Sticker shock: for ConocoPhillips boss Jim Mulva
ConocoPhillips taps coffers as costs rise
ConocoPhillips, the third-largest US oil company, said today it expects to increase its capital spending to between $14 billion and $15 billion in 2008 as costs to drill for oil and gas rise sharply.
The company projected costs of $13.5 billion for 2007.
"We have got some pretty significant opportunities that we are going to be adding to the programme, and we also see quite a bit of cost pressures on existing commitments," ConocoPhillips chief executive Jim Mulva said on a company conference call following the release of its second quarter results.
"Everything is costing us more than we thought it was going to cost," Mulva said.
ConocoPhillips posted much higher than expected earnings today as profits from its oil refineries rose 38%.
Excluding a $4.5 billion charge related to Venezuela's move to take over ConocoPhillips operations in the country, it posted earnings of $2.90 a share. The result was well ahead of Wall Street's average expectation of $2.68 a share, according to Reuters Estimates.
The company recently announced a $15 billion share repurchase plan that runs through the end of 2008, nearly quadrupling its previous program.
US oil companies have been buying back huge amounts of stock to pass on the windfall from soaring oil and natural gas prices to investors.
Mulva said one reason the company stepped up its share buybacks is because he believes acquisitions are currently very expensive and difficult to complete for political reasons.
"It is also a direct communication ... when we buy back this amount of shares, that we don't contemplate doing large M&A deals," Mulva said.
He said the company plans to complete the full buyback over the term regardless of changes to energy prices, even if the company needs to tap debt markets.
"We do recognize that the marketplace may or may not be at $70 oil," Mulva said.
"We have a very strong financial position that we can use to fund this share repurchase programme and our capital programme. If debt goes up a little bit, we still have a very strong financial structure," he said.