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NEW YORK -- ConocoPhillips plans to increase shareholder value through asset sales, debt reduction, returns enhancement, growth of shareholder distributions through higher dividends and a resumption of share repurchases.
In addition to halving its equity ownership in LUKOIL, ConocoPhillips intends to grow production per share and convert 10 billion barrels of oil equivalent (BOE) of resources into reserves over the next 10 years.
"We are focused on creating and delivering value to our shareholders," Jim Mulva, chairman and CEO, told analysts. "We are taking decisive action to sell assets, reduce debt, build on our record of shareholder distributions and improve returns while growing production and reserves per share."
As announced in 2009, ConocoPhillips intends to sell $10 billion of assets over two years. Approximately half of the assets will be sold in 2010 with the remainder in 2011. A portion of the proceeds will be used to reduce debt to targeted levels. Potential 2010 dispositions include the company's ownership interest in Syncrude and the Rex Pipeline, 10 percent of its Lower 48 and Western Canada portfolio and its remaining U.S. marketing assets. It is expected 60 percent to 80 percent of the proceeds generated will come from the exploration and production segment.
Significant cash flow is expected to be generated from operating activities, the sale of 10 percent of LUKOIL and asset sales over the next two years, the company said in a statement. After funding its capital program and dividends, the company expects to use a portion of the remaining free cash flow to fund a 10-percent increase in dividends, continuing the practice of annual dividend increases since the formation of ConocoPhillips eight years ago. Additional distributions to shareholders will come through a $5 billion share repurchase program.
Over the next several years, ConocoPhillips plans to significantly increase its return on capital employed (ROCE). This ROCE improvement will be assisted by a recovery in natural gas prices and refining margins in North America and driven by continuous improvement in operating efficiencies, constrained capital expenditures, reduced operating costs and a shift in the company's portfolio to 85 percent exploration and production over time, the company said.
The plans will have a negative impact on BOE production growth over the next few years. In spite of this, ConocoPhillips plans to deliver per share production growth of 3 percent in 2010 and 2011 and 3 percent to 5 percent in subsequent years. Longer term, underlying production is expected to grow 2 percent to 3 percent, as the company converts 10 billion BOE of resources to reserves at competitive finding and development costs.
Headquartered here, the company had approximately 30,000 employees, $153 billion of assets and $149 billion of revenues as of Dec. 31, 2009.
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