Shares of ConocoPhillips (COP) hit a 52-week high of $85.46 on Jun 20. In fact, the Houston, TX-based energy giant has seen its stock price climb 20.82% since the beginning of the year. This price appreciation can be attributed to consistency in its earnings/cash flows, attractive fundamentals and a shareholder-friendly financial policy.
The company’s recent performance was backed by continued portfolio shift to liquids and higher production from new development programs, as well as upstream ventures in key projects. However, this was partially offset by lower oil realizations. ConocoPhillips is progressing on other North American shale plays, including several emerging areas.
ConocoPhillips holds leading positions in both natural gas and heavy crude oil acreages in North America, as well as a legacy position in the North Sea and growing exposure to lucrative international regions. The Houston, TX-based company thus looks forward to replacing reserves and sustaining production growth over the long term.
ConocoPhillips’ initiatives toward liquids-rich plays are gaining momentum through the Eagle Ford, Bakken and Permian plays. The company is also poised to benefit from a pipeline of projects in the Gulf of Mexico, Malaysia, the liquefied natural gas project in Australia, the U.K., Norway, and the Canadian oil sands, apart from the US Lower 48 liquids-rich plays. Oil sands expansion projects are also on track.
Since Apr 2012, when the company spun off its refining operations to Phillips 66 (PSX), it has delivered total shareholder returns of 22%. ConocoPhillips’ complete shift of focus to upstream operations and thus oil and gas prices play a major role in determining its performance. The company plans to expand production by maintaining its growth focus on reserves, through global drilling programs in legacy assets, unconventional assets and major projects.
ConocoPhillips’ margin growth would also be aided by its shift of production mix to higher-value products. The company expects to spend $16 billion on average annually and allocate 95% of its capital to investments that deliver above-average margins. The recent activity targets offshore prospects in Australia, Angola and Senegal, conventional exploration in Norway and Indonesia, and unconventional exploration in North America, Poland and Colombia.
Zacks Rank & Key Picks
ConocoPhillips currently holds a Zacks Rank #3 (Hold). Some better-ranked stocks in the oil and gas sector include Encana Corp (ECA) and Matrix Service Company (MTRX), both sporting a Zacks Rank #1 (Strong Buy).
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