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OFFON

CONOCOPHILLIPS

(COP)
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ConocoPhillips : DBRS Morningstar Comments on ConocoPhillips' Announcement to Acquire Shell's Permian Assets for $9.5 Billion in an All-Cash Transaction

09/24/2021 | 04:31am EST

DBRS Limited (DBRS Morningstar) notes that ConocoPhillips (Conoco or the Company; rated 'A' with a Stable trend) has announced the acquisition of around 225,000 net acres and producing properties in the Delaware basin in Texas, including 600 miles of pipelines and infrastructure, from Shell Enterprises LLC for a total cash consideration of $9.5 billion.

The Company expects the assets (roughly half of which are nonoperated) to produce approximately 200,000 barrels of oil equivalent per day in 2022 and generate $2.6 billion in cash flow from operations under recent strip price levels. The effective date of the transaction is July 1, 2021, and the transaction is expected to close in Q4 2021, subject to regulatory clearance and customary closing conditions. The transaction is expected to be entirely funded from available cash and cash equivalents on its balance sheet, while still leaving sufficient cash for operations and general purposes.

In conjunction with the transaction, the Company also increased its asset dispositions target to $4 billion-$5 billion from $2 billion-$3 billion by 2023. The incremental $2 billion in planned dispositions is expected to be sourced from the Permian Basin. The Company reiterated its intention to reduce gross debt over the next several years. DBRS Morningstar also notes the Company's announcement to increase its Scope 1 and 2 greenhouse gas emissions intensity reduction targets for 2030 to 40%-50% on both a net equity and gross operated basis from 35%-45% on a gross operated basis, versus a 2016 baseline.

Given Conoco's already superior size, large low cost of supply resource base, and the all-cash nature of the transaction, DBRS Morningstar believes that the acquisition of assets are modestly credit positive but not enough to affect DBRS Morningstar's overall Issuer Rating of 'A.'

Notes:

All figures are in U.S. dollars unless otherwise noted.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

DBRS Limited

DBRS Tower, 181 University Avenue, Suite 700

Toronto, ON M5H 3M7 Canada

Tel. +1 416 593-5577

(C) 2021 Electronic News Publishing, source ENP Newswire

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Financials (USD)
Sales 2021 42 301 M - -
Net income 2021 8 145 M - -
Net Debt 2021 15 044 M - -
P/E ratio 2021 11,4x
Yield 2021 2,50%
Capitalization 92 498 M 92 498 M -
EV / Sales 2021 2,54x
EV / Sales 2022 2,11x
Nbr of Employees 9 900
Free-Float 63,1%
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Mean consensus BUY
Number of Analysts 28
Last Close Price 70,13 $
Average target price 90,20 $
Spread / Average Target 28,6%
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Managers and Directors
Ryan M. Lance Chairman & Chief Executive Officer
William L. Bullock Chief Financial Officer & Executive Vice President
Dominic E. Macklon Executive VP-Strategy, Sustainability & Technology
Pragati Mathur Chief Digital & Information Officer
Shannon Weinberg Kinney Secretary & Chief Compliance Officer
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