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COP

ConocoPhillips NYSE:COP Stock Report

Last Price

US$103.66

Market Cap

US$132.0b

7D

-5.8%

1Y

53.0%

Updated

29 Sep, 2022

Data

Company Financials +
COP fundamental analysis
Snowflake Score
Valuation4/6
Future Growth0/6
Past Performance6/6
Financial Health5/6
Dividends4/6

COP Stock Overview

ConocoPhillips explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG), and natural gas liquids worldwide.

ConocoPhillips Competitors

Price History & Performance

Summary of all time highs, changes and price drops for ConocoPhillips
Historical stock prices
Current Share PriceUS$103.66
52 Week HighUS$124.08
52 Week LowUS$66.06
Beta1.32
1 Month Change-6.19%
3 Month Change13.94%
1 Year Change52.96%
3 Year Change93.18%
5 Year Change108.57%
Change since IPO709.05%

Recent News & Updates

Sep 12

ConocoPhillips Will Be A Winner As Energy Enters Into A New Era

Summary ConocoPhillips is one of the most profitable firms in the energy sector. The company has rewarded investors for decades, beating the S&P 500, despite energy’s underperformance. The company’s recent business places it in a strategic position to be a key supplier for Europe. In addition, the industry has become more capital disciplined, providing a platform for sustainable profitability. The company’s free cash flows are trading at much cheaper levels, 10.75%, compared to the S&P 500 at 2.05%. ConocoPhillips (NYSE:COP) is one of the most storied names in energy. The company has traditionally rewarded investors, despite energy firms normally destroying shareholder capital. The European energy crisis, and a wider pattern of capital discipline in the industry, have created a path for future sustainable profitability. The company's free cash flows are trading at very attractive rates, providing investors with a strong buy signal. A History of Rewarding Investors Against the Odds The pareto principle has a wonderful way of making its presence felt. Energy firms are, in principle, bad buy-and-hold investments. Indeed, Hendrik Bessembinder found that, if held across their life, 96% of stocks do not have returns that beat T-bills, with just 4% of stocks earning virtually all lifetime value creation by stocks. The vast majority of stocks only beat T-bills when held for short periods of time. ConocoPhillips is unique in that, since listing in 1982, the firm has beaten the S&P 500, earning a more than 3,429% share price gain for its shareholders, compared to over 3,248% for the S&P 500. Google Finance Year-to-date, the stock is up more than 55%, compared to a decline of more than 14% for the S&P 500. Fossil Fuels Still Matter The end of the fossil fuel era has been pronounced over the last decade. Yet, in reality, between 1971 and 2019, fossil fuels declined from 86% of total energy supply, to 83%. Rather than rapid transition, Vaclav Smil has argued that energy has been characterized by inertia. International Energy Agency Bill Gates has argued that, because fossil fuels play such an important role in the economy, and that cars, and the creation of electric vehicles, are merely soft problems that do not fundamentally move the needle, the kind of rapid transition that policy assumes, are misleading, and, in fact, the world needs a "miracle" to shift from fossil fuels. The 2021 report by Bloomberg New Energy Finance shows that, in a "gray scenario" in which fossil fuels decline by just 2% a year, fossil fuels will make up 52% of total energy supply. Bloomberg New Energy Finance That gray scenario is more likely given that the Russo-Ukrainian War has forced Europe to reconsider the use of coal, with Germany, Italy, Austria and The Netherlands all indicating that a return to coal is possible. More importantly for our thesis, despite all the rhetoric of a green and rapid transition, even Europe is not ready for a pivot to renewables. Rather than a rapid shift to renewables, Europe will be forced to shift its supply of oil and gas, from Russia, to oil and gas from allied countries and regions, such as the United States. ConocoPhillips Will Benefit from the Russo-Ukrainian War In a period of deglobalization, cheap fossil fuel supplies are less important than strategically secure supplies. So, even in the event of a resumption of relations between Russia and the European Union (EU), the EU would find itself compelled, for geopolitical reasons, to continue a policy of breaking free from Russia. Rather than competing for the world's supply of oil and gas, Europe will compete only for an even more limited supply of oil and gas from friendly countries. That will certainly push up demand for American and Middle Eastern energy supplies. That makes ConocoPhillips' joint venture (JV) with QatarEnergy to develop the North Field