On May 21, we issued an updated research report on
). The company's recent 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.
However, this was partially offset by lower oil realizations.
ConocoPhillips is progressing on other North American shale plays,
including several emerging areas.
This Zacks Rank #3 (Hold) stock has delivered positive earnings
surprises in all the last 4 quarters with an average beat of 10.5%.
The company's first-quarter earnings of $1.81 per share, surpassed
the Zacks Consensus Estimate of $1.57 per share and increased 27.5%
from the year-earlier profit of $1.42. The year-over-year growth
was mainly attributable to production from new development programs
as well as upstream ventures in key projects.
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, ConocoPhillips
expects to replace reserves and sustain production growth over the
long term. ConocoPhillips' liquids-rich exploration initiatives are
gaining momentum through the Eagle Ford, Bakken and North Barnett
ConocoPhillips' initiatives toward liquids-rich plays are
gaining momentum through the Eagle Ford, Bakken and Permian plays.
The company is also poised to benefit from a pipeline of projects
in the Gulf of Mexico (GoM), Malaysia, the liquefied natural gas
(LNG) project in Australia, the U.K., Norway, and the Canadian oil
sands, apart from the US Lower 48 liquids-rich plays. Oil sands
expansion projects are also on track.
Since Apr 2012, when the company spun off its refining
), it has delivered total shareholder returns of 22%. With this,
ConocoPhillips has shifted its total focus to upstream operations
and thus oil and gas prices play a major role in determining its
performance. The company plans to grow production by maintaining
its focus on growth in reserves, through global drilling programs
in legacy assets, unconventional assets and major projects.
However, with the completion of the spin-off, the company has
shifted its total focus to upstream operations and thus oil and gas
prices play a major role in determining its performance. In
addition, natural decline and downtime in the fields are also
expected to result in weak production. Moreover, the company
remains vulnerable to unstable movements in crude oil and
ConocoPhillips' margin growth drive would also be helped by its
shift of production mix to higher-value products. The company
expects to spend $16 billion on average annually and will allocate
95% of its capital to investments that deliver above-average
margins. The recent activity aims offshore prospects in Australia
Angola and Senegal, conventional exploration in Norway and
Indonesia, and unconventional exploration in North America, Poland
Overall, a restrained risk-reward balance in the near term
has prompted negative estimate revisions for 2014 and 2015 in the
last 30 days. As a result, the Zacks Consensus Estimate for 2014
and 2015 are pegged at $6.25 and $6.05 per share, down 7.8% and
Key Picks in the Sector
Currently, we prefer to remain at the periphery regarding
ConocoPhillips. However, some better-ranked stocks in the oil and
gas sector such as
Emerge Energy Services LP
Athlon Energy Inc.
), sporting a Zacks Rank #1 (Strong Buy), are worth reckoning.
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