Conoco says it will sell off Lukoil stake
CONOCOPHILLIPS, the third-largest US oil company, yesterday said it will sell its entire stake in Russian oil major Lukoil in a bid to boost shareholder returns as it reported better-than-expected quarterly profit.
The Houston company, which has a two-year plan to shrink debt by selling $10bn (£6.4bn) in assets, said it will sell 40 per cent of its 20 per cent stake in Lukoil back to the company for $3.44bn. Conoco will sell the rest of its stake in the open market by the end of 2011, with proceeds going to share repurchases, the company said.
“This is a positive because there was some question about them keeping half of their stake,” Brian Youngberg, oil analyst with Edward Jones, said. “While it has been a good investment for the company, it hasn’t been a great investment and this move reduces the company’s risk profile.”
Previously, Conoco said it would sell half of its Lukoil shares.
“Given the expected business environment and our stated strategy to enhance returns and increase distributions, we have made the decision to sell our entire stake in Lukoil,” Jim Mulva, Conoco’s chief executive, said. Lukoil will use its own funds and an unsecured loan to repurchase the shares from Conoco, the company said.
Conoco’s earnings were boosted by higher crude oil profit and its refining business. Margins to process fuels like diesel improved globally, the oil company said. Conoco posted a second-quarter net profit of $4.2bn, or $2.77 per share, compared with $859m, or 57 cents per share a year earlier.
Excluding items, it earned $2.5bn, or $1.67 per share. Analysts on average had expected a profit of $1.56 per share. The company’s refining unit had a profit of $736m in the second quarter, up sharply from $20m in the year-ago period.