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ConocoPhillips: Slightly Expensive At $60.60; Buy On Weakness

Apr. 10, 2018 10:01 AM ETConocoPhillips (COP)21 Comments
Dividend Income profile picture
Dividend Income


  • ConocoPhillips is the largest independent oil producer in the world, and enjoys the advantage of holding the highest quality oil producing assets in the industry.
  • However, absolute oil production is decreasing, and management has no interest in expansion despite oil rising higher.
  • The company's current valuation is slightly expensive compared to its competitors.
  • The author recommends a hold (and watch) for COP at $60.60. Look to buy the company at $55.00 per share.


ConocoPhillips (NYSE:COP) is the largest independent oil producer in the world, and its shares have performed relatively well as of late. The company enjoys incredible competitive advantages in holding high quality assets, but its production growth prospect is lacking. After considering the company's strategy and a variety of factors, the author recommends a hold (and watch) for the share at $60.60, and a buy for the shares at $55.00. These opportunities should come frequently.

Here are some more key facts about the company:

Share Price: $60.62 per share

Market Cap: $69.40 billion

Dividend Yield: 2.0% and projected to grow

Image result for conocophillips

ConocoPhillips' Competitive Advantage – Extraordinary Quality Assets

ConocoPhillips has an incredible competitive advantage in holding some of the highest quality oil producing assets in the industry. Without going too much into details, here is a short summary of its global oil producing assets the company holds:

Type Reserve Supply Cost Major Locations
Unconventional Plays ~8BBOE $35/BBL BC, Delaware, Eagle Ford, Bakken
Conventionals ~4BBOE $30/BBL Alaska, UK, Indonesia, Malaysia
LNG/Oil Sands ~3BBOE $35/BBL Alberta, Qatar, Australia

Source: Page 22-24, COP's investor report.

To summarize COP’s assets, they have an average breakeven cost of under $40 WTI, and can continue production for at least 20 years with minimal capital spending, according to CEO Ryan Lance. The company's assets have the lowest breakeven cost in the industry, and can sustain current production rates for decades.

Source: COP's February Investor Update

The author views owning oil producing assets much like owning land in monopoly, where holding and developing the best areas will yield incredible returns over time. All in all, these high quality assets are an extraordinary advantage for COP and its shareholders, which should guarantee long term performance for the company and support its share prices and dividend payments.

This article was written by

Dividend Income profile picture
The utility companies discussed can be found in the following ETF (expense ratio):XLE - iShares Energy ETF (0.13% Expense Ratio)XLRE - iShares Real Estate ETF (0.13% Expense Ratio)

Analyst’s Disclosure: I am/we are long COP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

My recommendations are based on my personal opinions after thoroughly researching the company. If you like my analysis and wishes to enter into a position, please do additional research including carefully considering the opinions in the comments section. Also, please properly size your positions conservatively. If you disagree with any part of the analysis or have anything to add, please do explain your valued opinion in the comment section below. Thank you so much in advance.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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