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Shares of ConocoPhillips COP slipped 10.23% in the last trading session to close at $95.25 per share. The stock price is not far away from the 52-week low of $86.81 per share, and yesterday’s selling pressure was reflected in the spike in share volumes traded. The volume of shares traded in the last market session was 13,869,000, significantly higher than the past several trading days.
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Does it mean that investors should join the crowd to sell the stock? Before reaching an investment conclusion, a thorough analysis of the upstream energy major is highly warranted.
Marathon Oil Acquisition Strengthens COP’s Upstream Presence
The acquisition of Marathon Oil late last year has strengthened ConocoPhillips’ upstream presence in the Lower 48, comprising prolific shale plays like the Delaware Basin, Eagle Ford and Midland Basin. With the acquisition, COP has been able to enhance its scale, production capacity and operational efficiencies since the resources of Marathon Oil closely complement the existing assets of the upstream giant.
EOG Resources Inc. EOG is another exploration and production company that has a strong footprint in the Delaware Basin and Eagle Ford shale play. In 2024, most of EOG’s upstream operations were conducted in both the shale plays. Chevron Corporation CVX is also an energy major with a strong presence in the Permian – the most prolific play in the United States – of which Delaware is a sub-basin. In the December quarter of 2024, the Permian basin contributed significantly to CVX’s total production volume.
COP’s Impressive Reserve Replacement & Capital Efficiency
Last year, ConocoPhillips successfully replaced an impressive 244% of the produced oil and natural gas. The replacements primarily came from discoveries, acquiring Marathon Oil and the drilling of new wells. Interestingly, COP’s organic reserve replacement was a remarkable 123%, meaning that by excluding the impact of the Marathon Oil acquisition, the company was able to replace reserves just from their discoveries and drilling operations.
In this context, EOG Resources’ name is worth mentioning. EOG’s 201% reserve replacement (excluding price changes) suggests that it was able to replace twice as much of its produced oil and natural gas in 2024. The story, however, was disappointing for Chevron. CVX highlighted that its 2024 proved reserves declined 11% year over year.
Now, let's focus on ConocoPhillips’ capital efficiency, as reflected in the fact that the company only allocates capital projects in key regions like Permian, Eagle Ford and Bakken that command short payback periods and high margins.