ConocoPhillips' 10-Year Plan Ensures Growth and Shareholder Returns 

Strategist

Allen Good

Revenue segments as reported by the company.

Sales and other operating revenues

Equity in earnings of affiliates

Gain (loss) on dispositions

Other income (loss)

Revenue Segments

Revenue is the money generated from normal business operations. Gross Profit is revenue minus cost of goods sold. Operating Income is revenue minus cost of goods sold and other operating expenses.

Revenue

Operating Income

Revenue & Operating Income

Net Income, also called net earnings, is calculated as revenue minus cost of goods sold, operating expenses, depreciation, interest, taxes, and other expenses.

Net Income

Gross Profit, Operating Income, and Net Income as a percentage of Revenue

Operating Margin

Profit Margin

Margins

An operating expense is an expense a business incurs through its normal business operations. Often abbreviated as OPEX.

Purchased commodities

Production and operating expenses

Selling, general and administrative

Exploration expenses

Depreciation, depletion and amortization

Impairments

Taxes other than income taxes

Accretion on discounted liabilities

Interest and debt expense

Foreign currency transactions (gain) loss

Other expenses

Operating Expenses

Year over year growth in Revenue and Operating Expenses.

Revenue Y/Y

OpEx Y/Y

Growth

Shares outstanding refer to a company's stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company's officers and insiders.

Outstanding Shares

Market Cap

Also known as Price/Sales Ratio. Calculated using Average market cap for the quarter / Annualized quarterly revenue.

Revenue Multiple

Differentiating itself from peers big and small, ConocoPhillips has laid out a 10-year plan for restrained investment, steady growth, improving returns, and, importantly, returning cash to shareholders. Its strategy makes Conoco a compelling option in the energy sector, given its commitment to capital restraint and clear policy on return of cash to shareholders. Its low-cost portfolio gives it high return investment options to grow in a rising price environment while its strong financial position keeps the dividend safe in a downcycle.

Central to its plan is a commitment to maintain capital spending at $11 billion on average annually while returning 30% of operating cash flow to shareholders per year through a three-tier capital return program consisting of buybacks, an ordinary annual dividend, and a variable component. Through high-grading and cost improvements, the company has reduced the oil price necessary to earn a 10% return on produced resource in its plan to under $40/barrel.

Its growth plan rests largely on its unconventional assets, specifically its Permian position, which became the company’s largest position with the acquisition of Concho Resources and later grew with the purchase of Shell’s Permian shale assets. It has since steadily improved its operational performance. Permian resources constitute the bulk of the planned produced resources in the 10-year plan, with production plateauing at around 1.2 mmboe/d by the end of the decade. 

While the company holds acreage in the Bakken and Eagle Ford, production will only be held flat during the next decade. Outside of the U.S. unconventional portfolio, volumes will steadily grow during the next decade with Alaska and Canada offsetting declines internationally. Growth in Canada will come from the Montney, where Conoco plans to leverage its unconventional experience. New volumes in Alaska will come from leveraging existing infrastructure to grow around legacy assets and later the recently approved Willow project. LNG volume growth will come from participation in two Qatar expansion projects while also sourcing volumes from Port Arthur LNG in the U.S.

Business Strategy & Outlook

We think ConocoPhillips has sufficiently improved its portfolio through cost reductions and divestitures, which combined with the addition of low-cost unconventional production growth warrants a narrow moat rating, as we now expect the company to deliver excess returns on capital at our midcycle oil price assumption of $60/barrel.

In the last few years, ConocoPhillips has reshaped its portfolio by selling higher-cost, lower-return assets including natural gas production in the U.S. and Canada and bitumen production in Canada. Meanwhile, it acquired high-quality Permian acreage with the purchase of Concho Resources and additional acreage in the Delaware basin in the Shell asset acquisition. In total, production has remained flat since 2014, but divested volumes were largely natural gas, leaving higher-margin crude oil production at 53% of the portfolio compared with 39% previously.

Meanwhile, the company has reduced its per-barrel operating costs nearly 30% from 2013 levels. Reductions were most pronounced in its conventional assets in Europe and Asia-Pacific/Middle East regions, where costs are down over 40%. These reductions are a critical driver of the improved portfolio as conventional production constitutes around 600 thousand barrels of oil equivalent per day, or about 40% of current production. Operating costs typically track movements in commodity prices, so based on our expectations for lower oil prices over the cycle as well as the introduction of new technological innovations, we’d expect ConocoPhillips to hold on to the cost improvements during the next five years. 

