ConocoPhillips Streamlines Global Portfolio, Announces Two Deals

As part of its restructuring plan, ConocoPhillips (COP), the American multinational corporation engaged in hydrocarbon exploration and production, has inked two deals to focus on the Asia-Pacific segment of its diverse global portfolio.

First Agreement

Under the first agreement signed for $1.355 billion, the company will vend its subsidiary that indirectly owns the company’s 54% interest in the Indonesia Corridor Block Production Sharing Contract (PSC), and a 35% shareholding interest in the Transasia Pipeline Company, to MedcoEnergi. The deal, which is subject to customary adjustments, is likely to close in early 2022.

For the nine months ended September 30, 2021, the Indonesia assets to be sold recorded production of around 50 thousand barrels of oil equivalent per day (MBOED). Additionally, it had year-end 2020 proved reserves of around 85 million barrels of oil equivalent. 

Second Agreement

Through its Australian subsidiary, ConocoPhillips will exercise its preemption right to buy an additional 10% shareholding interest in Australia Pacific LNG (APLNG) from Origin Energy for $1.645 billion. The deal, which is expected to close in the first quarter of 2022 and awaits Australian government approval, will be funded from cash on the balance sheet.

APLNG is a supplier of LNG to long-term buyers in both China and Japan and is currently the largest supplier of natural gas to Australia’s East coast domestic market.

Currently, the ConocoPhillips subsidiary currently holds a 37.5% APLNG shareholding stake, which would increase to 47.5% upon the closing of the deal, if the other relevant APLNG shareholder does not exercise its preemption rights.

Notably, the company’s production from APLNG was about 115 MBOED for 2020, and distributions are expected to be around $750 million for 2021, excluding distributions from additional shareholding interest.

CEO Comments

ConocoPhillips CEO Ryan Lance said, “Today’s announcement reflects our ongoing commitment to further strengthen our company across every aspect of our global portfolio. The Asia Pacific region plays an important role in our diversification advantage as an independent E&P and these two transactions enhance that advantage by lowering our aggregate decline rate and diversifying our product mix.” 

Wall Street’s Take

On December 7, Mizuho Securities analyst Vincent Lovaglio maintained a Buy rating and a price target of $101 (36.28% upside potential) on the stock. 

ConocoPhillips shares have rallied 73.6% over the past year. The stock scores a Strong Buy consensus rating based on 15 Buys versus 3 Holds. The average ConocoPhillips price target of $91.56 implies 23.55% upside potential to current levels.

ConocoPhillips’ goes ex-div on December 31, 2021. The company is expected to pay a $0.20 dividend on January 14, 2022, reflecting a dividend yield of 2.36%. For more information on dividends, check out the U.S. dividend calendar on TipRanks.

Smart Score

ConocoPhillips scores an 8 of 10 from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations. (See Top Smart Score Stocks on TipRanks)

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