Back in March, ConocoPhillips Corp. (NYSE: COP) revealed a plan to increase shareholder value by selling assets, reducing debt, getting a better return on capital, increasing dividends, and buying back more shares. The company faced serious problems in each of these areas. The biggest was its crushing debt load of nearly $27 billion, primarily as a result of its purchase in 2005 of Burlington Resources for $35.6 billion.
To try to bring it’s debt down more in line with competitors Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp., and to get Warren Buffet’s Berkshire Hathaway Inc. (NYSE: BRK.B) to stop selling off shares, Conoco said it would sell $10 billion in assets during 2010 and 2011. The company also said it would sell half its 20% in OAO Lukoil, Russia’s largest publicly-held oil company. All together, the company expected to rake in about $15 billion from the sales.
In April, Conoco sold its 9% stake in Syncrude Canada Ltd. to Sinopec, officially known as
China Petroleum & Chemical Corp. (NYSE: SNP), for $4.65 billion. That takes care of about half the $10 billion in assets Conoco said it would sell over two years.
Because Lukoil retained first rights to buy back its own shares, Conoco sold 7.6% of its shares to the Russian company in August for $3.44 billion. Lukoil held a one-time option until September 26th to buy back another 11.6% of its shares at $56/share. The company exercised that option on 5% of the shares, spending another $2.38 billion. The two purchases have poured $5.82 billion into Conoco’s coffers.
In its earnings release for the second fiscal quarter, Conoco plans to sell 100% of its stake in Lukoil by the end of 2011. The company still owns about 56 million shares of Lukoil, out of the 163.3 million shares it owned before starting its sell-off.
Conoco has also pulled out of a deal that would have given the company a 40% stake in the Abu Dhabi’s Shah Gas Field development and canceled a scheduled upgrading project on its refinery in Wilhelmshaven, Germany. Conoco now plans either to sell the refine or to convert it to a storage terminal
While these moves will boost Conoco’s results in the short-term, the jury is still out on its long-term strategy. In March, the company said it would move about 10 billion barrels of oil equivalent from its resources column to its reserves column. Because the company doesn’t have to report reserves changes until its annual report is released, the jury will remain out on this part of the program for a few more months.
As of this writing, Paul Ausick did not own a position in any of the stocks named here.
The Best & Worst Cheap Stocks to Own Now. Includes the 3 small caps under $10 a share that could double your money by year’s end and the 26 time bombs to avoid like the plague. Plus, the five red flags for buying cheap stocks. Get your FREE report here.