ConocoPhillips’ unconventional portfolio includes positions in the Eagle Ford, Permian, and Bakken that produced about 1.0 mmboe/d in 2022, or about one third of total production, an holds about 12,000 remaining well locations. Production will continue to increase as investment is primarily directed to Lower 48 development including assets acquired from Concho and Shell in recent years. 

In the Permian, it holds 659,000 net acres in the Delaware Basin and another 251,000 in the Midland Basin. The Permian will drive the company's volume growth with production rising to a plateau level of 1.2 mmboe/d by the end of the decade from a little over 700 mboe/d in 2022

Its Eagle Ford position, acquired at a low cost well before the shale boom, totals 199,000, essentially all in the higher-return oil or liquids window. In the Bakken, ConocoPhillips holds 560,000 acres. Volumes are unlikely to grow too much beyond current levels of about 315 mboe/d, but improvements in drilling times and other advancements means those levels can be preserved with half the number of rigs needed in 2016. Although the Permian tends to garner most of the headlines, ConocoPhillips’ Eagle Ford-dominated portfolio holds break-evens for new shale wells at $40/barrel and below. 

Rounding out ConocoPhillips’ portfolio are the liquefied natural gas assets, which produce about 220 mboe/d from projects in Qatar and Australia. While its Qatar assets rank as some of the best in the world, its Australia assets are more of a mixed bag. Like other LNG projects in Australia that were developed over the past decade, ConocoPhillips’ APLNG facility struggled with cost inflation that ultimately resulted in impairment charges when oil prices fell. However, with startup in 2016, the large capital requirements are behind it while the project benefits from relatively lower operating costs and proximity to Asian demand markets as well as a large resource base capable of producing at plateau levels for decades. It acquired another 10% of APLNG in early 2022 and is set to acquire another 2.49% interest.

LNG low-cost volume growth will come from awarded interests in Qatar's North Field East and North Field South expansion projects which once complete near the end of the decade should bring Conoco's LNG production close to 300 mboed. 

In culmination, we expect ConocoPhillips to deliver midcycle returns on invested capital of 10.4%, above its 8.4% estimated cost of capital and in line with other narrow-moat E&Ps we cover.

We have incorporated environmental, social, and governance risk into our moat evaluation, but most fall outside the 10-year narrow moat window or risk is not material or probable enough to cause material value destruction in the next 10 years. A carbon tax is likely to be implemented and will increase the price of end products to consumers, which will likely erode demand, though the impact on hydrocarbon demand remains more than a decade away. 

ConocoPhillips’ reported greenhouse gas intensity of 27 kg CO2e/boe (2021) is relatively high for its peer group due to its oil sands operations. However, it is investing to improve its emissions intensity and reduce methane leakage and flaring. Management aims to reduce emissions intensity by 50%-60% by 2030 compared with 2016 levels (previously 40%-50%) on both gross operated and net equity basis and set a target for zero routine flaring by 2025. Additionally, ConocoPhillips set a target in 2020 to have net zero carbon emissions by 2050. However, these targets only concern Scope 1 and 2 emissions, while 90% of the full lifecycle of emissions from oil and gas occur during combustion (Scope 3), which lies outside the company’s influence. 

Unlike peers, ConocoPhillips has shown little appetite for investing in low-carbon solutions or renewable energy generation.

Narrow

Economic Moat

ConocoPhillips

ConocoPhillips engages in the exploration, production, transportation and marketing of crude oil, bitumen, natural gas, natural gas liquids, and liquefied natural gas on a worldwide basis. It operates through the following geographical segments: Alaska, Lower 48, Canada, Europe, Middle East and North Africa, Asia Pacific, and Other International. The Alaska segment primarily explores for, produces, transports, and markets crude oil, natural gas, and natural gas liquids. The Lower 48 segment consists of operations in the U.S. and the Gulf of Mexico. The Canada segment consists of oil sands development in the Athabasca Region of northeastern Alberta and a liquids-rich unconventional play in western Canada. The Europe, Middle East and North Africa segment consists of operations and exploration activities in Norway, the United Kingdom and Libya. The Asia Pacific segment has explorations and product operations in China, Indonesia, Malaysia, and Australia. The Other International segment handles exploration activities in Columbia and Argentina. The company was founded in 1875 and is headquartered in Houston, TX.

