Thursday, December 11, 2014

ConocoPhillips (COP) 2014 Review

Conoco Phillips one of the world’s largest exploration and production (E&P) companies. Profits and dividends have grown approximately 9-13% annually over the last 10 years.  In the same time frame, COP has earned between a 10-20% return on equity. The company should continue to make progress as a result of:

(1) its exposure to promising international regions,

(2) domestically, its capital expenditures will focus the development of Eagle Ford Shale, Permian, Bakken and Barnett fields,

(3) splitting the exploration and production from the refining and marketing should unlock value for shareholders,

(4) utilize its strong cash flow to pay down debt, raise dividends and buy back stock.


(1) short term, its production will be impacted by the shut down of its Libyan production,

(2) price fluctuations of oil and natural gas,

(3) its international operations are subject to political risks.

Conoco is rated A++ by Value Line, has a 28% debt to equity ratio and its stock yields approximately 4.6%.

     Statistical Summary

                 Stock      Dividend         Payout      # Increases  
                 Yield      Growth Rate     Ratio        Since 2004

COP          4.6%          10%                41%              9
Ind Ave      1.0             8                    12                NA 

                Debt/                      EPS Down       Net        Value Line
               Equity         ROE      Since 2004     Margin       Rating

COP         28%            18%            3               13%           A++
Ind Ave     44               14             NA             18             NA


            Note: COP stock made great progress off its March 2009 low, quickly surpassing the downtrend off its June 2008 high (straight red line) and the November 2008 trading high (green line).  Long term the stock is in an uptrend (blue lines).  Intermediate term, it is in a trading range (purple lines).  The wiggly red line is the 50 day moving average.  The Dividend Growth and High Yield Portfolios own 50% positions in COP, having Sold Half in late 2013.  The upper boundary of its Buy Value Range is $32; the lower boundary of its Sell Half Range is $71.



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