Positive Impact for ConocoPhillips from Burlington Acquisition (COP, BR)

The newest mega cap energy company, buy-recommended ConocoPhillips (COP) offers 63% appreciation potential to estimated net present value of $95 a share, revised from $100. Estimated present value presumes a long-term oil price of $50 a barrel compared to the current quote for delivery over the next six years of $60. Because COP trades at a low McDep Ratio of 0.70, the stock price corresponds to a long-term oil price of perhaps just $35 a barrel.

The revision in NPV reflects the impact of the acquisition of buy-recommended Burlington Resources (BR) that we believe will prove to be a successful deal because BR has valuable longlife natural gas resources. Despite those solid value characteristics, COP stock recently dipped below its 200-day average indicating that gains may be postponed for a few months. Though we respect the momentum warning, we believe that global growth and energy growth go hand in hand and that producers of natural gas, crude oil and refined products will prosper.

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Original Publication: 12/29/05
Kurt Wulff's McDep Associates offers realtime, independent research services for investors in the energy and utilities sectors. For more information, go to www.mcdep.com or email Mr. Wulff at [e-mail].