ConocoPhillips lowers capital expenditure to $12.3-billion in 2007

08 December 2006

Mumbai: Houstin-based US energy giant ConocoPhillips [NYSE:COP] has lined up cash capital expenditures of approximately $11.8 billion during 2007. Combined with about $0.6 billion for loans to affiliates and a $0.6 billion contribution to fund the recently announced EnCana transaction, the total cash capital spend is expected to be $13.0 billion. Including capitalised interest of $0.5 billion, the total authorised capital programme for 2007 is $13.5 billion.

EnCana is Canada's largest hydrocarbons producer and the two had agreed in October to to spend $10.7 billion over next decade in a deal under which oil from EnCana's vast oil-sands properties which would be refined at ConocoPhillips' US refineries,

"Our 2007 planned capital programme reflects our commitment to selectively invest in projects that will enable us to deliver energy to consumers worldwide, while providing long-term value for our shareholders," said Jim Mulva, chairman and chief executive officer.

"The reduction in the 2007 capital programme versus the 2006 capital programme primarily reflects the company's completion of our planned 20 per cent equity investment in LUKOIL. In addition, given the increasingly challenging business environment, which has been marked by rising costs, greater discipline in capital spending is warranted to better ensure value delivery over the long term, Mulva said.

He added that the prioritisation of the budgetary allocation would enable the company to to reduce the debt and increase dividends and share repurchases more quickly. "Assuming continuation of the current cost environment, this capital program is expected to result in a slight reduction to the company's medium-term production growth rate," he said.

Of the company's 2007 total authorised capital programme, 84 per cent would be allocated to its exploration and production segment. The refining and marketing segment will receive approximately 13 per cent, with the remaining being spent in emerging businesses and corporate segments.