November 16, 2008
Ticker: COP
About
ConocoPhillips operates as an integrated energy company worldwide. It operates in six segments:
Exploration and Production (E&P) - explores for, produces, and markets crude oil, natural gas, and natural gas liquids. It also mines deposits of oil sands in Canada to extract the bitumen and upgrade it into a synthetic crude oil
Midstream - gathers, processes, and markets natural gas; and fractionates and markets natural gas liquids in the United States and Trinidad
Refining and Marketing (R&M) - purchases, refines, markets, and transports crude oil and petroleum products, including gasoline, distillates, and aviation fuels primarily in the U.S., Europe, and Asia Pacific
LUKOIL Investment - consists of 20% interest in OAO LUKOIL, an international integrated oil and gas company
Chemicals - manufactures and markets petrochemicals and plastics.
Emerging Businesses - develops new technologies and businesses. It focuses on the power generation; development of carbon-to-liquids technology through coal and petroleum coke; and alternative energy and programs, energy conversion technologies, new petroleum-based products, and renewable fuels. It also offers E-Gas, a gasification technology that produces high-value synthetic gas
ConocoPhillips - In the News
COP was in the news recently as Warren Buffet's Berkshire disclosed that it owned 83.96 million shares in Houston-based Conoco, worth $6.15 billion, as of the end of September, equal to a 5.6 percent stake. That is up from 59.69 million shares as of June 30th and 17.51 million three months earlier.
Buffett had previously kept the June stake confidential. The SEC often lets Buffett, one of the world's richest people and perhaps its most revered investor, delay disclosure of his investing activity so others cannot copy him.
Conoco is Berkshire's fourth-largest U.S. stock investment as of Sept 30, after Wells Fargo (WFC), Coke (KO) and P&G (PG).
Now famous – hedge fund manager Mohnish Pabrai had this to say - "Energy companies are trading at massive discounts. Oil prices have come down, but many of these companies are extremely profitable even with oil at $60 a barrel. Buffett has invested before in PetroChina, so he understands the business."
While I would love for it to stay near the $60 a barrel mark – but if you ask me or James Beeland Rogers, Jr. it is extremely unlikely that it would stay that low – and very recent history has shown us that the oil companies revenues and profits go up many folds with higher oil prices.
Earnings
A quick look at the earnings -Earnings | Actual | Estimates | Surprise |
Q3 2008 | $3.32 | $3.06 | $0.26 |
Q2 2008 | $3.49 | $3.45 | $0.04 |
Q1 2008 | $2.52 | $2.42 | $0.10 |
Very healthy earnings – but then that should not come as a surprise – the media is obsessed with talking about how oil companies have been raking in mega bucks for some time now..
A look at the Vital Stats
COP has a very healthy cash flow position – with the CPS at $4.92 for Q3 2008 – better than it was for the corresponding period in 2007. Revenues have hardly been an issue with large oil companies - COP reported 3rd quarter 2008 Revenue of USD 70.0B. COP's debt to equity ratio indicates that it has been less aggressive with using debt to finance growth than 3/4th of its peers in the Oil & Gas industry. The resultant effect on earnings would be less volatile than related companies. The company's EPS Growth Rate is better than 87% of its peers in the Oil & Gas industry. To add to this the company also pays out a dividend of nearly 4% based on the current trading price.
The margins, although on the lower side for the Oil industry, are still reasonably strong – Gross Margin 18.83%, Profit Margin 7.49%. The Return on Equity (21.29%) for COP shows that it is able to reinvest its earnings more efficiently than nearly 2/3rd of its competitors in the Oil & Gas industry
Finally, here are some Analyst Research details –
- COP has been included in the S&P 5 STAR Portfolio and the Platinum Portfolio
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- COP's consensus score is higher than 90.9% of the major Integrated Oil & Gas Industry
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- COP's consensus score is higher than 99.4% of the Basic Materials Sector.
- COP's consensus score is higher than 99.8% of the Jaywalk Universe
Certainly a strong contender on my watch list!!
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