On September 30, 2016, ConocoPhillips’s (COP) total debt stood at ~$28.7 billion. With ~$4.3 billion in cash and cash equivalents, COP’s net debt was ~$24.4 billion at the end of 3Q16. In 1Q16, ConocoPhillips reported debt of ~29.5 billion, its highest debt level since 3Q09.
ConocoPhillips’s debt load has become heavy in view of its declining earnings, so the company has been focusing on containing its debt load. For the end of 2016, ConocoPhillips expects its debt load to decrease to ~$27 billion.
ConocoPhillips’s debt reduction plans
By the end of 2019, ConocoPhillips (COP) plans to reduce its debt load to $20 billion. This new debt target is $5 billion lower than its original debt target of $25 billion by the end of 2019.
ConocoPhillips’s explicit target of $20 billion debt by the end of 2019 is not arbitrary. This level of debt would be about twice that of COP’s estimated OCF (operating cash flow) in 2019 at $60 per barrel of Brent crude oil. It would also be about three times that of COP’s estimated OCF in 2019 at $50 per barrel of Brent crude oil. ConocoPhillips plan to operate in this range going forward.
In order to achieve the targeted debt reduction, ConocoPhillips plans to use part of its OCF as well as liquidity-boosting measures such as asset sales, where it is planning to sell $5 billion–$8 billion of assets over the next two years. We’ll study ConocoPhillips’s divestitures plans in Part 14 of this series.