ConocoPhillips to reduce costs by $1 billion

ConocoPhillips is set to reduce costs by $1 billion while increasing costs of uncoventionals. The company provided details of its financial priorities and operating plan at its Analyst and Investor meeting in New York.

“The energy landscape has changed dramatically as a result of the recent decline in commodity prices, but we responded quickly to position the company as a core energy holding in a lower, more volatile price environment,” said Ryan Lance, chairman and CEO. “We have a diverse, world-class portfolio that provides increasing capital flexibility as our major projects start to come online. We also have a strong balance sheet with the financial flexibility to respond to changes in the price environment.”

In the meeting, the company confirmed its priorities of a compelling dividend and cash flow neutrality in 2017 and beyond. It also outlined its cost improvement goal of reducing operating costs by $1 billion by year-end 2016 compared with 2014. Reductions will come primarily from lower lifting costs, improvements, and standardization of processes, and lower general and administrative costs.

The company released details on a three-year investment plan with annual capital expenditures of approximately $11.5 billion. Under this plan, the company expects to increase capital to development programs, primarily in the North American unconventionals by 50 percent as major project spending declines by 45 percent.

It outlined its plans for volume growth, which is expected to be 2 percent to 3 percent in 2015 and increase to 1.7 million barrels of oil equivalent per day in 2017. Production from the company’s Asia Pacific and Middle East, Canada, and US Lower 48 segments is expected to increase over this period, while production from the Alaska and Europe segments is expected to remain relatively flat. The company’s growth outlook excludes production from Libya.

The company also provided details on its captured resource base of 44 billion barrels of oil equivalent, which are primarily low cost of supply resources in OECD countries. These resources provide a diverse source of long-term growth opportunities.

“We believe we are uniquely positioned to execute a viable, prudent plan that delivers on our commitments to shareholders,” Lance said. “