ConocoPhillips CEO: Oil downturn could stretch into 2017
Thursday February 4, 2016
HOUSTON After announcing a big loss and dividend cut on Thursday, the CEO of ConocoPhillips proved more pessimistic than many analysts about the future of the oil market, telling investors the oil downturn could stretch into 2017.
We believe this downturn could last a while longer,†ConocoPhillips CEO Ryan Lance said in a conference call. Just a few months ago, we thought the market would rebalance by the second half of 2016.â€
ConocoPhillips last year cut 10 percent of its global workforce, about 1,800 employees, trying to shield its dividend and its balance sheet against the pressures of cheap crude. But the oil-market crash has persisted beyond previous expectations and domestic crude has fallen close to $30 a barrel. That prompted ConocoPhillips to make the gut-wrenching†decision to cut its quarterly dividend by two thirds to 25 cents a share.
We were not willing to risk a strong balance sheet on it,†Lance said. Marathon Oil Corp. and Chesapeake Energy Corp., two of the larger U.S. shale drillers, have also reduced their shareholder dividends.
Its dividend yield was well above that of the average U.S. oil producer and ranked with the biggest oil majors. But the cushy payout was a relic of its past as an integrated oil company, as it had kept its dividend at elevated levels even after it spun its refining business into Phillips 66 three years ago.
Lance said heightened concerns about global economic growth suggest it could take longer for crude prices to recover even after the oil market has corrected the oversupply.
There's certainly a lot of debate about these factors but we can't bet on prices turning quickly,†Lance said.
ConocoPhillips, the No. 3 U.S. oil company, also announced a quarterly loss on Thursday. The Houston oil producer said it lost $3.5 billion, or $2.78 a share, in the fourth quarter, down from its net loss of $39 million, or 3 cents a share, in the same period the year before. Its revenues sank 42 percent to $6.8 billion.
While we don't know how far commodity prices will fall, or the duration of the downturn, we believe it's prudent to plan for lower prices for a longer period of time,†ConocoPhillips CEO Ryan Lance ...