Houston-based major ConocoPhillips has implemented a three-point plan designed to improve its return on capital employed from 12% to 14% over the next several years, with almost 75% of the 2003 capital budget directed toward improving the upstream business.

CEO Jim Mulva, in ConocoPhillips’ first analyst presentation in New York City on Friday, told the audience that the company is on track to reduce its capital spending by 25% overall, using as comparison the stand-along capital programs of the pre-merged Conoco and Phillips Petroleum companies. In addition, Mulva said it will “rationalize” or sell off $3 billion to $4 billion of lower returning assets. Post-merger annual savings also will be upped to $1.25 billion from the once forecast $750 million.

By completing these actions, said Mulva, the company’s debt-to-capital ratio by 2004 will be reduced to 34% from the current 39%. Debt also will be reduced as the company’s equity grows, he added.

“We will use a disciplined approach to improve returns for our shareholders,” said Mulva. “In addition to the increased post-merger cost savings and asset rationalization, 75% of our 2003 capital budget will be dedicated to growing our upstream business, which has historically provided higher returns.”

Eventually, the company wants its upstream business to comprise 65% of its total asset base, compared with a current 57% level. The emphasis, said Mulva, will be on profitably growing production and reserves and on building legacy projects — large oil and gas developments that can generate significant revenues over long periods at competitive operating costs.

In the downstream segment, the major plans to focus on improving returns through operating reliably with a low-cost structure, rationalizing assets, executing its clean fuels projects and capitalizing on proprietary technologies.

The CEO also reported that the merger transition remains smooth. “We have a committed and talented leadership team that is doing an excellent job,” he said. “We are creating a new corporate culture focused on improving financial returns, operating efficiently, reliably and safely, and harnessing the spirit of our people.”

©Copyright 2002 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.