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

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 Q3 2023

Revenue

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

Hess

Marathon Oil

Favorable oil price is backing modestly higher production volumes in Bakken. Companies that are well-poised to gain are Hess (HES), Marathon Oil (MRO) and ConocoPhillips (COP).

Keep a Close Watch on These 3 Bakken Stocks: Here's Why

ConocoPhillips has a strategic 10-year plan focused on restrained investment, steady growth and returning cash to shareholders. The company is diversifying its energy assets intelligently. ConocoPhillips is surprisingly nimble given its conservative approach. The strategic plan drives coherent execution and opportunistic tactical moves.

ConocoPhillips: A Value-Rich Energy Operator

Chevron

McDonald's

Pioneer Natural Resources

Seagate Technology Holdings PLC

TipRanks analyst ranking service pinpoints Wall Street's best-performing stocks, including McDonald's and Chevron.

Top Wall Street analysts pick these dividend stocks for solid returns

On 8/15/23, ConocoPhillips will trade ex-dividend, for its quarterly dividend of $0.51, payable on 9/1/23.

Ex-Div Reminder For ConocoPhillips

ConocoPhillips (COP) is set to offer notes in order to raise money for its remaining 50% stake acquisition in Surmount plant.

ConocoPhillips (COP) to Sell Notes for Financing Surmount Buyout

ConocoPhillips will offer notes to raise funds for its acquisition of the remaining 50% stake in Surmont oil facility in Canada worth $3 billion, the U.S. oil gas producer said in a filing on Tuesday.

ConocoPhillips to offer notes to fund $3 bln Surmont oil facility buyout

Conocophillips (NYSE:COP ) Q2 2023 Earnings Conference Call August 3, 2023 12:00 PM ET Company Participants Philip Gresh - VP, IR Ryan Lance - Chairman & CEO William Bullock - EVP & CFO Dominic Macklon - EVP, Strategy, Sustainability & Technology Nicholas Olds - EVP, Lower 48 Andrew O'Brien - SVP, Global Operations Conference Call Participants Neil Mehta - Goldman Sachs Group Stephen Richardson - Evercore ISI Doug Leggate - Bank of America Merrill Lynch Devin McDermott - Morgan Stanley Sam Margolin - Wolfe Research Alastair Syme - Citigroup Francis Byrne - Jefferies John Royall - JPMorgan Chase & Co. Joshua Silverstein - UBS Roger Read - Wells Fargo Securities Ryan Todd - Piper Sandler & Co. Operator Welcome to the Second Quarter 2023 ConocoPhillips Earnings Conference Call. My name is Liz, and I will be your operator for today.

Conocophillips (COP) Q2 2023 Earnings Call Transcript

ConocoPhillips has signed 20-year deals to receive a collective 2.2 million tons of liquefied natural gas (LNG) a year from Mexico Pacific's Saguaro export facility, the U.S. oil and gas producer said on Thursday.

ConocoPhillips signs 20-year LNG supply deals with Mexico Pacific

Lower average realized oil equivalent prices hurt ConocoPhillips' (COP) earnings in Q2.

ConocoPhillips (COP) Lags on Q2 Earnings, Ups '23 Output View

While the top- and bottom-line numbers for ConocoPhillips (COP) give a sense of how the business performed in the quarter ended June 2023, it could be worth looking at how some of its key metrics compare to Wall Street estimates and year-ago values.

ConocoPhillips (COP) Reports Q2 Earnings: What Key Metrics Have to Say

Energy giant ConocoPhillips posted second-quarter profit and revenue that missed expectations, reflecting a pullback in oil prices from last year's highs and despite record production levels.

ConocoPhillips Misses Earnings Expectations Despite Record Production

ConocoPhillips (COP) came out with quarterly earnings of $1.84 per share, missing the Zacks Consensus Estimate of $1.94 per share. This compares to earnings of $3.91 per share a year ago.

