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

APA Corporation

DCP Midstream

EnLink Midstream

Enterprise Products Partners

Energy Transfer LP Unit

Kinetik Holdings

Permian Resources Corp

Targa Resources

Exxon Mobil

Public and private producers are parting ways in the Permian Basin. Led by Exxon Mobil, public companies have been steadily adding rigs in.

Midstream Caught In Middle Of Permian Producer Split

HOUSTON--(BUSINESS WIRE)--ConocoPhillips (NYSE: COP) will host a conference call webcast on Thursday, May 4, 2023, at 12:00 p.m. Eastern time.

ConocoPhillips to Hold First-Quarter Earnings Conference Call on Thursday, May 4

Hess

Occidental Petroleum

Cactus

From upstream activities to midstream, prospects for companies are rosy now, enhancing the outlook for the Zacks Oil & Gas US Integrated industry. COP, OXY, HES and WHD will make the most of the favorable business scenario.

4 Integrated US Stocks to Gain as Crude Price Remains Favorable

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

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

ConocoPhillips (COP) will enjoy specific equity and offtake rights to engage in future expansion projects at Port Arthur LNG.

ConocoPhillips (COP), Sempra Energy Finalize Port Arthur LNG JV

Eni SpA Sponsored ADR

Equinor

Pembina Pipeline

Petroleo Brasileiro

Apart from Equinor (EQNR) and Eni (E), ConocoPhillips (COP), Pembina Pipeline (PBA) and Petrobras (PBR) hogged attention during the week.

Discoveries by Equinor and Eni Lead Oil & Gas Stock Roundup

Freeport-McMoRan

The electrification of everything and the energy transition are driving demand for copper. ConocoPhillips plans to distribute $11 billion to shareholders in 2023 through buybacks and dividends.

3 Dividend Stocks for a Commodity Supercycle

Sempra Energy

Finalizes Joint Venture with ConocoPhillips Closes Non-Recourse Project Financing Announces Equity Participation by KKR Issues Final Notice to Proceed to Bechtel SAN DIEGO , March 20, 2023 /PRNewswire/ -- Sempra (NYSE: SRE) (BMV: SRE) today announced that its 70%-owned subsidiary, Sempra Infrastructure Partners, LP (Sempra Infrastructure), reached a positive final investment decision (FID) for the development, construction and operation of the Port Arthur LNG Phase 1 project in Jefferson County, Texas. Sempra Infrastructure closed its joint venture with an affiliate of ConocoPhillips (NYSE: COP), as well as announced an agreement to sell an indirect, non-controlling interest in the project to an infrastructure fund managed by KKR.

Sempra Launches Port Arthur LNG Project

AllianceBernstein Hld

Arbor Realty Trust

Ares Capital

Alexandria Real Estate Equities

BHP Billiton

British American Tobacco

CVS Health

Fifth Third Bancorp

Hasbro

Navient

NexPoint Residential Trust

PacWest Bancorp

Pfizer

Philip Morris

Vici Properties

March-April, 2022, UBS, Kiplinger, and Barrons analysts and reporters combined to list five sets of stocks sorted as: “Inflation Busters.” Those five articles revealed 48 equities, with 43 paying dividends.

13 Ideal Inflation-Busting March Dividend Dogs

Chevron

Shell PLC

Despite record profits, the oil and gas industry is still headed for a long-term decline, even if it sees more boom-and-bust cycles along the way.

This could be Big Oil's last surge

Oil and natural gas producer ConocoPhillips COP, +1.22% disclosed Friday that Chief Executive Ryan Lance‘s total 2022 compensation was $19.97 billion, down 16.4% from $23.89 million a year ago. His 2022 compensation included a 4.4% raise in his base salary to $1.69 million and a 32.0% drop in non-equity incentive plan compensation to $3.43 million.

ConocoPhillips CEO total pay dropped 16% in 2022 even as stock soared more than 60%

Ameresco

Array Technologies

Atkore International Group

Clearway Energy

Eaton

First Solar

Chart Industries

MasTec

SolarEdge Technologies

Till Bechtolsheimer is the co-founder, CEO and portfolio manager at Arosa Capital Management.

These Are the Top 10 Holdings of Till Bechtolsheimer

TotalEnergies SE

The best-performing sector last year was energy, and with good reason, given that benchmark pricing in the summer of 2022 hit levels not seen in years.

Buy These 7 Blue-Chip Oil Dividend Stocks Now While Banks Melt Down the Stock Market

Coterra Energy

Devon Energy

EOG Resources

MPLX

Ovintiv

The energy sector had a stellar 2022, but it has been largely sitting out the recent broader market rally.

The 5 Best- and Worst-Performing Energy Stocks in February 2023

Are these the best oil stocks to invest in right now?

Top Oil Stocks To Buy Today? 2 For Your List

Amazon

CyberArk Software

Microsoft

Valens Semiconductor Ltd

Wheaton Precious Metals

With a banking sector implosion compounding the Federal Reserve's possible decision to aggressively raise interest rates, investors looking for stocks to buy may want to align their acquisitive strategies with what the experts believe. In other words, a significant value may exist in targeting securities that enjoy strong buy consensus ratings among Wall Street analysts.

7 Stocks to Buy That Analysts Are Loving Now

HOUSTON--(BUSINESS WIRE)--ConocoPhillips (NYSE: COP) welcomes the Department of the Interior's Record of Decision (ROD) on the Willow project, adopting the three core pads detailed in the Bureau of Land Management (BLM) preferred Alternative E. ConocoPhillips Alaska completed extensive preparations with key contractors and expects to immediately initiate gravel road construction activities. The company continues to review the ROD and will advance internal approval processes towards a Final Investment Decision.

ConocoPhillips Welcomes Record of Decision on the Willow Project

In this article, I start by explaining why I believe that peak shale production growth in the US is an underestimated long-term issue, providing oil with a massive tailwind. Energy investors need to be picky as challenges persist. A focus on high-quality inventories and efficient operations is important.

The Shale Revolution Is Dead, Long Live EOG Resources And ConocoPhillips!

ConocoPhillips has enjoyed a 132% total shareholder return over the last five years. This is due to a wider trend of improving profitability in the energy industry.

ConocoPhillips Is Still Attractive Despite A 5-Year 132% TSR

Domino's Pizza

Gen Digital Inc

Moderna

Newmont Mining

V.F.

The S&P 500 lost 2.6% in February. However, on the plus side, the index has gained nearly 5% year-to-date through March 7.

February's 7 Worst-Performing S&P 500 Stocks to Buy on the Cheap

Airbnb

Align Technology

Centene

Coinbase

Charles River Laboratories

Corteva Inc

DuPont de Nemours

Dell Technologies

Disney

Dow Inc

Forward Air

Herbalife

The month of February had a couple of very interesting insider purchases. In this article, we discuss the 10 biggest insider purchases by value. In addition, we will take a look into 2 companies more in-depth, which we found particularly interesting this month.

Top Insider Picks For February 2023

News for ConocoPhillips Stock (COP)