ConocoPhillips CEO: Most investors are underweight energy stocks, ‘by a lot’

ConocoPhillips CEO Ryan Lance says the energy sector wants investors to like it again.

“Most investors are underweight energy, not by a little but by a lot,” said Lance when he appeared at the CERAWeek conference in Houston this week.

A big focus at the annual energy conference was how to keep costs low, while using technology to maximize efficiencies. Lance said it’s been difficult over the past year in the stock market. “We’re trying to attract value investors back,” he said.

The Energy Select Sector SPDR ETF (XLE), for instance, is down 6.5 percent over the past year, while the S&P 500 is up more than 14.5 percent. The S&P energy sector was down more than 11 percent in the month of February as the stock market sold off, its worst monthly performance since 2011.

ConocoPhillips shares, trading at just under $54, are midway between a 52-week high and low.

Lance was not alone among the oil CEOs looking to attract investors back to the spurned sector, with Royal Dutch Shell CEO Ben van Beurden saying Shell and the industry are working to achieve better shareholder returns through strong free cash flow and lower debt.

“One of the things you’re seeing is a trend to return cash to shareholders,” said Kevin Brown, research analyst with Tortoise Capital Advisors.

Lance said a key is to give money back to shareholders through buybacks, as well as dividends.

A goal is to keep sustainable capital as low as possible, and that level is now $3.5 billion for ConocoPhillips. That is the amount the company needs to maintain its production, while its cost per barrel is about $40.

“We believe 20 to 30 percent of capital should go to shareholders,” Lance said.

ConocoPhillips’ production is now about a quarter shale and growing.

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