East liquefied natural gas project, strategically important. ConocoPhillips is QatarEnergy's third international partner (the others are France's TotalEnergies SE (TTE) and Italian energy firm Eni S.p.A. (E)), and will have a 25% stake in the JV company, and the JV will own a 12.5% stake in the $28.75 billion NFE expansion project, with a capacity of 32 million tonnes a year ((t/y)). The project is the second-largest LNG project in history, and will begin production before the end of 2025. The company also announced a heads of agreement (HOA) with Sempra Infrastructure, a division of Sempra (SRE). The deal will allow it to expand its LNG projects and carbon capture activities, through a multi-phasal approach. Capital is Exiting the Market The oil and gas markets traditionally follow Kaldor's cobweb model, with a large lag between production decisions and future prices. That has encouraged firms to expand assets during booms, issuing equity, assuming debt, and funding capital expenditures, until supply goes in excess of demand, the bubble bursts, and prices fall, with capital exiting the market, and waves of consolidation and bankruptcies occurring, until profitability returns with the market clearing. Energy investors will recognize this pattern in the last decade of the sector, with the post-Great Recession period being one of consolidation, bankruptcies, and capital discipline. Thus, there is an inverse relationship between asset growth and future returns, what is known as the asset growth effect. In the wake of the 2008 crash, and more recent events, the industry has become much more capital disciplined, with SP Global reporting last year that mangers had stressed that "high oil prices won't sway them from continued capital and production discipline," with the focus being on maintenance capex growth of between 10% and 15%. Even if in 2022, the ultimate capex growth is 20%, that remains historically low and well below the 50% capex growth that current prices would suggest. So, while global capex has risen, it-s still far short of earlier peaks, with Fitch Solutions highlighting the unevenness of the pandemic recovery and continued caution on the part of oil & gas companies, despite rising prices. Fitch Solutions A combination of lobbying by ESG and impact investors, and government actions, has deepened the exit of capital from oil and gas. Oil and gas firms have underinvested, in aggregate, in oil and gas, and shifted, admittedly very superficially, capital to renewables. This has occurred despite the fact that demand for oil and gas has continued to grow. We have the balancing act of Western governments urging a rapid transition to a domestic audience, and then asking OPEC to ramp up production. Meanwhile, OPEC has become more disciplined about capital allocation, and so far refused to give into pressure to respond with the kind of ramp up the West needs, especially in this period. This contraction of capital in the industry is a good thing for investors, because it keeps supply at a profitable and sustainable point. Growth is the enemy, and it's an enemy the industry has learned to avoid. ConocoPhillips is One of the Most Profitable Energy Businesses in America In the last decade, revenue has declined from more than $62 billion in 2012 to nearly $48.35 billion in 2021, in line with an industry-wide shift. That retrenchment is clear in the balance sheet, where total assets have declined from more than $117 billion to nearly $90.7 billion, in that time. Year-to-date, the company has earned revenue of nearly $68.86 billion. However, and this highlights the inverse relationship between asset growth and future returns, the company's gross profitability has risen from nearly 0.23 to 0.25, between 2012 and 2022. In the trailing twelve-month period, gross profitability is 0.35, just above the 0.33 threshold recommended by Robert Novy-Marx. While net income dipped from nearly $8.43 billion in 2012, to just over $8 billion in 2021, in the TTM period, it is $15.91 billion and this while using fewer resources. Free cash flow has risen from -$250 million in 2012, to more than $11.67 billion in 2021, rising to nearly $16.66 billion in the TTM period. Return on invested capital rose from 14.1% in 2012, to 14.9% in 2021. At 26.6% in the TTM period, ROIC is at its highest level in a decade. Once again returning to Pareto's principle, research conducted by renowned financial service firm, New Constructs, LLC, shows that just five firms generate 65% of the S&P 500 Energy sector's core earnings, a measure of the profitability of a business' core operations. ConocoPhillips is one of those five companies, the others being Exxon Mobil (XOM), Chevron Corporation (CVX), Occidental Petroleum Corp. (OXY), and Marathon Petroleum (MPC).