ConocoPhillips (COP) Q2 Earnings and Revenues Lag Estimates

ConocoPhillips (NYSE:COP) stock traded down in Thursday's premarket deals as it confirmed a steep decline in financial metrics for the second quarter, reflecting softer crude oil pricing compared to last year's peaks. The Houston-headquartered oiler reported US$2.2 billion of earnings (adjusted EBITDA), US$1.84 per share, from US$5.1 billion and US$3.96 a year ago.

ConocoPhillips stock slips as lower crude price comparatives bite quarterly earnings

Shares of ConocoPhillips COP, -1.52% fell 1.4% in premarket trading Thursday, after the oil exploration and production company reported second-quarter profit and revenue that missed expectations as prices tumbled, while production reached record levels and the full-year outlook was raised. Net income fell to $2.23 billion, or $1.84 a share, from $5.15 billion, or $3.96 a share, in the year-ago period.

ConocoPhillips stock falls after profit, revenue miss expectations as realized prices tumbled 38%

U.S. shale producer ConocoPhillips reported a fall in second-quarter profit on Thursday, as oil and gas prices dropped from last year's peaks.

ConocoPhillips joins shale peers in reporting Q2 profit slump

HOUSTON--(BUSINESS WIRE)--ConocoPhillips (NYSE: COP) today reported second-quarter 2023 earnings and adjusted earnings of $2.2 billion, or $1.84 per share.

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

We expect ConocoPhillips stock to trade lower post Q2 with both revenue and earnings missing market expectations.

ConocoPhillips Q2 Earnings: What Are We Watching?

Cinemark Holdings

Starwood Property

If you're a big believer in Warren Buffett's slow-and-steady approach to the capital market, you're not going to find much value in these stocks to buy tomorrow. Frankly, this list centers almost exclusively on hubris; that is, the audacity to assume how the market will respond on any given day.

The Top 3 Stocks to Buy TOMORROW

Warner Bros Discovery Inc

Anheuser-Busch InBev

After U.S. markets closed on Monday, Diamondback Energy reported revenue that beat Wall Street estimates by 1.2% and fell more than 30% year over year.

Earnings Previews: AB-InBev, ConocoPhillips, Warner Bros Discovery

Although a softer oil price is likely to have hurt ConocoPhillips' (COP) Q2 earnings, rising production is expected to have nullified the negative partially.

ConocoPhillips (COP) to Post Q2 Earnings: What's in Store?

GoPro

Innovative Industrial Properties

Match Group

Sibanye Stillwater

NuScale Power Corp

Scorpio Tankers

For contrarians seeking significant upside for the second half of this year, the best sleeper stocks may represent an avenue to explore. According to Cambridge University, a sleeper stock is a publicly traded asset that's currently not performing well.

7 Millionaire-Maker Sleeper Stocks to Buy Before the Window Closes

Bloom Energy

Clearway Energy

Enphase Energy

EOG Resources

Halliburton

Northwest Natural Gas

The energy sector is going through a dramatic shift, which has roiled stocks throughout the industry. The global focus on reducing carbon emissions has catalyzed a general shift away from fossil fuels and toward cleaner energy generation.

The 7 Most Undervalued Energy Stocks to Buy Now: July 2023

Natural gas may materially boost stock price appreciation prospects. The market is not focusing upon some likely strong drawdowns of oil inventory. The company should be analyzed as a variable dividend entity.

ConocoPhillips: Focus On The Gas

ConocoPhillips tends to trade at a premium valuation given the strength of its management and low breakeven. The company's free cash flow should increase into the back half of the year as the company uses it for both repurchases and dividends. The company's production should continue growing, increasing returns into the back half of the decade, as the company emerges from the decade stronger.

ConocoPhillips Is Interesting In An Expensive Market

Realty Income Corp

Philip Morris

Prudential Financial

Simon Property Group

Truist Financial

U.S. Bancorp

AT&T's plump dividend used to be like money in the bank. But now investors seeking income and safety might look elsewhere.

News for ConocoPhillips Stock (COP)