Public companies profiles
Discipline. Resilience. Value. Returns.
These aren’t sexy terms but they represent the consistent focus preached by ConocoPhillips that made the world’s largest independent oil and gas firm the top-performing public company in this year’s Chronicle 100 list.
ConocoPhillips last year saw its revenue spike 25 percent up to more than $36 billion. And its net income rose to $6.3 billion compared with a nearly $1 billion loss in the year prior. The Houston producer also is off to a good start in 2019, turning a $1.8 billion profit in the first quarter that doubled its net gain for the first three months of 2018.
The company closed out 2018 by completing its move into its new headquarters in the Energy Center Three and Four buildings in the Energy Corridor.
Chairman and Chief Executive Ryan Lance wants the company to rake in the dollars when oil prices are booming, but he especially wants to ensure that ConocoPhillips remains sustainably profitable when crude is bearish. ConocoPhillips won’t be held hostage to the whims of the boom-andbust cycles that are inherent to the industry, he said.
“We’ve set up the company to be resilient to low
oil prices,” Lance said at the annual meeting in May. “We believe that volatility is here to stay. It’s a thinly balanced world.”
So, unlike Occidental Petroleum which just outbid Chevron to buy Anadarko Petroleum for $38 billion, Lance says ConocoPhillips won’t get into any bidding wars and likely won’t agree to any massive mergers or acquisitions. He wants to focus on steady and consistent growth with the occasional modest bit of deal-making sprinkled in here and there for good measure.
“The big corporate M&A that requires these very large premiums that we’ve seen here in the last month or so, those are very tough,” he said. “Those are destructive to value.”
He aims to keep Wall Street happy. That means dedicating dollars to investor dividends, share buybacks, debt reduction and other monotonous measures that build on the metaphorical Good Housekeeping seal of approval. Some industry analysts shy away from ConocoPhillips because of its limited ceiling from its risk-averse nature, but Lance just points to the company’s recent results.
In the meantime, ConocoPhillips will focus on organic growth on its holdings in the Eagle Ford shale and the Permian Basin here in Texas, North Dakota’s Bakken shale, as well as Alaska, western Canada and liquefied natural gas projects in Qatar and Australia.
Opting to lean less on Europe, ConocoPhillips said in April it would sell its United Kingdom-based assets in the North Sea for $2.7 billion to Londonbased Chrysaor.
ConocoPhillips’ success with its conservative approach has come in the past couple of years since the last oil bust when crude prices plunged from more than $100 a barrel as recently as 2014 down to a low of $26 in early 2016. Lance has acknowledged some lessons learned the hard way since ConocoPhillips split from Phillips 66 and emerged as an independent oil and gas producer in 2012.
Unfortunately for the many impacted, a lot of that success also has come from shrinking — both selling assets and cutting jobs. ConocoPhillips slashed its workforce by more than 40 percent in four years from 19,000 people down to 11,000. In Houston, the headcount fell from 3,600 to more than 2,100.
The company has argued the reductions were necessary to rightsize the firm after the industry chased growth for the sake of growth when oil prices were booming and ConocoPhillips was still an integrated energy giant.
And that’s why the company won’t chase overly costly deals now, Lance said.
Just look at the hottest oil field in the world — West Texas’ booming Permian. Lance admits ConocoPhillips would love to have a larger position there, but he isn’t willing to overpay. Instead, ConocoPhillips will focus more on slowly developing its modest Permian position that’s nestled in a prime location.
“It’s quality over quantity,” he said.