Many investors, including Nordea Asset Management, PensionDanmark, and Danske Bank, have a 5% production or revenue threshold for oil sands production. Companies that exceed these thresholds are subject to divestment.
ConocoPhillips has increased production of bitumen, a type of fuel extracted from oil sands, since fully acquiring the Surmont facility in Canada in 2023. We estimate that 6.2% of its total revenues were generated by bitumen production in H1 2024, up from 4.3% in H2 2023. This makes it likely that the company will trigger a number of exclusion policies.
The pending acquisition of Marathon Oil, which does not have an oil sands operation, will enlarge ConocoPhillips’ overall revenue base. However, our calculations suggest bitumen will still account for 5.8% of the consolidated entity’s production once the merger completes.
This means divestment of ConocoPhillips bonds are likely to proceed over the coming months. Analysis shows that the company’s Aug 2023 bonds are currently underperforming the benchmark. If this continues, investors risk further losses if they wait for further information before executing their exclusion policies.
