Thread regarding ConocoPhillips layoffs

Stock buy backs suggest that a company has no growth opportunities looking forward. From what I have seen, this is probably true with COP from what I have read is they have nothing major in the queue for the future (when they do, they usually crow about it). I doubt anyone is stupid enough to think that undervaluation is the reason as this company is not prospering since it is selling off assets in this cheap environment. Unfortunately for this company, the most logical reason is to hit some executive metric so they can maximize their compensation packages. They have been very good at doing that.

At $3 MM per unconventional well, we could have drilled 400 unconventional wells and yet elected to use the $1.2 billion in asset sales to buy back 27 million shares (2.2 percent of outstanding stock) yielding 2.4 percent? Seems the shale prospects can not compete with stock buy backs. Farm-out the shale plays: Eagle Ford, Bakken, Delaware & Niobrara at $5000-$10,000 per acre and retain 5-10 percent over-ride royalty. Farm out would provide an immediate cash infusion and provide a production & revenue stream at no CAPEX outlay.....maybe use the freed up CAPEX to buy back more stock if it is such a good use funds and discontinue the sale of assets in a low price environment (to fund stock buy backs!....unbelievable).

If unconventional wells are only $3B per well, why aren't we drilling the additional 400 wells?

They are not $12MM/well they are just under $3MM/well

-2wpo:

I believe they are saying shale wells are approximately $12 MM per well...not $1-2 MM per well.

If we could drill, complete and produce a shale well for $1-2MM we would be able to make some money .... we spend nearly that much on facilities which pale in comparison to D&C costs.

-inyp, please refer to the last paragraph posted by -aph (preceding your post):

"Again, the $1.2 Billion spent on buying approximately 2 percent of the outstanding shares could have funded the drilling of 100 Eagle Ford-Bakken-Delaware shale wells based on a well cost of $12 MM per well. Electing to buy back shares does not speak very well of the shale plays."

The $1.2 Billion expended to buy back 27 million shares could have been used to drill 600-1200 conventional wells at a well cost of $1MM-$2MM per well.

Again, it is just absolutely amazing we sell assets in a low commodity price environment in order to fund stock buy backs. Does not say much about the commercial value of our development opportunities.

Don't know if any of the posters are in "finance" but am reasonably sure they are not members of the ELT.

As we head toward low prices, for the foreseeable future it is about tightening up the balance sheet and with asset disposition this was a necessity. RL may not be popular but is doing all the right things, lowering cost of supply and positioning us for a tight market.

Math question, isn't 1.2 billion divided by 1.2 million equal to 1,000? I hope all of you are not in finance! 😊

-wtb, regarding purchasing company stock to "maintain" share price:

There are approximately 1.217 billion shares outstanding. The purchase of 27 million shares is equivalent to approximately 2 percent of the outstanding shares. Why would anyone anticipate a measurable movement in stock price one way or the other?

The purchase of 27 million shares is equivalent an outlay of approximately $1.2 Billion again equivalent to approximately 2 percent of current market cap.

Does this company not have a better use for $1.2 Billion for CAPEX opportunities? CAPEX expenditures for 2017 are estimated to be $4.7 Billion.

Are we CAPEX constrained or do we not have an inventory of commercially viable projects in this price environment? If CAPEX constrained, seems the $1.2 Billion would be better utilized on development projects. If there are no commercially viable projects in this price environment, why are we selling assets in this price environment if there is no need for additional CAPEX for project funding? Surely we are not selling assets to fund share buy backs.

Just seems a poor use of $1.2 Billion dollars made available from asset sales in a low commodity price environment. If we are of the opinion that prices will be "lower for longer", then there must be a need for significant & necessary right- sizing to take place for a less than $5 billion CAPEX program.

Again, the $1.2 Billion spent on buying approximately 2 percent of the outstanding shares could have funded the drilling of 100 Eagle Ford-Bakken-Delaware shale wells based on a well cost of $12 MM per well. Electing to buy back shares does not speak very well of the shale plays.

-wtb, if ELT was wanting to mitigate risk:

EOG, Pionner and Concho could drill shale wells for less than $12 MM per well. Why not farm-out undeveloped acreage in Eagle Ford, Bakken & Delaware for $5,000-$10,000 per acre and retain 5-10 percent over-ride. EOG, Pioneer or Concho will drill the wells that apparently we are unwilling to fund since we prefer to buy back stock (saving the company the approximately 2.4 percent in annual dividend payments). The farm-out would provide an immedidiate infusion of cash and provide a production & revenue stream at no CAPEX outlay.

The ELT should request a farm-out evaluation be made. The farm-out scenario would allow for additional down-sizing and associated cost savings.

The main concern is that we are selling off assets in a low commodity price environment and then using some of the funds to buy back stock instead of using those fund so fund commercially viable CAPEX opportunities. The fact that we are buying back stock suggests that we are not CAPEX constrained and that we have no inventory of commercially viable development opportunities. Just could not find additional investment opportunities for a relatively modest $1.2 billion.

The obvious reason is your executive team might habe made the better choice to mitigate risk and maintain share price