As it attempts to bolster its core businesses, one of the United States’ largest independent oil producers, ConocoPhillips, have announced in a statement that they will offload nearly $10 billion worth of their natural gas assets.
Two years of low commodity prices have squeezed margins for Conoco and similar players in the market and the desire to sell off large chunks of peripheral operations reflects the continued efforts by oil companies to push towards further efficiency and streamlining.
On the statement’s release, shares of Conoco dropped around a percentage point to $45.22 in the morning session in New York and U.S. crude prices fell by the same margin overall.
Chief Executive Ryan Lance has been praised in recent years for his drive to reduce the company’s $30 billion debt, and the sale of the gas assets is another step towards his vision of sustainability for the Houston-based firm.
“Getting debt off our balance sheet is of primary importance both to the board and to shareholders and potential investors,” said Lance in a BBC interview. “The assets in question are not a good fit for the company in the long term so selling now is good on two fronts, to reduce debt and to streamline our operations.”
The planned divestiture is estimated at between $9billion and $11 billion worth of North American gas assets and comes after the company slashed its budget by 50 percent in 2015.
“What the board are essentially doing is not betting on commodity prices coming back to normal levels,” said James Coleman, Managing Director and co-head of Portfolio Trading at Softbank CIBC International. “Instead they are wisely adapting their business model so it can withstand these kinds of price cycles. We don’t know how long the current dip in crude is going to last for.”
The capital inflow expected from the sale will allow Conoco to focus on maintenance of their shale operations in the U.S. and development of new exploration projects in Europe. The company were previously active in 30 nations across the world, but have cut that figure in half in the last ten years.
Brent crude was trading at $45.97 on Friday; a price that still makes it difficult for large oil companies to be profitable. The benchmark figure is $50. This has forced firms like Conoco to develop new methods to raise funds, and Lance recently announced a share repurchase program worth around $4 billion.
