ConocoPhillips’s Steps to Reduce Its Break-Even Price

Since 2014, ConocoPhillips (COP) has been focusing on reducing its break-even price.

Nicholas Chapman - Author

Nov. 25 2016, Updated 11:04 a.m. ET

uploads///COP Q AIM Breakeven Reduction

ConocoPhillips’s break-even price

Since 2014, ConocoPhillips (COP) has been focusing on reducing its break-even price. In the last two years, ConocoPhillips’s break-even price has decreased from greater than $75 per barrel of Brent crude oil to less than $50 per barrel of Brent crude oil.

This movement represents a break-even price reduction of more than ~33% in the last two years. ConocoPhillips defines its break-even price as the Brent price that can cover costs needed to sustain production and pay its dividends.

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ConocoPhillips’s break-even price reduction efforts

As shown in the above chart, ConocoPhillips (COP) successfully reduced its break-even costs by using measures such as:

  • completion of megaprojects in the LNG and oil sand space
  • exiting deepwater projects
  • reducing capital intensity by increasing capital efficiency
  • lowering operating costs
  • dividend reduction

Capital deflation and operating costs deflation also contributed to lowering its break-even price reduction efforts. We’ll study ConocoPhillips’s latest operating costs guidance in Part 11. To learn more about ConocoPhillips’s capital intensity, please refer to Part 5 of this series.

Other upstream players

In the last year, in order to reduce their break-even prices, Energen Corporation (EGN) and Denbury Resources (DNR) announced that they have discontinued their cash dividends on common stock.

The ISE-Revere Nat Gas Index ETF (FCG) invests in natural gas producers.


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