ConocoPhillips' new CEO inherits $7 Billion cash flow pledge on Alaska oil project
Analysts and investors have said that Andy 'O'Brien, the long-time CEO of ConocoPhillips, will be succeeded by Ryan Lance in the next month. He will inherit an Alaskan oil project, which will need to be completed, and costs to control, as well as a share price, which has lagged behind peers. ConocoPhillips, the 'largest independent U.S. oil exploration and production firm' announced its succession plan Thursday along with the company’s highest quarterly net income in 2022. The higher crude prices as a result of the Iran War boosted the earnings. O'Brien will be the new CEO on September 1, when Lance, who has been with the company for nearly 30 years, steps down as CEO after 14 successful years.
ConocoPhillips has been surprised by the timing of this move, since it is halfway through a multi-year plan that aims to increase free cash flow from operations by $7 billion before 2029.
Analysts say that achieving this goal will depend on whether the company can complete the expensive Willow oil project in Alaska. ConocoPhillips also has to deal with disruptions caused by the Middle East conflict at two large liquefied gas expansions in Qatar.
Scott Hanold is a managing director at RBC Capital Markets. He said: "His plate will be full, and investors may?be critical if the things do not go smoothly." Lance was a trusted name among shareholders, and O'Brien must meet their high expectations.
When asked about the succession by a ConocoPhillips representative, the spokesperson referred to O'Brien's remarks on the earnings call held on Thursday. O'Brien stated that his priority was achieving goals set forth by the company.
O'Brien stated, "We are on track to deliver the major projects and reduce costs that will support our free cash flow inflection of $7 billion. "That will be a hyper-focus for me and my team."
Lance stated on Thursday that he believed the company to be in its best position. "And I would not leave if I did not think that this was the case."
CONOCOPHILLIPS HAS RECENTLY UNDERPERFORMED PEEKS
Since 2012, ConocoPhillips has been outperforming its peers. Only EOG Resources is behind it.
The company's shares have performed worse than ExxonMobil or Chevron in the last three years. Hanold believes that heavy spending in order to generate free-cash flow could be the reason, since investors are waiting for results before purchasing stock. ConocoPhillips approved Willow in 2023. It is expected to produce 60 million barrels of oil over its lifetime on the Alaska North Slope. The company increased the project cost estimate to $9 billion last year -- an increase by $1.5 billion from its previous projection -- due to rising inflation and supply-chain costs.
Barclays' Betty Jiang, an analyst, wrote that the completion of Willow is critical because it underpins ConocoPhillips’ free cash flow plan. The company plans to begin production in 2029.
ConocoPhillips also has been cutting costs. It announced last year that it would be laying off up to 25 percent of its global staff.
Lance said at the time, that the company was behind its competitors and had to streamline operations and control costs which had increased by $2 per barrel in the last three years.
Oil industry consolidation is expected to continue over the next few years, as producers seek scale. Bill Smead is the chief investment officer of Smead Capital Management. The company holds approximately $220 million in stock, according to LSEG.
Smead stated, "That is a dynamic that this new CEO must deal with." Sheila Dang reported from Houston, and Nathan Crooks edited the story.
(source: Reuters)