Sep 05

ConocoPhillips: Time To Take Profits Off The Table

Summary ConocoPhillips enjoyed a wonderful start to 2022 on the back of booming oil and gas prices. Whilst their shareholders are enjoying large variable dividends and share buybacks, it seems time to take profits off the table. Oil and gas prices are notoriously volatile and will soften one day, which may already be underway with oil prices dipping back below $100 per barrel. Their shares do not offer desirable value at their current valuation without their booming financial performance, which cannot last forever. Since their shares are not exorbitantly expensive, I only believe that downgrading my buy rating to a hold rating is now appropriate. Introduction Following ConocoPhillips (COP) enjoying a strong end to 2021, one way or another, it seemed that higher shareholder returns were coming, as my previous article highlighted earlier in 2022. Thankfully they did not disappoint with large variable dividends boosting their cash returns, which if continued at their most recent quarterly rate would see a high yield of 6.75%. Even though shareholders are certainly enjoying this cash windfall along with their strong share price rally, it seems time to take profits off the table given the economic risks on the horizon, as discussed within this follow-up analysis that also covers their subsequently released results for the second quarter of 2022. Executive Summary & Ratings Since many readers are likely short on time, the table below provides a very brief executive summary and ratings for the primary criteria that were assessed. This Google Document provides a list of all my equivalent ratings as well as more information regarding my rating system. The following section provides a detailed analysis for those readers who are wishing to dig deeper into their situation. Author *Instead of simply assessing dividend coverage through earnings per share cash flow, I prefer to utilize free cash flow since it provides the toughest criteria and also best captures the true impact upon their financial position. Detailed Analysis Author The recovery they enjoyed during 2021 accelerated during the first half of 2022, as widely expected given oil and gas prices surged to levels not seen for around a decade following the Russian invasion of Ukraine. This saw their operating cash flow reach a massive $12.982b for the first half of 2022 that was more than twice its previous result of $6.331b during the first half of 2021. In fact, if removing its $1.381b working capital build, their underlying result of $14.363b is close to their full-year result of $16.996b for 2021, despite being only half the length of time. In spite of this working capital build and their higher capital expenditure effectively doubling year-on-year to $5.129b during the first half of 2022 from $2.465b during the first half of 2021, they still generated immense free cash flow of $7.853b. Apart from easily funding their dividend payments of $1.852b, it also easily funded their share buybacks of $3.725b, thereby making for very impressive shareholder returns of $5.577b for only half of a year. Whilst everyone knows that booming oil and gas prices line the pockets of shareholders handsomely with cash, in my eyes, the bigger question going forwards is actually what happens when operating conditions soften. The current global energy shortage provides support and thus reduces the downside risks in the short-term but at the same time, I still feel that it would be prudent for investors to remember the energy sector is notoriously volatile and thus one day, like it or not, these booming operating conditions will soften, even if they avoid a severe downturn. This consideration is especially relevant at the moment in light of the growing recession risks on the horizon, which have already sent oil prices back below $100 per barrel and could see further weakness and also hurt investor sentiment towards their industry and send their share price lower. Despite their variable dividends providing a tangible cash return to shareholders, circa two-thirds of their shareholder returns during the first half of 2022 came via share buybacks that scale up and down in tandem with their free cash flow. Since their share price would obviously also follow in tandem, it makes their scope for shareholder returns without these booming oil and gas prices especially important to ensure shareholders are not left high and dry when the proverbial tide recedes. To assess this consideration, I prefer comparing their current valuation against their free cash flow from business-as-usual operating conditions. In my eyes, their results from 2021 provide a suitable basis since its strong end was mirrored by a weak start, thereby averaging out accordingly with free cash flow of $11.672b. If this is compared to their current market capitalization of approximately $140b, it sees a high but still single-digit free cash flow yield of slightly over 8%. Whilst this is not necessarily bad nor exorbitantly expensive, it nevertheless is also not particularly cheap and thus in the medium to long-term, their shares do not appear to offer desirable value without these booming oil and gas prices. Author Despite ramping up their shareholder returns during the first half of 2022, their immense free cash flow still sent their net debt plunging to $8.79b, which represents a massive decrease of 39.21% versus its previous level of $14.46b at the end of 2021. After seeing this $5.67b decrease, their net debt is now only an immaterial $21m above its previous level at the end of 2020 and thus effectively saw them repaying their borrowings to fund their 2021 acquisitions of Concho Resources and shale assets from Shell (SHEL). Admittedly, $2.914b of this decrease stemmed from divestitures net of relatively immaterial acquisitions, most notably their shares in Cenovus Energy (CVE) but regardless, it still provides a lasting benefit. Author Thanks to repaying their borrowings during 2021, they are now in a far stronger position to handle whatever the future may hold for their industry. Unsurprisingly, this saw their respective net debt-to-EBITDA and net debt-to-operating cash flow drop even lower to 0.24 and 0.31 than their already very low previous respective results of 0.73 and 0.85 at the end of 2021. These results already ended 2021 below the threshold of 1.00 for the very low territory but if they were to have faced another severe downturn before repaying their additional borrowings, their leverage would have skyrocketed. To provide an example, if comparing their net debt of $14.46b from the end of 2021 against their downturn-impacted financial performance of 2020, it creates a net debt-to-EBITDA of 3.01 and a net debt-to-operating cash flow of 3.71, the latter of which would have been within the high territory of between 3.51 and 5.00. Whilst these results would not necessarily have endangered their solvency, they nevertheless would have still hindered their shareholder returns and likely suppressed their share price as higher leverage equals higher risks and thus as a result, translates into a lower valuation. Whereas now that their net debt is essentially back to its previous level from the end of 2020, even if this same scenario were to transpire now, their net debt-to-EBITDA and net debt-to-operating cash flow would obviously only revert back to their previous results of 2.25 and 1.83 at the end of 2020. Apart from the former only sitting within the moderate territory of 2.01 and 3.50 and thus lowering risks from a hypothetical severe downturn, this lasting benefit also lessens any requirement for deleveraging going forwards.

