A return to a higher price of oil is obviously a big catalyst for ConocoPhillips ' stock price this year. However, the company also has three other major opportunities it has the potential to capture over the next year -- each of which could push the stock price higher.
Opportunity No. 1: Capturing plunging oil-field service costs
When ConocoPhillips cut another $2 billion out of its 2015 capital budget, it noted that $500 million of that reduction is the result of anticipated cost deflation as oil-field service costs are expected to come down. That equates to roughly a 3.7% savings as a result of lower costs that typically follow plunging oil prices.
However, the company has the opportunity to capture a lot more than just 3.7% in cost savings. The last time crude oil prices crashed was during the financial crisis, and at that time, operating costs dropped by almost 20% for many producers . This time around, cost savings could be even more significant, as some drillers are refusing to drill another well until costs drop by 40% , which is why many oil-field service companies foresee painfuldrops in margins over the next few quarters. ConocoPhillips has a huge opportunity to capture additional costs savings, which could enable it to spend a lot less money this year than it's currently planning to spend, but still accomplish all of its goals.
ConocoPhillips really is venturing into uncharted waters in a lot of its exploration efforts, and these efforts could lead to the company discovering a future growth engine. For example, the company has already announced two newdiscoveries in Senegal, and appraisal drilling this year should help the company better understand the extent of these finds. A discovery of a big oil field could provide the company with a major growth driver over the next decade while also providing a near-term boost to the stock price.
Despite the weak oil market, 2015 could be a real pivotal year for ConocoPhillips. In the near term, the company has the potential to capture substantial cost savings from oil-field services, which would enable it to earn much better returns than it would otherwise. Meanwhile, the company also has the potential to lead what could very well be a big consolidation wave as oil companies bulk up to better handle future downturns. Finally, ConocoPhillips hasn't abandoned its oil exploration program, and a big new oil find could fuel future gains in its stock.
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The article 3 Big Opportunities That Could Cause ConocoPhillips' Stock to Rise originally appeared on Fool.com.
Matt DiLallo owns shares of ConocoPhillips. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
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