World’s largest independent E&P company teaches poetic strategy at CERAWeek
ConocoPhillips, the world’s largest independent E&P company, on Tuesday provided insights into its seemingly simple yet effective strategy that has enabled the company’s reserve base of 18 billion barrels of resources at less than $40 cost of supply.
Matt Fox, Executive Vice President, Strategy, Exploration & Technology at ConocoPhillips, contributed to a session on “International oil company strategies: Positioning for the future” together with representatives of Shell, Statoil, and Ecopetrol, as part of CERAWeek by IHS Markit in Houston.
“A strategy,” Fox said in his introduction, “is nothing more but a set of coherent choices in pursuing a goal.”
“For ConocoPhillips, our main goal is to deliver value through the cycles. Now, when your goal is clear, three choices are key: 1) What portfolio choices do you make? 2) How do you choose to allocate capital? and 3) How do you manage uncertainty?”
Fox, who is responsible for an extensive portfolio including strategic planning, business development, acquisitions and divestitures, exploration and resource base management, elaborated on the answers of ConocoPhillips to each of these questions.
“ConocoPhillips has dramatically reshaped its portfolio”, said Fox “most notably our decision to exit deepwater exploration.”
On the allocation of capital, ConocoPhillips has a number of priorities including maintaining of production, growing dividend and reducing debt. Not unimportantly, ConocoPhillips has initiated a share repurchase program worth $3 billion. When all these priorities are met, another comes in, which is investing in high-return organic growth.
To manage uncertainty, ConocoPhillips has worked on sustainable cost reductions.
“Today,“ Fox said, “the company has a reserve base of 18 billion barrels of resources at less than $50 and for some parts even $40 cost of supply.” “ConocoPhillips is only going to invest when cost of supply is less than $50 per barrel.”
Strategies between companies differ, argued Fox, but they share the three key characteristics. Indeed the other speakers at the session – Lars Christian Bacher, EVP Development & Production International at Statoil, Juan Carlos Echeverry, CEO of Ecopetrol and Katie Jackson, VP Commercial & New Business Development, Europe/CIS with Shell, discussed similar notes while at the same time putting different emphasis on capital strategies, portfolio choices and future opportunities, with Statoil and Shell explicitly referencing to their cash engines on the one hand and their focus on renewables and new energy resources, on the other.
Strategy a waste of time?
Also worth noting, ConocoPhillips’ Fox started his strategy vision with a Scottish poem by the 18-th century poet Robert Burns:
But Mousie, thou are no thy-lane// In proving foresight may be vain //The best laid schemes o’ Mice an’ Men // Gang aft agley // An’ lea’e us nought but grief an’ pain // For promis’d joy!
Which translates as But mouse-friend, you are not alone // In proving foresight may be vain // The best laid strategies of Mice and Men // Go oft awry // And leave us only grief and pain // For promised joy!
“So basically what Burns is saying, is that strategy is a waste of time,” quipped Fox. In reality though, the EVP responsible for strategy believes that with a clear goal in place and the right answers to the three key questions, his company has a solid strategy to deliver.
Article by Femke Perlot-Hoogeveen