5 Things ConocoPhillips' Management Team Wants You to Know

By Matt DiLalloFool.com

The oil market is awful right now. That was on display when ConocoPhillips reported plummeting profits in itsfourth-quarter results. However, management is taking action to protect investors in the near term while also setting the company up for long-term success. Executives made this evident in comments on the company's fourth-quarter conference call.

Protecting the dividend is the No. 1 priorityI lost count of the number of times executives repeated the phrase the "dividend remains our top priority," which was first said by CEO Ryan Lance in his opening comments. Suffice it to say, the company left no doubt the payout would not be a casualty of lower oil prices.

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Focused on becoming cash flow neutralManagement also said repeatedly it is focused on making ConocoPhillips cash flow neutral by 2017. In fact, Lance placed it as the No. 2 priority behind sustaining the dividend. As the following slide illustrates, the company has a way to go: In 2014, it outspent cash flow plus asset sales by $1.4 billion, requiring it to take on some additional debt.

Source: ConocoPhillips Investor Presentation.

The plan is to get its capital expenditures and investments plus dividends to equal cash flow from operations. However, this isn't as wide a gap as it might appear as the company has several major projects wrapping up. As these projects come online and production from them ramp up,cash flow should increase as long as commodity prices behave.

Taking actionThe company does not intend to sit back and wait for oil prices to recover. Instead, it is taking action now to ensure it can meet its dividend and cash flow priorities. It has decided to lower its capital budget again and now plans to spend just $11.5 billion this year.Lance commented on the additional cut to capex by saying:

Strong balance sheet it is prepared to useThe company also plans to use its strong balance sheet to ensure it meets its two priorities. ConocoPhillips management made clear it is not afraid to take on additional debt to fund the balance of its major projects. As CFO Jeff Sheets stated:

Source: ConocoPhillips Investor Presentation.

Focused on the long termIn closing the company's prepared comments on the call, Lance reminded investors that the company is focused on creating long-term value.

ConocoPhillips' emphasis here starts with what it views as a long-term relationship with its shareholders. That's why it refuses to part with its dividend, and instead sees that as the first check out the door. This view has been lacking in the energy industry as companies have been quick to reduce, or in some cases eliminate, investor payouts as the oil market soured over the past few months.

Investor takeawayConocoPhillips plans to put its investors first, which is why their payout income will not dry up. Instead, the company will focus on keeping costs low and maintain its plan to create value. It sees that game plan yielding a big win over the long term.

The article 5 Things ConocoPhillips' Management Team Wants You to Know originally appeared on Fool.com.

Matt DiLallo owns shares of ConocoPhillips. It was the first oil stock he ever bought and a purchase he's never regretted. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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