Plunging oil prices were reflected in the sharply lower fourth quarter profits recently reported by ConocoPhillips. However, management’s actions to protect its investors in the near term has been applauded by investment website The Motley Fool.
In his analysis of ConocoPhillips’ Q4 conference call, shareholder Matt DiLallo highlights five messages to investors that were prominent throughout:
- Protecting the dividend is the top priority:The phrase the “dividend remains our top priority,” which was first said by chief executive (CEO) Ryan Lance in his opening comments and the company left no doubt the payout would not be a casualty of lower oil prices.
- Focused on becoming cash flow neutral: Management also said repeatedly that it is focused on making ConocoPhillips cash flow neutral by 2017, Lance placing it as second only to sustaining the dividend as a priority.
- Taking action: The company does not intend to sit back and wait for oil prices to recover, but is taking action now to ensure it can meet its dividend and cash flow priorities. It has decided to lower its capital budget again and now plans to spend just US$11.5bn this year.
- Strong balance sheet it is prepared to use: The company also plans to use its strong balance sheet to ensure it meets its two priorities. ConocoPhillips management made clear it is not afraid to take on additional debt to fund the balance of its major projects.
- Focused on the long term: In closing the company’s prepared comments on the call, Lance reminded investors that the company is focused on creating long-term value.
DiLallo summarises the investor takeaway as follows: “ConocoPhillips plans to put its investors first, which is why their payout income will not dry up. Instead, the company will focus on keeping costs low and maintain its plan to create value. It sees that game plan yielding a big win over the long term.”
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