ConocoPhillips Gets More Shareholder-Friendly (COP, XOM, CVX)

ConocoPhillips (NYSE: COP) is trying to further adopt shareholder-friendly strategies with a higher payout and lower expenses.  With as much as this stock has lagged some peers until recently, that should be of little surprise.  It was back in early March when we listed ConocoPhillips as one our picks in the energy sector which might double from their lows.  Shares were around $37 at the time and we noted that they would have to hit $68 for that double to hold true.  And now shares are up close to $49 and look as though that they want to challenge the $50 mark.

In order to generate more cash, the company cut its cap-ex budget for next year to about $11 billion for exploration and production and to replace reserves.  It will also sell what is said to be about $10 billion in assets.  To entice shareholders, it also lifted its quarterly dividend 6.4% to $0.50. This puts it above a 4% yield, which looks on the surface to be the highest of the major US-based integrated oil players such as Chevron Corp. (NYSE: CVX) and Exxon Mobil Corp. (NYSE: XOM).  It also marks what appears to be the 7th year in a row to boost its dividend.

These moves combined likely reflect an acknowledgment from management that the company needs to be more proactive for shareholders as it is still one of the laggards of the integrated oil players.  ConocoPhillips already fessed up that its third-quarter earnings would be soft.  Part of the reasoning was lower natural gas prices, and it just seems that those pesky refining profits are hitting it as well.  What is interesting is that when you compare it to Chevron Corp. (NYSE: CVX) and Exxon Mobil Corp. (NYSE: XOM), this is now the best of the three performers in the last six months.

We had already seen 2009 capital expenditures go down to $12.5 billion or so, and every oil player out there has cut down on staffers.  The assets sales are said to be to pay down additional debt, which is a further attraction for future shareholders.  Other players have cut capital budgets for 2009 and 2010 and have taken on additional measures to operate within the means of the annual cash flows.

Just because Warren Buffett got his timing way wrong in ConocoPhillips doesn’t mean that it is all still bad there.  If T. Boone Pickens’ most recent projections for 2010 hold up, then ConocoPhillips could still reach that $68 figure if it continues to take on more shareholder-friendly activities.

Jon C. Ogg
October 7, 2009