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On Thursday, UBS analysts maintained their Buy rating for ConocoPhillips (BVMF:COPH34) shares (NYSE:COP) with a constant price target of $137.00. The firm’s analysis suggests that ConocoPhillips stands out as the most favorably positioned Large Cap Oil Exploration & Production (E&P) company for the coming five years.
The optimism from UBS is based on four principal factors that they believe set ConocoPhillips apart from its competitors. Firstly, the company’s depth of resources in North America is a strong advantage. Secondly, ConocoPhillips is recognized for its robust balance sheet, with a moderate debt-to-equity ratio of 0.39. Thirdly, the company has a compelling shareholder return profile, including a 3.08% dividend yield and a remarkable 55-year streak of consecutive dividend payments. Lastly, the extensive backlog of long-cycle projects is anticipated to drive tangible cash flow growth.
UBS forecasts a Compound Annual Growth Rate (CAGR) of 12% and 20% in cash flow per share (CFPS) and free cash flow per share (FCFPS) respectively from 2025 to 2030, assuming a steady West Texas Intermediate (WTI) crude oil price of $70. This projection is underpinned by the expectation that ConocoPhillips’ projects will start coming online next year, coupled with a predicted decline in capital expenditures from this year’s peak levels.
The analysis by UBS indicates that ConocoPhillips is increasingly resembling an Integrated Oil Company (IOC) rather than just an E&P firm, yet the market valuation does not reflect this shift. According to UBS, as ConocoPhillips begins to operationalize its projects, there is a clear opportunity for a market revaluation to occur.
In other recent news, ConocoPhillips reported robust financial results for the fourth quarter of 2024, with earnings per share (EPS) of $1.98, exceeding the forecast of $1.79. The company’s revenue also surpassed expectations, reaching $14.7 billion compared to the anticipated $14.27 billion. Despite these positive results, the company experienced a 2% year-over-year decline in organic revenue, which may have raised some concerns among investors. Additionally, net debt increased to €773 million, potentially impacting financial stability.
JPMorgan maintained its Overweight rating for ConocoPhillips, highlighting the company’s strong balance sheet and low-cost resource base. The firm noted the company’s commitment to a $10 billion capital return by 2025, despite market concerns over oil price declines. Analysts at JPMorgan also suggested that ConocoPhillips could achieve significant free cash flow growth earlier than expected, particularly in 2027-28. The company projects low to mid-single-digit organic revenue growth for 2025, with a focus on innovation and operational efficiency.
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