Shareholder Returns

COPUS Oil and GasUS Market
7D-5.8%-4.5%-2.0%
1Y53.0%35.9%-20.3%

Return vs Industry: COP exceeded the US Oil and Gas industry which returned 35.9% over the past year.

Return vs Market: COP exceeded the US Market which returned -20.3% over the past year.

Price Volatility

Is COP's price volatile compared to industry and market?
COP volatility
COP Average Weekly Movement5.9%
Oil and Gas Industry Average Movement8.1%
Market Average Movement6.9%
10% most volatile stocks in US Market15.8%
10% least volatile stocks in US Market2.8%

Stable Share Price: COP is not significantly more volatile than the rest of US stocks over the past 3 months, typically moving +/- 6% a week.

Volatility Over Time: COP's weekly volatility (6%) has been stable over the past year.

About the Company

FoundedEmployeesCEOWebsite
19179,400Ryan Lancehttps://www.conocophillips.com

ConocoPhillips explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG), and natural gas liquids worldwide. It primarily engages in the conventional and tight oil reservoirs, shale gas, heavy oil, LNG, oil sands, and other production operations. The company’s portfolio includes unconventional plays in North America; conventional assets in North America, Europe, Asia, and Australia; various LNG developments; oil sands assets in Canada; and an inventory of conventional and unconventional exploration prospects.

ConocoPhillips Fundamentals Summary

How do ConocoPhillips's earnings and revenue compare to its market cap?
COP fundamental statistics
Market CapUS$131.96b
Earnings (TTM)US$15.91b
Revenue (TTM)US$66.89b

8.3x

P/E Ratio

2.0x

P/S Ratio

Earnings & Revenue

Key profitability statistics from the latest earnings report
COP income statement (TTM)
RevenueUS$66.89b
Cost of RevenueUS$32.79b
Gross ProfitUS$34.10b
Other ExpensesUS$18.19b
EarningsUS$15.91b

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

Nov 03, 2022

Earnings per share (EPS)12.50
Gross Margin50.98%
Net Profit Margin23.79%
Debt/Equity Ratio31.2%

How did COP perform over the long term?

See historical performance and comparison

Dividends

4.3%

Current Dividend Yield

19%

Payout Ratio

Does COP pay a reliable dividends?

See COP dividend history and benchmarks
When do you need to buy COP by to receive an upcoming dividend?
ConocoPhillips dividend dates
Ex Dividend DateSep 29 2022
Dividend Pay DateOct 14 2022
Days until Ex dividend1 day
Days until Dividend pay date14 days

Does COP pay a reliable dividends?

See COP dividend history and benchmarks