Conocophillips Britannia Northsea

Source: ConocoPhillips.

According to a report in the Financial Times ConocoPhillips (NYSE:COP) has hired banks to sell its stake in the U.K.'s largest oilfield. The U.S. independent oil and gas company owns a 24% stake in the Clair oilfield, which sits in Scottish territorial waters. The report suggests that ConocoPhillips could pick up $2-$3 billion by exiting the field, which has become a central battleground in the Scottish independence debate.

Drilling down into Clair
The Clair oilfield was originally discovered in 1977 and is located west of the Shetland Islands. However, it didn't start producing oil until 2005. It's operated by BP plc (NYSE:BP), which owns a 28.6% interest in the field, while Royal Dutch Shell plc (NYSE:RDS-A)(NYSE:RDS-B) and Chevron Corporation (NYSE:CVX) own 28% and 19.4%, respectively. Currently, those partners are investing $7.3 billion to develop a second phase of the project called Clair Ridge. That phase is expected to deliver first oil in 2017.

While that next phase will provide a boost to the field's declining production, the field might hold a lot more promise. Last year, BP announced that the partnership would start a two-year appraisal program to explore for a third phase of development. It's thought that Clair could hold a wealth of oil with estimates of upwards of 30 billion barrels of oil being in place, though most estimates peg Clair at around seven billion barrels of oil. That being said it's a complex geological structure that is now being further complicated by politics as Clair is seen as a potential cash cow for Scottish public finances. Combine the two, and ConocoPhillips would rather cash in before things get really expensive.

ConocoPhillips sticks with the easy money
ConocoPhillips has been burned by geopolitics in the past. It had its assets in Venezuela unlawfully seized in 2007 and has had issues keeping its oil production in Libya flowing during that country's recent upheaval. Because of this, ConocoPhillips has been exiting nearly all operating regions that have a hint of geopolitical uncertainty. Over the past few years, it has exited its operations in Russia, Nigeria, and Kazakhstan in order to reinvest into safer geographies.

That being said, ConocoPhillips is finding that these safer investments are actually the best ones it can be making, as the margins are much higher. As the following chart notes, the company's margins in North American unconventional shale opportunities are higher, while Canadian oil sands are equal to international oil and gas margins.

Conocophillips Margins

Source: ConocoPhillips Investor Presentation. 

Because the margins are as good if not better, ConocoPhillips is making the right move to invest in safer geographies given its issues in the past. This will help the company meet its goal to grow production and margins by 3%-5% each year, as it doesn't have to worry about those margins being squeezed by additional taxes. Further, it can deliver much faster growth by focusing on unconventional production, as the lead time for new wells can be a matter of months as opposed to years for large projects like Clair. 

Investor takeaway
While it's possible Clair is a simply massive oil field waiting to be unlocked, there are a number of geological and geopolitical risks standing in the way. That's why it makes sense for ConocoPhillips to cash in on its position and reinvest that money in North America, where it knows its margins and growth prospects are a surer bet. 

Matt DiLallo owns shares of ConocoPhillips. The Motley Fool recommends Chevron. 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.