Top 3 ConocoPhillips Concerns For Deutsche Clients

The brokerage's concerns were:

• 1. "Lack of confidence around cash flow ramp and/or capital requirements, primarily outside of the US onshore
• 2. "Uncertainty modeling equity affiliate cash requirements/distributions
• 3. "Priority of cash usage (i.e., debt paydown vs. cash return to shareholders)."

"We estimate ~$6 billion in capital investment needed to maintain production (ex ~$800 million/year of affiliate maintenance spend in APLNG/FCCL) with an incremental $1 billion needed to support annual growth of 1 percent," analyst Ryan Todd wrote in a note.

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The analyst noted that uncertainty around cash requirements/distributions at Equity Affiliates, remains an issue.

"While the dynamics underlying movements in quarterly equity affiliate contributions remain a bit of a black box, we expect a ramp in volumes (APLNG, FCCL) and a subsequent decrease in capital outlay to support a corporate-wide $45/bbl break-even target with leverage to a sustained crude rally," Todd highlighted.

Todd believes investors focus on a multiples-based approach for names with diversified asset bases with a significant international exposure given the lack of sufficiently granular data to construct a proper NAV.

At the time of writing, shares of ConocoPhillips were down 0.98 percent to $43.30.