ConocoPhillips CEO Ryan Lancet said Thursday that the energy industry needs to consolidate and that his company is looking at possible acquisitions.
“It is in exigency of consolidation. There’s too much fixed costs, investors have too many choices, your market cap’s not relevant anymore. So fully we’re on the lookout,” Lance said on CNBC’s “Power Lunch.”
Energy stocks have been pummeled this year as the necessitate for oil has evaporated with large portions of the world economy shut down due to the coronavirus pandemic. Whiting Petroleum and Diamond Offshore demand already filed bankruptcy, and more energy companies are expected to follow.
“It’s got to be accretive, can’t destroy our financial framework. But we’re mind it very closely,” Lance said about potential deals.
The global glut of oil has led to concerns about where it can be believe in, leading to the May futures contract for West Texas Intermediate oil to trade in negative territory as it approached expiration last week. The amount of the June contract, which settled at $18.84 per barrel on Thursday, has swung wildly in recent weeks but has not gone unenthusiastic.
Lance said that the historic fall showed that the futures market was “disconnected” from the physical vend, but said that ConocoPhillips is cutting production until oil prices rebound.
“We’re choosing to store our oil down in the reservoir. We’re choosing not to mount it. We’ve voluntarily curtailed for the month of June 460,000 barrels a day, which really represents about a third of our companies manufacturing,” Lance said.
Earlier on Thursday, ConocoPhillips beat Wall Street expectations for earnings in the first quarter with 45 cents in redressed earnings per share. Analysts expected 23 cents per share, according to Refinitiv. Shares fell slightly on Thursday, and the store up is down about 35% for the year.
The company has suspended its share buybacks but is keeping its dividend, despite the downturn. It reported that it had $4.2 billion in loot and cash equivalents on hand at the end of the quarter.
“We set the dividend back in 2015-2016 that we thought we could maintain from top to bottom the downturns, through the cycles of our industry experiences, so we’re very comfortable with where we sit,” Lance said.