Seven years after selling its Nigerian assets for $1.79billion to Oando Energy Resources, ConocoPhillips has revealed a ten-year operational plan which includes free cash flow of $50 billion and an average yearly CAPEX of less than $7 billion.
The Houston-based oil and gas producer is targeting a free cash flow of approximately $50 billion based on a real West Texas intermediate price of $50 per barrel and annual capital expenditures averaging less than $7 billion over the decade.
ConocoPhillips expects several decades ahead of lackluster oil prices, with U.S. oil to average between $40 to $70 per barrel through the 2050s. Ride-sharing, electric vehicles and urbanization will impact demand for the company’s products, but Executive Vice President Matt Fox said oil and gas would remain an important part of the energy mix through 2050.
According to the company, it will spend about $4 billion per year on shale, running about 20 drilling rigs across four fields, and boosting shale production from more than 400,000 barrels per day (bpd) next year to around 900,000 bpd by the end of the decade, it said.
The company projected ordinary dividends of approximately $20 billion, reflecting growth in the current dividend over the plan period; and a projected $30 billion in share buybacks over the 10-year period, representing almost 50 percent of current market capitalization;
The announcement comes as investors, frustrated by weak commodity prices for five years, have been pressuring oil and gas companies to cut back on drilling and shore up cash to return to shareholders.
“Over the past few years we have successfully transformed ConocoPhillips to position the company for consistent, predictable performance across the inevitable price cycles of our industry,” said Ryan Lance, chairman, and chief executive officer. “We believe that we offer the market a compelling, long-term E&P investment that provides downside protection and full exposure to the upside.
Today’s plan demonstrates sustained value creation through significant free cash flow generation, distinctive returns of capital and growing returns on capital.”
Lance continued, “We are committed to delivering superior returns to shareholders. Our plan provides a powerful, multi-year outlook that combines a robust, scenario-based strategy framework, a diverse, low cost of supply resource base, a disciplined, value-based investment approach, and a world-class workforce. We believe we are unique in being able to offer this formula to the market.”
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