growth plan.

Conocophillips Matt Fox

EVP of E&P Matt Fox. Source: ConocoPhillips. 

No. 5: Forget about an MLP
The combination of low interest rates and the North American energy boom is creating a lot of excitement around master limited partnerships. Many of ConocoPhillips' peers, including most recently Devon Energy (NYSE:DVN) and Hess (NYSE:HES), are forming MLPs out of their midstream assets to unlock the value of those assets. So, of course that makes us wonder when ConocoPhillips would be forming an MLP out of its midstream assets. This question was asked on the call as an analysts noted that the company has been building midstream assets in the Eagle Ford Shale, which could be packaged into an MLP and monetized.

Chief Financial Officer Jeff Sheets, however, threw cold water on that idea by saying:

When you look at our midstream position overall... going back in history, most of that midstream position... has then since gone off course with Phillips 66. So there's not a lot of midstream assets that are out there that could form the core of an MLP for us. As we go forward, we are having some midstream investments in the Eagle Ford and in the Permian. But those are really not of a size that we feel like we have the critical mass to be thinking about an MLP, but that's something that we'll just continue to evaluate as we go through time.

So, basically, investors can forget about an announcement of an MLP coming from ConocoPhillips. The company simply doesn't have enough MLP-type assets to make it worth forming an MLP. Instead, if the company did decide to monetize the assets, it might simply sell them to an existing MLP. However, right now, these assets are critical to the company's growth.

Investor takeaway
The biggest takeaway from ConocoPhillips' call is the fact that the company's strategic plan remains on track. Its production growth won't be affected by any major delays, and its dividend remains its other top priority. Because of that the company should continue to deliver steady growth and income for investors over the next few years. 

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven't heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America's greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, "The IRS Is Daring You to Make This Investment Now!," and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Matt DiLallo owns shares of ConocoPhillips and Phillips 66. The Motley Fool owns shares of Devon Energy. 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.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers