Group 1: Company Performance - ConocoPhillips (COP) has declined 5.4% over the past year, underperforming the industry composite stocks which gained 18.3% [1] - The company's downward trend may reflect analysts' expectations of declining crude oil prices in 2025 and 2026 [1] Group 2: Recent Acquisitions - ConocoPhillips completed the acquisition of Marathon Oil, broadening its Lower 48 portfolio and expanding its presence in low-cost U.S. basins, adding over 2 billion barrels of resources [5] - The company anticipates achieving annual savings exceeding $1 billion from the integration of operations within the next 12 months [6] Group 3: Financial Position - ConocoPhillips maintains a total debt-to-capitalization ratio of almost 27%, lower than the industry average of 31.1%, indicating a stronger balance sheet compared to peers [8] - The robust financial position will help the company navigate periods of low crude prices [8] Group 4: Market Outlook - The U.S. Energy Information Administration projects that global oil production will exceed demand, likely putting downward pressure on oil prices and affecting revenues for oil producers like ConocoPhillips [10] - As a predominantly upstream-focused company, ConocoPhillips is more vulnerable to oil price volatility compared to diversified energy giants [11] Group 5: Valuation - ConocoPhillips' shares are considered somewhat expensive on a relative basis, with a trailing 12-month Enterprise Value/Earnings before Interest Tax Depreciation and Amortization of 5.11X, which is a premium to the broader energy sector average of 4.41X [12]

Core Viewpoint - The oil market is expected to face geopolitical risks in 2024, particularly related to Russia and Iran, which may lead to increased crude prices and potential rallies in oil stocks [1] Group 1: Oil Market Overview - Last year saw healthy demand and tight OPEC supplies, stabilizing oil prices [1] - Geopolitical risks in 2024 could disrupt this stability, impacting crude prices [1] Group 2: Top Oil Stocks - Investors are encouraged to consider Chevron, ConocoPhillips, and Occidental Petroleum as top oil stock picks for the year [2] Group 3: Chevron Analysis - Chevron's integrated business model provides diversification across upstream, midstream, and downstream operations, mitigating volatility [4] - The company maintains a strong balance sheet with a debt-to-equity ratio of 0.17, allowing it to manage downturns effectively [5] - Chevron has a 37-year history of annual dividend increases, currently offering a 4% dividend yield, appealing to conservative investors [6] Group 4: ConocoPhillips Analysis - ConocoPhillips has a resource base of 20 billion barrels of oil equivalent (BOE) with an average supply cost of $32 per barrel, enabling strong cash flow generation [7] - The company generated $14.9 billion in cash flow from operations in the first nine months of last year, with an average selling price of $55.77 per BOE [8] - Following the $22.5 billion acquisition of Marathon Oil, ConocoPhillips expects enhanced cash flow and significant cost synergies, leading to a 34% dividend increase and a rise in share repurchases from $5 billion to $7 billion [10][11] Group 5: Occidental Petroleum Analysis - Occidental Petroleum's stock has faced pressure due to lower oil prices and increased debt from a $12 billion acquisition of CrownRock [12][13] - The company has made significant progress in debt reduction, repaying $4 billion shortly after the acquisition [14] - Despite current challenges, Occidental is expected to generate cash flows to support further debt reduction and potentially higher dividends in 2025 [15]

