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ConocoPhillips Extends Share Buybacks Through 2020

Oil

ConocoPhillips (NYSE:COP) plans to extend share buybacks for another year to boost capital spending to $5.5 billion annually through 2020, based on a flat real WTI price of $50 a barrel, in a sign that it’s targeting higher profits and shareholder returns.

ConocoPhillips aims to achieve greater than 30-percent payout of cash provided by operating activities to shareholders annually, including dividends and share buybacks, the largest independent U.S. exploration and production company said on Wednesday ahead of its analyst and investor meeting beginning at 9 a.m.

Conoco will extend its $1.5-billion-per-year share buybacks for another year through 2020, which will result in total 2017-2020 share buybacks of $7.5 billion.

The $5.5-billion annual capex between 2018 and 2020 is $1-billion higher than the latest guidance for 2017 capex of $4.5 billion that ConocoPhillips announced two weeks ago, when it reported a return to profit in Q3, beating analyst expectations. At the time, the company lowered its full-year 2017 capex guidance to $4.5 billion, a 10 percent reduction from initial guidance and the second cut this year from the $5.0 billion guidance announced in February. But two weeks ago, oil prices started to rally, and WTI was trading at $57 per barrel at the time of Conoco’s analyst and investor meeting.

In the operating plan released today, Conoco also targets to cut its debt to $15 billion in 2019, from debt of below $20 billion expected by the end of this year.

The total $7.5-billion share repurchases and reducing debt to $15 billion will represent a 20 percent decrease in debt-adjusted share count by year-end 2020, the company said.

Related: Why Saudi Arabia’s Crackdown Sent Oil Prices Soaring

ConocoPhillips aims to raise underlying production by some 5 percent yearly by 2020, with cash flow’s compound annual growth rate (CAGR) expected at more than 10 percent.

“Through accretive asset sales and an ongoing focus on capital and cost efficiency, we’ve lowered the capital intensity and sustaining price of the company, reduced the cost of supply of our investment portfolio, substantially strengthened our balance sheet and returned a significant portion of cash flow to our owners,” Ryan Lance, chairman and chief executive officer, said in the statement.  

By Tsvetana Paraskova for Oilprice.com

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