On Feb 22 we reaffirmed our long-term Neutral recommendation
) − a major U.S. exploration and production company. The
reiteration was backed by the company's better-than-expected
fourth quarter 2012 results, initiatives toward liquids-rich
plays and pipeline of projects. These were, however, partially
dampened by a weak production level.
CONOCOPHILLIPS (COP): Free Stock Analysis
POSTROCK ENERGY (PSTR): Free Stock Analysis
RANGE RESOURCES (RRC): Free Stock Analysis
TOTAL FINA SA (TOT): Free Stock Analysis
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Why the Reiteration?
ConocoPhillips reported its fourth quarter financial results on
Jan 30. Adjusted earnings came in at $1.43 per share, surpassing
the Zacks Consensus Estimate of $1.41. Robust production of crude
oil from high-margin areas like the Eagle Ford and Bakken
supported the outperformance.
Moreover, ConocoPhillips' initiatives toward liquids-rich plays
are gaining momentum through the Eagle Ford, Bakken and North
Barnett shale plays. During the fourth quarter, Eagle Ford and
Bakken shale plays delivered significant results contributing 113
thousand BOE per day (MBOE/d) to the total production. This
represents a 71% improvement from the year-ago level.
Eagle Ford production reached a key milestone of 100 MBOE/d
during the fourth quarter and Bakken averaged 24 MBOE/d. In
Canada and the lower 48 U.S. states, the percentage of liquids in
production increased to 48% from 43% in the year-ago quarter.
The company remains on-track with major growth projects that are
expected to offset production declines and diversify its
portfolio. These projects include the Eagle Ford and Bakken
plays, Canadian Oil Sands, the North Sea projects, APLNG and the
Malaysian deepwater projects.
ConocoPhillips has completed around $12 billion worth asset sale
of its total divestiture program. Although the generated proceeds
are likely to offset the financing gap for 2013 to a great
extent, it could adversely affect the production level.
The company managed to increase volumes marginally in the fourth
quarter of 2012, however, the level dropped more than 2% in the
full year. The decline was mainly due to the impact of
divestitures. ConocoPhillips does not also expect meaningful
production growth during 2013 based on asset dispositions and
downtime in the North Sea.
We see no earnings momentum for the stock over the last 30 days
for the first quarter of 2013. The Zacks Consensus Estimate for
the first quarter is currently pegged at $1.42 per share,
reflecting a year-over-year decrease of 29.6%. For full-year
2013, the Zacks Consensus Estimate is $5.43 per share, reflecting
a year-over-year increase of 1.2%. Over the last 30 days, Zacks
Consensus Estimate for 2013 has gone down by 3.5% from $5.62 per
Other Stocks to Consider
Currently, the shares of ConocoPhillips retain a Zacks Rank #3
However, there are certain other pipeline companies like
Range Resources Corporation
PostRock Energy Corporation
) that offer value and are worth buying now. Total and PostRock
sport a Zacks Rank #2 (Buy), while Range Resources carries a
Zacks Rank #1 (Strong Buy).