Oil Price and Market Context - WTI crude oil price has fluctuated, reaching over $80 per barrel multiple times but currently trading in the mid-$70s [1] - The price of crude oil significantly impacts oil stocks, including ConocoPhillips [1] ConocoPhillips Financial Performance - ConocoPhillips averaged 1.9 million BOE per day in Q3 last year, selling oil at $76.77 per barrel and total output at $54.18 per BOE [2] - Generated $4.7 billion in cash from operations in Q3, used for investments, dividends ($900 million), share repurchases ($1.2 billion), and maintaining a strong balance sheet ($7.1 billion in cash and short-term investments) [2] - Through the first nine months of last year, the company generated $14.9 billion in cash from operations, covering capital expenditures ($8.8 billion), share repurchases ($3.5 billion), and dividends ($2.7 billion) [3] - Repaid $500 million of debt at maturity [3] Low-Cost Supply Advantage - ConocoPhillips has 20 billion barrels of resources with a cost of supply of $40 per barrel or lower, averaging $32 per barrel [4] - The company can generate significant cash flow even with crude prices in the $70s [4] Marathon Oil Acquisition Impact - ConocoPhillips closed a $22.5 billion acquisition of Marathon Oil, adding over 2 billion barrels of resources with an average cost of supply below $30 per barrel [5] - The acquisition is immediately accretive to cash flow from operations and free cash flow [6] - Expected to capture over $1 billion in cost and capital synergies within the first year, double the initial estimate of $500 million [6] Future Cash Return to Investors - ConocoPhillips increased its dividend by 34% and plans to deliver dividend growth in the top 25% of S&P 500 companies [7] - Plans to ramp up share repurchases from over $5 billion annually to more than $7 billion per year [7] Investment Outlook - ConocoPhillips remains a buy at sub-$80 oil due to its low-cost oil production and the added benefits from the Marathon Oil acquisition [8] - The company is well-positioned to generate significant cash flow even at lower oil prices [8]

Group 1: ConocoPhillips and Kebabangan Gas Field - ConocoPhillips has taken full operatorship of the Kebabangan gas field in East Malaysia, previously operated jointly with Petronas and Shell [1] - The Kebabangan gas field has an export capacity of up to 750 million standard cubic feet per day and is estimated to hold nearly 2.2 trillion cubic feet of gas [2] - New commercial agreements have been secured to ensure the gas field's developments remain economically viable until 2050, supporting regional energy requirements in Sabah [2] Group 2: Industry Comparisons and Rankings - ConocoPhillips currently holds a Zacks Rank 3 (Hold), indicating a neutral outlook [3] - Other energy sector stocks with better rankings include Sunoco LP and Equinor ASA, both with Zacks Rank 1 (Strong Buy), and Cheniere Energy, which has a Zacks Rank 2 (Buy) [3] Group 3: Competitor Insights - Sunoco LP is a major distributor of motor fuel in the U.S., providing consistent returns to unitholders with a distribution yield greater than the industry average [4] - Equinor ASA is a leading integrated energy company and the second-largest natural gas supplier in Europe, focusing on renewable energy for long-term growth [5] - Cheniere Energy is expanding its LNG production capacity with the Corpus Christi Stage 3 Liquefaction Project, enhancing its position in the global LNG market [6]

Company Performance - ConocoPhillips (COP) closed at $104.28, reflecting a -1.48% change from the previous day, underperforming the S&P 500 which gained 0.88% [1] - The stock has increased by 9.83% over the past month, while the Oils-Energy sector experienced a loss of 0.38% and the S&P 500 gained 1.17% [1] Upcoming Earnings Report - ConocoPhillips is set to release its earnings report on February 6, 2025, with analysts expecting earnings of $1.86 per share, indicating a year-over-year decline of 22.5% [2] - Revenue is anticipated to be $14.65 billion, reflecting a 4.27% decrease compared to the same quarter last year [2] Analyst Estimates - Recent changes to analyst estimates for ConocoPhillips suggest a favorable outlook on the company's business health and profitability [3] - The Zacks Consensus EPS estimate has decreased by 4.33% in the past month, and ConocoPhillips currently holds a Zacks Rank of 3 (Hold) [5] Valuation Metrics - ConocoPhillips has a Forward P/E ratio of 13.84, which is lower than the industry average Forward P/E of 16.57 [6] - The company has a PEG ratio of 0.88, significantly below the average PEG ratio of 3.24 for the Oil and Gas - Integrated - United States industry [7] Industry Context - The Oil and Gas - Integrated - United States industry is part of the Oils-Energy sector, holding a Zacks Industry Rank of 26, placing it in the top 11% of over 250 industries [8] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [8]

