1 Magnificent Oil Stock Down 18% to Buy and Hold Forever
ConocoPhillips: A Strong Investment Opportunity
ConocoPhillips (NYSE: COP) has taken a hit lately, with its shares dropping nearly 18% over the past year. This decline contrasts sharply with the S&P 500’s impressive 15% rise during the same period, primarily due to falling oil prices. Brent crude, the global benchmark, has seen a drop of over 15%, lingering around $60 per barrel. Despite this downturn, ConocoPhillips remains a formidable player in the oil sector, with strong growth catalysts that set the stage for future stability and profitability.
Built to Thrive: ConocoPhillips’ Strategic Advantages
The management team at ConocoPhillips is confident in their robust resource portfolio, boasting one of the highest quality in the energy industry. Following a series of strategic acquisitions, including the $22.5 billion purchase of Marathon Oil, the company offers a diverse array of oil and gas assets. With a cost of supply below $40 per barrel, ConocoPhillips is well-positioned to generate significant cash flow, projecting around $7 billion in free cash for this year alone. This cash flow can be reinvested in the company or returned to shareholders through dividends and buybacks.
The company also maintains a solid balance sheet, ending Q2 with approximately $5.7 billion in cash and short-term investments. This financial cushion allows for continued investment in growth and shareholder returns, even amid fluctuating oil prices. ConocoPhillips is further optimizing its asset portfolio by selling non-core assets, including a recent $1.3 billion agreement for its Anadarko Basin assets.
Upcoming Growth Catalysts
ConocoPhillips anticipates a multi-year growth cycle, fueled by the successful integration of the Marathon Oil acquisition, which has exceeded initial expectations. Originally targeting $500 million in cost savings, the company is now on track to achieve $1 billion in synergies by the end of the year, which will significantly enhance its free cash flow.
Additionally, the company is investing in expanding its global LNG portfolio. Its partnership with Sempra Energy on the Port Arthur LNG project and expansion efforts in Qatar’s North Field are expected to yield another $2 billion in annual free cash flow. Moreover, the $7 billion investment in the Willow hub in Alaska is set to tap into a substantial low-cost oil resource, potentially generating over $4 billion in annual cash flow starting in 2029.
The Bottom Line: A Stock for Long-Term Growth
Given the promising catalysts in place, ConocoPhillips could see its free cash flow grow significantly by 2029, potentially reaching over $7 billion. With such an outlook, the company is well-equipped to continue increasing its dividend—currently offering a yield of over 3.5%—and buying back shares, making it a magnificent oil stock worth considering.
For investors looking for long-term income and growth potential, now may be the ideal time to consider adding ConocoPhillips to their portfolio.