COP ConocoPhillips

By Erin Ailworth and Tess Stynes 

ConocoPhillips cut its dividend by two-thirds and sliced another chunk from its budget, underscoring concerns that the oil industry's downturn could stretch into 2017.

Chief among oil's problem spots: the resiliency of U.S. crude production, which is declining but slowly, and faltering demand for crude in large markets like China.

Simply cutting this year's budget to $6.4 billion, down from $10.1 billion in 2015, wouldn't be enough to weather the downturn, ConocoPhillips Chief Executive Ryan Lance told investors and analysts on a call after the company reported a large loss in the fourth-quarter. The Houston company made what Mr. Lance called a "gut-wrenching" decision to slash its dividend from 74 cents to 25 cents a share in order to ensure the company's ability to maintain its financial health while oil prices hovered near 12-year lows.

"The easy moves were made a long time ago," Mr. Lance said. "We can't count on a quick fix for prices, and we're not willing to risk a strong balance sheet."

Analyst Paul Sankey of Wolfe Research questioned the magnitude of the dividend cut, saying that ConocoPhillips's problems weren't as dire as those at many of its smaller or weaker rivals.

"Why didn't you tough it out for another year?" Mr. Sankey asked Mr. Lance during Thursday's call. "I'm just worried that you've capitulated at the bottom."

ConocoPhillips' shares closed 8.7% lower at $35.29.

The company reported a fourth-quarter loss of $3.45 billion, or $2.78 a share, as it posted $2.7 billion in asset write-downs to reflect low oil and natural-gas prices and changes to its energy-exploration plans. A year earlier, ConocoPhillips recorded a loss of $39 million, or three cents a share.

Excluding asset write-downs, asset-sale gains and other items, the adjusted per-share loss was 90 cents, compared with year-earlier adjusted earnings of 60 cents. Revenue slumped 43% to $6.77 billion.

Analysts polled by Thomson Reuters had expected per-share loss of 65 cents and revenue of $9.06 billion.

The company, which in December had projected 2016 capital expenditures at $7.7 billion, on Thursday also cut its operating-cost estimate to $7 billion from $7.7 billion.

ConocoPhillips said the reduced capital-spending guidance mostly reflects diminished activity in the lower 48 U.S. states.

"While we don't know how far commodity prices will fall, or the duration of the downturn, we believe it's prudent to plan for lower prices for a longer period of time," Mr. Lance said. "The actions we have announced will improve net cash flow by $4.4 billion in 2016."

ConocoPhillips said that average selling prices fell 46% from a year earlier, offsetting an increase in production.

The company plans to divest about $2.3 billion in assets in 2015. On Thursday, the company said it had completed roughly $2 billion in asset sales last year.

Write to Erin Ailworth at Erin.Ailworth@wsj.com and Tess Stynes at tess.stynes@wsj.com

(END) Dow Jones Newswires

February 04, 2016 18:39 ET (23:39 GMT)

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