Company History - ConocoPhillips has evolved into one of the largest oil and gas producers globally, with its public history beginning in 1998 when it separated from DuPont in a historic IPO valued at nearly $4.4 billion [1] - The merger of Conoco and Phillips Petroleum in 2001 created ConocoPhillips, which became the sixth largest oil company at that time [2] Stock Performance - The company's share price has increased significantly since its IPO, leading to a 2-for-1 stock split in June 2005, meaning investors who bought one share at the IPO would own two shares post-split [2] - The only stock split in ConocoPhillips' history occurred in 2005, but a stock spinoff in May 2012 resulted in shareholders receiving one share of Phillips 66 for every two shares of ConocoPhillips owned [3] Investment Growth - An initial investment of one share at the IPO would now be worth over $325, comprising two shares of ConocoPhillips valued at $105 each and one share of Phillips 66 valued at $117 [4] - Investors have also benefited from dividend payments, currently amounting to $10.52 per share annually from the initial investment [4]

Group 1: Company Performance - ConocoPhillips (COP) stock closed at $105.48, reflecting a +0.57% change from the previous trading day, trailing the S&P 500's gain of 1.83% [1] - The stock has increased by 6.74% over the past month, outperforming the Oils-Energy sector's loss of 7.35% and the S&P 500's loss of 3.31% [1] Group 2: Upcoming Earnings - ConocoPhillips is set to release its earnings report on February 6, 2025, with an expected EPS of $1.91, indicating a 20.42% decline from the same quarter last year [2] - The consensus estimate for revenue is $14.65 billion, down 4.27% from the prior-year quarter [2] Group 3: Analyst Estimates and Rankings - Recent changes to analyst estimates for ConocoPhillips suggest a shifting business landscape, with positive revisions indicating optimism about the company's outlook [3] - The Zacks Rank system, which incorporates estimate changes, currently ranks ConocoPhillips at 3 (Hold), with a Zacks Consensus EPS estimate moving 6.08% lower over the past month [5] Group 4: Valuation Metrics - ConocoPhillips has a Forward P/E ratio of 13.54, which is below the industry average of 15.97 [5] - The company boasts a PEG ratio of 0.86, significantly lower than the average PEG ratio of 5.18 for the Oil and Gas - Integrated - United States industry [6] Group 5: Industry Context - The Oil and Gas - Integrated - United States industry holds a Zacks Industry Rank of 144, placing it in the bottom 43% of over 250 industries [7] - Research indicates that the top 50% rated industries outperform the bottom half by a factor of 2 to 1 [7]

