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ConocoPhillips COP, a leading upstream energy firm in terms of production and reserves, is well-positioned to capitalize on handsome crude prices. Currently, the firm carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Factors Working in Favor of COP
West Texas Intermediate crude price, currently hovering around the $60-per-barrel mark, is still favorable for upstream activities, as the breakeven oil price is significantly lower for existing wells in the shale plays.
COP secured a solid production outlook thanks to its decades of drilling inventories across its low-cost and diversified upstream asset base. The resource base represents the company’s strong footprint in prolific acres in the United States, comprising Eagle Ford shale, the Permian Basin and Bakken shale. COP boasted that its drilling and completion activities are becoming more efficient in all key U.S. basins.
Compared with composite stocks belonging to the industry, the leading upstream energy company has considerably lower exposure to debt capital. This reflects that COP is well-positioned to rely on its strong balance sheet to withstand any adverse business scenario.
Also, ConocoPhillips is well-known for its disciplined capital management. The exploration and production major lowered its planned capital expenditure guidance for 2025 from $12.9 billion to a band of $12.3 to $12.6 billion, while keeping its full-year production guidance intact.
Risks to the COP’s Business
However, after completing its current large-scale developments – namely the Willow project in Alaska and several LNG (liquefied natural gas) projects – ConocoPhillips is currently lacking additional major long-cycle projects in its pipeline. This is, in turn, limiting the near-term production outlook.
Moreover, as an upstream energy player, the company’s overall operations are exposed to oil and natural gas price volatility. Other exploration and production players that are also exposed to commodity price volatility are EOG Resources EOG, Diamondback Energy, Inc. FANG and Matador Resources Company MTDR.
EOG Resources
In the United States, EOG Resources is one of the foremost explorers and producers of oil and gas. It has crude reserves across the United States and Trinidad.
Diamondback Energy
Diamondback Energy, a leading pure-play Permian operator, reported ongoing enhancements in the average productivity per well in the Midland Basin. Thus, the exploration and production company will likely continue witnessing increased production volumes.