We are downgrading our Outperform recommendation on ConocoPhillips
to Neutral following its second quarter results. The company's
performance was backed by a continued portfolio shift to liquids
and higher production from new development programs, as well as
upstream ventures in key projects. ConocoPhillips' initiatives
toward liquids-rich plays are gaining momentum through the Eagle
Ford, Bakken and Permian plays. With leading positions in both
natural gas and heavy crude oil in North America, as well as a
legacy position in the North Sea and growing exposure to lucrative
international regions, the company expects to deliver 3 5%
production growth in 2014. However, ConocoPhillips remains
vulnerable to unstable movements in crude oil and
, as well as the volatile macro backdrop.
Houston, Texas-based ConocoPhillips (COP) is a major global
exploration and production (E&P) company with operations and
activities in 30 countries that include the U.S., Canada,
UK/Norway, China, Australia, offshore Timor-Leste, Indonesia,
Libya, Nigeria, Algeria, Russia and Qatar.
As of the end of 2013, the company had estimated proved reserves
of 8.9 billion oil-equivalent barrels (BOE) as compared with 8.6
billion BOE at the end of 2012. The company added 1.1 billion BOE
of proved organic reserves in 2013, representing a reserve
replacement ratio of 179%. Assets disposition in 2013 reduced
reserves by 188 million BOE and total reserve replacement was
Earlier, in May 2012, ConocoPhillips completed the spin-off of
its refining/sales business into a separate, independent and
publicly traded company, Phillips 66. The move had resulted in the
creation of the largest refining company in the U.S. (with a
capacity of 2.4 million barrels per day) and the largest
exploration and production player based on oil and gas
The new downstream company, Phillips 66, is headquartered in
Houston, Texas. In addition to the refining, marketing and
transportation businesses, Phillips 66 also include most of the
Midstream and Chemicals segments, as well as power generation and
certain technology operations included in the Emerging Businesses
segment, creating an integrated downstream company.
ConocoPhillips (COP): Read the Full Research
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