Earnings data Q2 2023

Cost of revenue

Gross profit

Operating expenses

SG&A

Other

Operating income

EBITDA

Net income

Earnings per share

Total assets

Current assets

Cash & equivalents

Receivables

Inventory

Non-current assets

Net PPE

Intangibles

Total liabilities

Current liabilities

Short term debt

Income tax payable

Non-current liabilities

Long-term debt

Total equity

Stockholders equity

Minority interest

Total liabilities & equity

Total debt

Net debt

Book value per share

Cash from operations

Funds from operations

Change in working capital

Cash from investing

Capital expenditure

Purchase/sale of investments

Purchase/sale of business

Other sources

Cash from financing

Change in stock

Change in debt

Cash dividends paid

Cash from other sources

Net change in cash

Free cash flow

Brookfield Renewable Partners

Chevron

NextEra Energy

Electric vehicle (EV) stocks are not the investment solution we expected. Finding a single power provider that is a good investment has been a problem, but there is a good solution. Investors seem to shift their focus from one energy source to another.

Profiting From Green Energy - But Not EVs

Gaining control of Surmont's production will help ConocoPhillips (COP) reach its goal of returning $11 billion in cash to shareholders in 2023.

ConocoPhillips (COP) to Buy Remaining Stake in Surmont Facility

ConocoPhillips said on Friday it was purchasing the remaining 50% interest in the Surmont project from TotalEnergies's Canadian subsidiary for about $3 billion.

ConocoPhillips buys remaining stake in Canada's Surmont project for $3 bln

HOUSTON--(BUSINESS WIRE)--ConocoPhillips today announced that it is exercising its preemption right to purchase the remaining 50% interest in Surmont from TotalEnergies.

ConocoPhillips Provides Notice that it is Exercising its Preemption Right to Purchase the Remaining 50% Interest in Surmont

Canadian Natural Resources

Cenovus Energy

Imperial Oil

Suncor Energy

Canadian oil sands production is expected to reach 3.7 million barrels per day by 2030, S&P Global said on Thursday, raising the analytics firm's 2030 production outlook for the country for the first time in half a decade.

Canadian oil sands output expected to reach 3.7 mln bpd by 2030 - S&P Global

ConocoPhillips (COP) has received quite a bit of attention from Zacks.com users lately. Therefore, it is wise to be aware of the facts that can impact the stock's prospects.

Here is What to Know Beyond Why ConocoPhillips (COP) is a Trending Stock

HOUSTON--(BUSINESS WIRE)--ConocoPhillips announced pricing terms of the tender offer to purchase outstanding debt securities.

ConocoPhillips Announces Pricing of Cash Tender Offer

HOUSTON--(BUSINESS WIRE)--ConocoPhillips announced early results of tender offer of ConocoPhillips and its wholly-owned subsidiary to purchase outstanding debt securities.

ConocoPhillips Announces Early Results of Cash Tender Offer

Hess

World Fuel Services

Occidental Petroleum

Transocean

Schlumberger

It may be time to sell some of the top energy stocks, especially as they become overvalued. Sure, according to the International Energy Agency, rising post-Covid demand from China, coupled with tight supply, suggests that a crude oil rebound is possible later this year.

7 Overvalued Energy Stocks to Sell Before June 2023

Baker Hughes Co

Newmont Mining

ConocoPhillips isn't the kind of company to get greedy during an oil and gas boom. Baker Hughes offers more than exposure to high energy prices and an attractive dividend yield.

3 Top Stocks That Offer Investors So Much More Than Just Dividends

Favorable oil price is aiding ConocoPhillips' (COP) bottom line.

Here's Why Hold Strategy is Apt for ConocoPhillips (COP) Now

Devon Energy

New Mexico's crude oil production grew more last year than any other U.S. state, including top producer Texas, and accounted for half the nation's overall gain, signaling its importance in expanding U.S. oil output.

New Mexico's oil output gains top Texas in 2022, delivering half of US growth

Shell PLC

TotalEnergies SE

HF Sinclair Corp

Enbridge

Valero Energy

Williams

Although many market experts expected the hydrocarbon industry sector to soar – thus sending oil stocks to buy higher – in reality, the segment has been conspicuously deflated. Still, according to a recent CNBC article, the plunge in fossil fuel prices may bottom out soon.

7 Oil Stocks to Snatch Up Before They Bounce Back

Arbor Realty Trust

Bar Harbor Bankshares

Cogent Communications Holdings

Comfort Systems USA

Innospec

Microchip Technology

MSA Safety

Pool

Raytheon Technologies

Schwab US Dividend Equity ETF

Timken

All these stocks have at least five fiscal years of dividend growth history and come from the U.S. Dividend Champions List. They have an average increase of 7.7% and a median increase of 7.0%.

