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Should You Buy ConocoPhillips Stock With Oil Prices Below $80 a Barrel?
COPConocoPhillips(COP) The Motley Fool·2025-01-25 10:16

Oil Price and Market Context - WTI crude oil price has fluctuated, reaching over 80perbarrelmultipletimesbutcurrentlytradinginthemid−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 76.77perbarrelandtotaloutputat76.77 per barrel and total output at 54.18 per BOE [2] - Generated 4.7billionincashfromoperationsinQ3,usedforinvestments,dividends(4.7 billion in cash from operations in Q3, used for investments, dividends (900 million), share repurchases (1.2billion),andmaintainingastrongbalancesheet(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 14.9billionincashfromoperations,coveringcapitalexpenditures(14.9 billion in cash from operations, covering capital expenditures (8.8 billion), share repurchases (3.5billion),anddividends(3.5 billion), and dividends (2.7 billion) [3] - Repaid 500millionofdebtatmaturity[3]Low−CostSupplyAdvantage−ConocoPhillipshas20billionbarrelsofresourceswithacostofsupplyof500 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 32perbarrel[4]−Thecompanycangeneratesignificantcashflowevenwithcrudepricesinthe32 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 22.5billionacquisitionofMarathonOil,addingover2billionbarrelsofresourceswithanaveragecostofsupplybelow22.5 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 1billionincostandcapitalsynergieswithinthefirstyear,doubletheinitialestimateof1 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 5billionannuallytomorethan5 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]