U.S. energy giant, ConocoPhillips (COP) has completed the sale of its Algeria business unit to Indonesia’s state owned oil company – PT Pertamina. The sales consideration totaled $1.75 billion.
ConocoPhillips’ divestment of its Algerian unit will be value accretive for its shareholders as well as raise funds to concentrate on higher return assets. It will facilitate the company to focus on capital investments that will benefit production and cash margins and enhance returns on capital.
ConocoPhillips’ divestiture proceeds from 2012 through third-quarter 2013, were approximately $12.4 billion. The company would use these proceeds for general corporate purposes, and investments in its organic growth programs.
Houston, Texas-based ConocoPhillips is a major global exploration and production (E&P) company with operations and activities in 30 countries that include the U.S., Canada, UK/Norway, China, Australia, offshore Timor-Leste, Indonesia, Libya, Nigeria, Algeria, Russia and Qatar.
With leading positions in both natural gas and heavy crude oil in North America, as well as a legacy position in the North Sea and growing exposure to lucrative international regions, ConocoPhillips expects to replace reserves and sustain production growth over the long term. The company’s exploration initiatives toward liquids-rich plays are gaining momentum through the Eagle Ford, Bakken and North Barnett shale plays.
Again, ConocoPhillips completed the spin-off of its refining/sales business into a separate, independent and publicly traded company, Phillips 66 (PSX) in 2012. With this, ConocoPhillips shifted its complete focus to upstream operations and thus oil and gas prices play a major role in determining its performance.
We believe that any downtrend in the global economy will affect the supply-demand fundamentals of oil and gas, hurting the sales prices for crude oil and natural gas.
We have a Zacks Rank #3 (Hold) on ConocoPhillips. However, Zacks Ranked #1 (Strong Buy) SM Energy Company (SM) and Abraxas Petroleum Corp. (AXAS) are expected to outperform the market over the next few months.