11 Upcoming Dividend Increases, Including 1 Dividend King

Zacks.com users have recently been watching ConocoPhillips (COP) quite a bit. Thus, it is worth knowing the facts that could determine the stock's prospects.

Is Trending Stock ConocoPhillips (COP) a Buy Now?

HOUSTON--(BUSINESS WIRE)--ConocoPhillips Announces Upsize of Previously Announced Cash Tender Offer.

ConocoPhillips Announces Upsize of Previously Announced Cash Tender Offer

HOUSTON--(BUSINESS WIRE)--ConocoPhillips and its wholly-owned subsidiary, ConocoPhillips Company, have commenced a cash tender offer.

ConocoPhillips Announces Cash Tender Offer for up to $750.0 Million of Debt Securities

During 2022, management focused on maintaining and enhancing the company's balance sheet strength by executing activities aimed at reducing debt. With a focus on reducing debt levels and increasing cash reserves, the company's leverage conditions are expected to improve further in the coming year.

ConocoPhillips: Solid Financial Structure Makes The Stock Valuable

Exxon Mobil

The world's greatest investor has been very hit-or-miss with oil stocks. But he keeps going back to the (oil) well.

This Might Be Warren Buffett's FOMO Stock Sector

Although the revenue and EPS for ConocoPhillips (COP) give a sense of how its business performed in the quarter ended March 2023, it might be worth considering how some key metrics compare with Wall Street estimates and the year-ago numbers.

ConocoPhillips (COP) Q1 Earnings: How Key Metrics Compare to Wall Street Estimates

ConocoPhillips (NYSE:COP ) Q1 2023 Earnings Conference Call May 4, 2023 12:00 PM ET Company Participants Phil Gresh - Vice President, Investor Relations Ryan Lance - Chairman and CEO William Bullock - Executive Vice President and Chief Financial Officer Andy O'Brien - Senior Vice President of Global Operations Dominic Macklon - Executive Vice President of Strategy, Sustainability and Technology Nicholas Olds - Executive President of Lower 48 Tim Leach - Advisor to the CEO Conference Call Participants Stephen Richardson - Evercore ISI Neil Mehta - Goldman Sachs Roger Read - Wells Fargo Kalei Akamine - Bank of America Sam Margolin - Wolfe Research John Royall - JPMorgan Ryan Todd - Piper Sandler Devin McDermott - Morgan Stanley Josh Silverstein - UBS Paul Cheng - Scotiabank Scott Hanold - RBC Capital Markets Alastair Syme - Citigroup Raphael DuBois - Societe Generale Neal Dingmann - Truist Securities Leo Mariani - ROTH MKM Partners Operator Welcome to the First Quarter 2023 ConocoPhillips Earnings Conference Call. My name is Michelle, and I will be your operator for today's call.

ConocoPhillips (COP) Q1 2023 Earnings Call Transcript

Higher oil equivalent production aids ConocoPhillips' (COP) Q1 earnings.

ConocoPhillips (COP) Q1 Earnings Beat Estimates on Production

ConocoPhillips (COP) came out with quarterly earnings of $2.38 per share, beating the Zacks Consensus Estimate of $2.02 per share. This compares to earnings of $3.27 per share a year ago.

ConocoPhillips (COP) Q1 Earnings and Revenues Surpass Estimates

ConocoPhillips COP, -2.59% said Thursday it had net income of $2.9 billion, or $2.38 per share, for the first quarter, down from $5.8 billion, or $4.39 a share, in the year-earlier period. The FactSet consensus was for EPS of $2.06.

ConocoPhillips tops profit estimates for first quarter

HOUSTON--(BUSINESS WIRE)--ConocoPhillips (NYSE: COP) today reported first-quarter 2023 earnings and adjusted earnings of $2.9 billion, or $2.38 per share, compared with first-quarter 2022 earnings of $5.8 billion, or $4.39 per share, and first-quarter 2022 adjusted earnings of $4.3 billion, or $3.27 per share. "Our first quarter results are a clear demonstration of the durable, returns-focused value proposition that we laid out at our recent analyst and investor meeting," said Ryan Lance, chair.

ConocoPhillips Reports First-Quarter 2023 Results; Raises Full-Year Production Guidance Midpoint and Declares Quarterly Dividend and Variable Return of Cash Distribution

News for ConocoPhillips Stock (COP)