After slashing its payroll and immediate capital investment plans, ConocoPhillips (COP) said Wednesday it doesn't expect to increase production in the near future.

Speaking to journalists after the company's annual analyst meeting in New York, ConocoPhillips Chief Executive Jim Mulva said the company would have flat production for the "next several years," holding at 1.8 million barrels of oil equivalent a day, a figure that includes natural gas production.

The forecast marks a departure from last year's outlook, which projected a 2% annual increase in production over the next five years. At current prices, spending to achieve that target doesn't make sense, Mulva said.

Houston-based ConocoPhillips said it is delaying some oil and gas projects in North America, and confirmed it is cutting 1,300 workers, or about 4% of its staff.

The company's grim long-term production outlook shows that the recession and global financial crisis are taking a heavier toll on ConocoPhillips than on its peers.

Although Chevron Corp. (CVX) lowered its production growth outlook on Tuesday as a result of lower investment on existing production areas, Conoco is the first among U.S. major oil companies to announce its long-term production won't grow.

Conoco's production forecast also highlights the company's struggle to manage the expectations of analysts, who are becoming disappointed with Conoco's performance.

ConocoPhillips faces the challenge of "underpromising and overdelivering or disappointing everybody," said Phil Weiss, an analyst at Argus Research in New York. Some analysts also warned that the company's production average for the next five years may actually shrink.

 
  Tight Cash Flow

ConocoPhillips reaffirmed that it is cutting its 2009 capital budget to $12.5 billion, an 37% reduction from 2008.

In the same meeting, ConocoPhillips Chief Financial Officer Sig Cornelius said the company needs oil prices to average $52 a barrel and natural gas prices to average $6 per million British Thermal Units to break even at its current projection for spending and dividend payments.

If oil prices average $40 a barrel, ConocoPhillips could experience a cash flow shortfall of nearly $3 billion this year under its current budget and force the company to borrow money or cut its capital expenditure program further, he said.

"We believe we do have flexibility to make further capital reductions if necessary," ConocoPhillips Chief Financial Officer Sig Cornelius said. "Our debt may creep up if facing that scenario." He added, however, that reducing the company's dividend isn't under consideration.

Company executives made it clear that acquisitions aren't part of the company's current strategy and that future investments are based on "modest" oil prices. Mulva said he sees oil prices stabilizing around $60 to $70 a barrel in the long term.

"We wish market price was a little stronger, to increase dividends, get back in share repurchases programs, but the market doesn't allow us to do all that," Mulva said.

He said the company's priority, over any potential acquisition, is to bring down debt.

ConocoPhillips will defer work on some oil and gas projects this year because low energy prices have made certain projects uneconomical. The most likely targets for delays involve oil sands and natural gas fields in Canada. Major projects due for startup this year will move forward as previously scheduled.

Conoco recently traded at 35 cents a share, down 0.95% at $37.65.

-By Isabel Ordonez and Brian Baskin, Dow Jones Newswires; 713-547-9207; isabel.ordonez@dowjones.com