ConocoPhillips said on Thursday it will reduce future spending on deepwater drilling due to low crude oil prices, and also raise its dividend 1 cent. Conoco, which has already twice cut capital spending for 2015 in response to crude price declines of more than 50 percent, has long maintained that its payouts to shareholders are a top priority. “A compelling dividend is a key aspect of our value proposition to shareholders,” said Ryan Lance, Conoco’s chief executive officer.
“While this increase is more modest than in previous years, we believe it is appropriate given the lower commodity price environment.” Conoco said it raised its quarterly dividend to 74 cents per share from 73 cents per share, payable on Sept 1 to shareholders of record on July 27.
The biggest deepwater spending cuts will come in the Gulf of Mexico, where the Houston-based company said it will terminate a three-year contract for an Ensco drill ship that was due to be delivered late this year. In a separate announcement, London-based Ensco said Conoco is obligated to pay early contract termination fees monthly for two years that equal the vessel’s operating day rate of $550,000.
The companies are discussing details of the contract termination and Conoco said it expects to take a charge related to the fees it owes Ensco. Conoco said it will continue to pursue oil production growth from U.S. shale formations include the Eagle Ford and Permian Basin in Texas and Bakken in North Dakota.