Conoco To Unload $10B in Assets, What Will Go First?

(MoneyWatch)  ConocoPhillips is cleaning house with plans to sell $10 billion in assets, cut capital spending by $1.5 billion and pay down its debt in an effort to strengthen its balance sheet and give shareholders more value. The third-largest U.S. oil company also will increase its dividend.

The announcement marks a shift in Conoco's operations, which have grown through a series of acquisitions including Burlington Resources in 2006 and a 20 percent stake in OAO Lukoil.

That strategy has created its fair share of problems for the company. Conoco announced back in January it would write down $34 billion of previous acquisitions and lay off about 1,300 employees or 4 percent of its workforce.

Conoco continues to tighten its belt, this time reducing its 2010 capital spending budget to $11 billion, down from $12.5 billion in 2009.

The company's 2009 capital spending budget had been reduced as well -- some 18 percent from $15.3 billion in the previous year. Conoco will provide more details of its 2010 capital spending plan near the end of the year, according to a statement from the company.

That leaves the $10 billion in assets to ponder over. Conoco will sell the assets over the next two years and its divestitures may include refineries and oil and gas properties.

Its stake in Lukoil rises to the top of the list as well as its refinery operations.

Refinery operations have struggled in recent months, beaten down by a recession that has sapped demand and reduced margins to paper-thin amounts.

Valero Energy, the largest U.S. refiner, announced plans to cut back operations at its Delaware facility and extend its Aruba refinery shutdown. Sunoco, another major U.S. refiner, announced Tuesday plans to close its Eagle Point refinery in Westville, N.J. and reduce its quarterly dividend to 0.15 cents a share.

All of this bad news for refiners may mean Conoco will look at ridding itself of its own refining assets first. As of Jan. 1, the company had 12 refineries in the U.S. and five other international locations.

Of course, Conoco will have to find a company willing to ignore the horrible margins and weak demand figures.

Perhaps, Conoco already provided a really big hint when it sold its 40 percent share in a natural gas field offshore Venezuela back to the state-run Pdvsa, or Petroleos de Venezuela.

Conoco has decided that operating in the increasingly nationalized country is more trouble than its worth. The company filed an international arbitration claim against the country over the nationalization of crude oil projects two years ago.

The company may look at its assets in other tough locales put them on the selling block.