ConocoPhillips' headquarters in Houston, Texas. (Source: Shutterstock)
ConocoPhillips Chairman and CEO Ryan Lance joined a chorus of oil and gas executives calling out U.S. President Joe Biden’s recent decision to pause LNG export applications, saying the decision is “shortsighted in the short-term.”
Lance, commenting Feb. 8 during ConocoPhillips’ fourth quarter of 2023 webcast with analysts, said he was hopeful “it will be fixed in the long-term.” Other CEOs, including EQT Corp.’s Toby Rice, have similarly lambasted the administration for the pause. Rice said it undermines U.S. allies’ confidence in U.S. natural gas exports and would “chill investments.”
The U.S. Department of Energy (DOE) formally paused approvals for new LNG export projects on Jan. 26. In doing so, it put the brakes on billions of dollars of new LNG development for energy companies.
The mandate is a “temporary pause on pending applications” and doesn’t apply to already authorized exports of some 48 Bcf/d, according to DOE data. U.S. LNG exports are still expected to nearly double by the end of this decade, and the DOE said the mandate will not impact the U.S.’ ability to supply its allies in Europe and Asia or other recipients of already authorized U.S. exports.
“But it's unfortunate, it's clearly more politically driven than fundamental, but I think we feel pretty good. It just makes us feel a little bit better about what we're doing on the LNG side because of what we do have permitted,” Lance said.
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ConocoPhillips continues to move forward several key strategic initiatives, the company revealed in its fourth-quarter 2023 financial and operational press release. The company said it has progressed its global LNG strategy through expansion in Qatar, a final investment decision at Port Arthur LNG, regasification agreements in the Netherlands and offtake agreements in Mexico.
Port Arthur Phase 1 is fully permitted, ConocoPhillips’ CFO William Bullock said during the webcast. The project has its free trade and non-free trade agreement permits in place, as well as environmental permits.
Bullock said the company continued to access development of a diversified offtake portfolio.
“We remain interested in a number of LNG opportunities because we think the market is going to be strong for decades to come,” Bullock said. “We're focusing on low cost of supply, low greenhouse-gas intensity resources that meet that transition pathway.”
US M&A environment
Lance commented on recent U.S. M&A as companies continue to execute mainly all-stock deals. Lance said more deals are likely to come as part of needed consolidation. The Wall Street Journal reported Feb. 13 that ConocoPhillips was a bidder for Endeavor Energy, which ultimately reached a $26 billion agreement with Diamondback Energy.
Lance said that ConocoPhillips’ deal making approach hasn’t changed.
“Our approach is we think about cost of supply. We think about the framework that we've laid out to the market over the last four or five years, and that's how we've executed some of our M&A activities. So again, it's got to fit that financial framework, how we think about mid-cycle price. It's got to make our 10-year plan better,” Lance said.
The company’s M&A would also be driven by a diverse asset base, Lance said.
“So, we’ve got to see a way to make that plan better through any inorganic M&A. And then finally, we’ve got to see a way to make the asset better, and that's really dictated how we've approached M&A over the last number of years. As we think about it going forward, that approach is consistent,” Lance said.
Earnings, dividends
ConocoPhillips reported adjusted earnings of $10.6 billion in 2023 compared to $17.3 billion in 2022. The company generated cash provided by operating activities of $20 billion and cash from operations of $21.3 billion.
For the year, the E&P distributed $11 billion to shareholders through a three-tier framework that included $5.6 billion through an ordinary dividend and variable return of cash and $5.4 billion through share repurchases.
“Our deep, durable and diversified portfolio continues to generate robust cash flow, enabling us to start the year with a $9 billion return of capital target,” Lance said.
The company hit a 17% return on capital employed on record total production of 1.82 MMboe/d, including 1.086 MMboe/d in the Lower 48. Permian Basin production averaged 750,000 boe/d, the Eagle Ford Shale averaged 211,000 boe/d and the Bakken averaged 110,000 boe/d.
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