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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information