What’s Next For ConocoPhillips Stock?

+15.72%
Upside
111
Market
129
Trefis
COP: ConocoPhillips logo
COP
ConocoPhillips

After an 8% decline over the last six months, at the current price of around $111 per share, we believe ConocoPhillips (NYSE: COP), a pure-play oil and natural gas producer, looks fairly priced at this point. COP stock has declined from around $120 to $111 in the last six months, as oil prices have been surprisingly lower than expected this year. However, oil prices have jumped over the last week – boosted by a falling U.S. dollar and supply cuts by the world’s biggest oil exporters (Saudi Arabia and Russia). Brent futures currently trade at $81.39 a barrel and U.S. West Texas Intermediate (WTI) crude settled at $76.95 (as of July 14). A report released by OPEC also kept an optimistic outlook for world oil demand despite weak economic growth. It raised its growth forecast for 2023 and predicted only a slight slowdown in 2024, with China and India expected to keep driving the expansion in fuel use.

In Q1, ConocoPhillips posted total revenue of $15.52 billion, down from the $19.29 billion made in the same quarter last year. The company’s net income was chopped in half to $2.9 billion, or $2.38 per share, from $5.8 billion, or $4.39 per share, in the year-earlier quarter, as the company’s averaged realized price fell 21% year-over-year (y-o-y) to $60.86 per barrel of oil equivalent (boe) per day from $76.99/boe a year ago. Q1 production increased by 45K boe/day to a quarterly record 1.79 million boe/day, including record Lower 48 production of 1.04 million boe/day, primarily driven by new wells online in the Lower 48 and improved well performance across the portfolio. The Lower 48 comprises the three U.S. shale basins (Eagle Ford, Bakken, Permian Basin) and the Gulf of Mexico production, but not Alaska. Almost 58% of the total output comes from production in the Lower 48 of which 38% of the output comes from the Permian Basin itself. Going forward, Conoco raised production guidance for Q2 to 1.77 million to 1.81 million boe/day.

We forecast COP’s Revenues to be $67.5 billion for the fiscal year 2023, down 18% y-o-y. Looking at the bottom line, we now forecast EPS to come in at $9.76. Given the changes to our revenues and earnings forecast, we have revised our COP’s Valuation to $104 per share, based on $9.76 expected EPS and a 10.7x P/E multiple for the fiscal year 2023 – almost 5% lower than the current market price.

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It is helpful to see how its peers stack up. ConocoPhillips Peers shows how COP stock compares against peers on metrics that matter. You will find other useful comparisons for companies across industries at Peer Comparisons.

What if you’re looking for a portfolio that aims for long-term growth? Here’s a value portfolio that’s done much better than the market since 2016.

 Returns Jul 2023
MTD [1]
2023
YTD [1]
2017-23
Total [2]
 COP Return 7% -6% 120%
 S&P 500 Return 0% 16% 100%
 Trefis Multi-Strategy Portfolio 5% 25% 302%

[1] Month-to-date and year-to-date as of 7/14/2023
[2] Cumulative total returns since the end of 2016

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