Pick ConocoPhillips Stock For Stable Returns

+31.03%
Upside
84.64
Market
111
Trefis
COP: ConocoPhillips logo
COP
ConocoPhillips

The extension of production curtailments by OPEC and a dip in crude oil inventory levels have pushed benchmark prices higher. Thus, the shares of prominent upstream company, ConocoPhillips (NYSE: COP) have reached pre-Covid levels assisted by incremental cash generation from growing benchmark prices. Per recent filings, the company has announced a debt reduction plan along with quarterly dividend and share buybacks. Given the current dividend yield of 3%, the stock provides economic returns to investors willing to preserve their wealth from market volatility. We highlight the historical trends in ConocoPhillips’ revenues, earnings, and stock price in an interactive dashboard analysis, ConocoPhillips (COP) Stock Has Lost 11% Between 2018-End And Now.

Low productions costs to assist cash generation and dividend payouts

In 2020, the company’s three cost heads, production, direct taxes, and depreciation were $10.99, $1.91, and $15.54 per barrel, respectively. On average, the company incurs $27 per barrel total cost of production. Considering the sizable margin difference between WTI benchmark and total production cost, the company expects strong cash generation in 2021.

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Assisted by production curtailments and capex reduction in 2020, the company funded $4.7 billion of capital expenditures from $4.8 billion of operating cash. While dividends were supported by asset dispositions last year, excess cash generation is key to share repurchases and dividend growth in 2021.

Industry Outlook

Crude oil prices have observed a strong surge in the past month as commercial crude oil inventories reached pre-Covid levels. Moreover, OPEC has not indicated toward easing of production curtailments to alleviate soaring prices. Thus, EIA’s projections for the WTI benchmark and Henry Hub spot price are expected to be revised in the near-term. Broadly, oil, coal, and natural gas account for 32%, 27%, and 24% of the global energy consumption, respectively. With industry leaders including Exxon, Chevron, BP, and Royal Dutch Shell enhancing their low carbon and renewable energy portfolio, the share of natural gas is expected to rise in the long run.

Is there a better alternative to ConocoPhillips? ConocoPhillips Stock Comparison With Peers summarizes how COP compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

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