Categories AlphaGraphs, Analysis, Earnings, Energy

ConocoPhillips (COP) set to end FY21 on a high note. Should you buy the stock?

The company this week completed the acquisition of the Delaware basin position of Shell Enterprises for about $9.5 billion

Coming out of the pandemic-induced slump, the oil and gas industry hit the recovery path this year aided by higher prices and resumption of production. ConocoPhillips Co. (NYSE: COP), the energy giant focused on upstream operations, began the fiscal year well by returning to the positive territory, after suffering net losses for three consecutive quarters.

Stock Dips

Though the company’s stock gained soon after the positive earnings results early last month, the momentum was not sustained and it experienced volatility since then. However, the weakness looks temporary, and market watchers see strong gains through next year. The majority of them believe this is the right time to invest in COP, citing the moderation in value.


Read management/analysts’ comments on quarterly reports


Adding to the bullish sentiment, the management recently raised the quarterly dividend by 7% to 46 cents per share, encouraged by the impressive cash flow that rose sharply to $4.8 billion in the most recent quarter.

Strong Q3

In the September quarter, the company’s earnings beat analysts’ estimates, as they did in each of the three trailing quarters. At $11.62 billion, revenues were at a multi-year high in the third quarter, and well above analysts’ estimates. Consequently, the company swung to a profit of $1.77 per share, on an adjusted basis, from a loss of $0.31 per share in the third quarter of 2020.

ConocoPhillips Q3 2021 earnings infographic

Unadjusted profit was $2.38 billion or $1.78 per share, compared to a loss of $450 million or $0.42 per share last year. Total production, excluding Libya, rose by 41% to 1,507 MBOED, reflecting strong operational performance across the asset base even as the COVID-related challenges eased.

“We’ll close out 2021 as a stronger company compared to any time in the past decade. Every aspect of our triple mandate is moving in the right direction. Our underlying portfolio cost of supply is improving. Our overall GHG intensity is lower. Our emissions-intensity-reduction targets are more stringent. Underlying margins are expanding, and our trailing 12-month return on capital employed is headed toward an estimated 14% by year-end, reflecting the benefit of more than just stronger commodity prices,” said ConocoPhillips’ CEO Ryan Lance during his post-earnings interaction with analysts.

Shell Deal

The company this week completed the acquisition of the Delaware basin position of Shell Enterprises for about $9.5 billion. The estimated production from the acquired assets is about 200 MBOED in 2022. The buyout is expected to drive strong growth in the coming months and help the company enter the next fiscal year on a positive note.


Key highlights from Exxon Mobil’s Q3 2021 earnings results


COP has lost around 3% since last month’s earnings announcement, paring a part of the strong gains the stock made over the past several weeks. The shares traded slightly above the $70-mark on Friday afternoon, after closing the previous session at $71.26.

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