An unexpected cash windfall and a new partnership with Abu Dhabi are lifting ConocoPhillips out of a hole the US oil major dug for itself last year. Good news this week has extended recent gains, with Conoco's stock up 6.8 per cent to $56.55 since last Wednesday. The firm was reported yesterday to be in an alliance with Abu Dhabi's Mubadala Development to bid for oil and gas fields in offshore Turkmenistan in the Caspian Sea.
The two companies are already developing a Caspian field next door in Kazakhstan. As Mubadala is the investment arm of the Abu Dhabi Government, which has close ties to Turkmenistan, the alliance should be well positioned to win the project. A source close to Conoco's strategy makers told Bloomberg that the two companies had been operating together in Turkmenistan for six months. The report came a day after Conoco announced that it had sold off an equity stake in Canada's oil sands to a Chinese company for US$4.65 billion (Dh17.07bn), well above the highest forecast by analysts.
The sale was part of a $10bn divestment of assets the company announced last October as part of its strategy to recover from a steep drop in profits and run-up in debt. Conoco's next big divestment is the sale of half of a 20 per cent stake in Lukoil, Russia's largest oil company. Conoco reaffirmed on Monday it would continue to reduce its debt load even as it increased its capital investment budget and bought back $5bn worth of shares.
This week's news led Openheimer Funds to upgrade the stock to "outperform" from "perform" yesterday. Conoco is "the most undervalued among its peers", Oppenheimer said in a note. The firm has a number of major investments coming up, including a final decision on whether to develop the Shah sour gas field in Abu Dhabi with the Abu Dhabi National Oil Company, and a major refinery project in Saudi Arabia in partnership with Saudi Aramco.