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ConocoPhillips Message Board

  • cantgthrtondirt cantgthrtondirt Apr 23, 2014 9:59 AM Flag


    Credit concerns center on the company's relatively aggressive shareholder distributions (with 20% - 25% of cash flow from operations earmarked for dividends and share buybacks); the trend of declines in COP's production (2013 production of 1.502 million boepd versus over 2.0 million boepd in 2010); and significant asset sales which have helped bridge COP's funding gap, but have also driven production declines.

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    • Asset Sales to Fill the Gap

      COP has used asset sale proceeds to help fund capex, pay dividends, repurchase shares, and pay down debt. As calculated by Fitch, the company sold more than $32.5 billion in assets since 2010 (including Lukoil shares and downstream assets prior to the Phillips 66 spin-off), bought back just over $20 billion in shares, and paid down approximately $7.7 billion in debt. Looking forward, we expect COP will be significantly FCF negative in 2014 and 2015 as it invests for higher margin growth and will continue to rely on asset sales proceeds to fund the gap over this period.

      • 1 Reply to cantgthrtondirt

        Positive: Future developments that could lead to positive rating actions include:

        --Long-term adoption of a more conservative financial policy. An upgrade is unlikely in the near term given the funding needs associated with COP's strategic growth plan and large dividend payout.

        Negative: Future developments that could lead to negative rating action include:

        --An inability to fill funding gaps with planned asset sales or significant execution issues with plans to raise production and achieve cash margin improvement;

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