Market Overview - The S&P 500 is near a record high with expensive valuations, but energy stocks offer inexpensive valuations and high yields, making them attractive for value and passive-income investors [1] - ConocoPhillips, Kinder Morgan, and Phillips 66 have compelling valuations and yields over 3%, with a $1,000 investment in each expected to generate about $112 in passive income by 2025 [2] ConocoPhillips (COP) - ConocoPhillips has a highly efficient production portfolio, allowing it to break even at low oil and gas prices, with a free cash flow (FCF) breakeven in the low $40s per barrel of oil equivalent (boe) including dividends, and low $30s without dividends [3] - Despite mediocre oil prices in 2023, ConocoPhillips continued to generate strong earnings and FCF, with a P/E ratio of 12.1 and a price-to-FCF ratio of 12.9, making it a great value for investors [4] - ConocoPhillips is the largest U.S.-based independent exploration and production company by market cap, with production significantly increased due to organic investments and acquisitions of Concho Resources and Marathon Oil [12] - The company has a solid yield of 3.1% and expects its dividend growth rate to be in the top 25% of S&P 500 companies [13] Kinder Morgan (KMI) - Kinder Morgan's valuation is attractive despite concerns about the role of oil and gas in a cleaner energy future, with a P/E ratio of 24.4, a forward P/E of 22, and a price-to-FCF ratio of 15.7 [7] - The company is expected to benefit from rising industrial gas demand, onshore liquefied natural gas exports to Mexico, and demand from AI data centers, with several large projects coming online in the next few years [6] - Kinder Morgan operates in the midstream sector, connecting hydrocarbon production areas to processing, distribution, and consumption through pipelines, storage, and terminals [15] - The stock surged over 50% in 2024 due to years of underperformance, growing earnings, and a change in sentiment toward its long-term growth projects [14] Phillips 66 (PSX) - Phillips 66 operates in the downstream sector, refining crude oil into gasoline, petroleum products, and aviation fuel, with a focus on operational efficiency and cost management [16] - Despite a downturn in the refining industry, Phillips 66 remains profitable with a dividend of $4.60 per share and trailing-12-month earnings of $7.83 per share, with consensus estimates for $9.33 earnings per share in 2025 [10] - The company has a P/E ratio of 14.8, a forward P/E of 12.4, and a price-to-FCF of 16.9, with a 4% yield, making its dividend affordable [10] - A $1,000 investment in Phillips 66 is expected to generate $40 in passive income in 2025 [11]

Industry Overview - Crude oil prices remained stable in 2023, with Brent oil closing at approximately $77 per barrel, down 3%, and WTI ending at around $71 per barrel, unchanged from the start of the year [1] - Analysts predict that crude prices will continue to hover in the $70s range in 2025, indicating that oil stocks will need additional catalysts beyond oil price increases to drive share price growth [2] ConocoPhillips - ConocoPhillips completed a significant acquisition of Marathon Oil for $22.5 billion, which included assuming $5.4 billion in debt, enhancing its resource portfolio with over 2 billion barrels at an average supply cost below $30 per barrel [3] - The company initially projected $500 million in cost and capital synergies from the acquisition but has since revised this estimate to over $1 billion within the first year, which is expected to significantly boost free cash flow [4] - ConocoPhillips has increased its dividend by 34% and plans to return a substantial portion of its growing cash flow to shareholders, aiming for dividend growth in the top 25% of S&P 500 companies [5] - The company has raised its share repurchase program from $5 billion to $7 billion annually, with plans to retire all equity issued for the Marathon Oil acquisition within two to three years [6] Chevron - Chevron is in the process of acquiring Hess for $60 billion, a deal that would enhance its production and free cash flow growth outlook into the 2030s, potentially doubling its free cash flow by 2027 under a $70 oil scenario [7] - There is an ongoing arbitration regarding a change of control clause related to a joint development agreement with Exxon and CNOOC in Guyana, which could impact the acquisition [8] - If Chevron successfully navigates the arbitration, the acquisition will significantly strengthen its long-term growth profile, adding valuable resources in Bakken, Gulf of Mexico, and Southeast Asia [9][10] - Even in the event of a loss in arbitration, Chevron expects to grow its free cash flow by over 10% annually through 2027, supported by high-return capital investments [11] - Chevron has a long-standing history of increasing dividends annually for over three decades and plans to continue share repurchases within a $10 billion to $20 billion target range [12] Conclusion - Both ConocoPhillips and Chevron are positioned for significant growth in 2025 due to their recent acquisitions, making them standout investment opportunities in the oil sector [13]

Energy stocks delivered an underwhelming performance in 2024. For example, the Energy Select Sector SPDR Fund -- which holds the energy stocks listed in the S&P 500 -- delivered a meager 2% return last year, significantly underperforming the broader market index's 23% return. Oil prices, which initially rallied but ended the year right about where they started, kept a lid on oil stocks last year.While oil stocks performed poorly last year, they could bounce back in 2025. Devon Energy (DVN -0.53%), ConocoPhi ...