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This Energy Giant Is Gearing Up to Provide Greater Returns
Posted by: abirk (IP Logged)
Date: November 26, 2013 03:52PM
ConocoPhillips (COP), being one of the most interesting stocks is getting ready to provide greater returns. It has started to see production growth in certain key segments due to its multi-year turnaround. Recent Financials
ConocoPhillips recently announced its third-quarterly dividend of $0.69 per share, the same rate it paid last quarter after raising the payout 4.5% from $0.66 per share. The regular dividend payment equates to a $2.76-per-share annual dividend. Dividend companies make investors rich. One can count on this company for that. The company has adopted a turnaround strategy by alienating capital and assets away from risky overseas locations. Growth in North America has accelerated as production in the Eagle Ford, Bakken, and Permian increased nearly by 40%. ConocoPhillips's cash margins were $28.84 per BOE in Q3 2013, up 13% compared to last year, and 6.5% from last quarter.
Step Ahead of Its Peers
ConocoPhillips faces some competition from other major A-grade players like ExxonMobil (XOM), and Chevron (CVX). The two companies are somewhat flat this year, and don’t pose much of a threat to ConocoPhillips. ConocoPhillips's cash flow will continue to grow faster than the other two through 2017. It is in the process of improving its grade, which is the reason for the stock's steady climb. That process is not over, and as an investment , ConocoPhillips is still the best choice of the three. The two competitors are highly efficient. But this in no way undermines ConocoPhillip’s potential . ConocoPhillips has been the best at harnessing the long-term potential of shale oil. Its production will grow between 3%-5% to 2017, a rate similar to Chevron, but without the inflated margin.
Unlike Chevron and ExxonMobil, its margins are improving. Management is disposing of assets in places with opaque business environments, and focusing mostly on stable OECD countries. Share prices for this company have gained around 4.8% compared to a 4.50% decline for Chevron, and 3.80% decline for ExxonMobil.
Doing It All for Growth
ConocoPhillips has some exciting shale plays and Gulf of Mexico prospects . Already, the Gulf has yielded a 1 billion barrel discovery in the Shenandoah block. ConocoPhillips is also exploring the Permian basin of West Texas. Finally, it is putting a lot of work into exploring for shale oil in the Duvernay, up in the Yukon Territory. Of the big three U.S. energy companies, ConocoPhillips is poised to take advantage of shale oil production. Shale oil production is the primary driver of growth in oil capacity over the last few years . No major player has done as well as ConocoPhillips in taking advantage of this trend.
There is a plot under way at ConocoPhillips to figure out new ways to increase production. One of its latest creations is a new proprietary software that yields information enabling it to improve the production of optimized wells by more than 5%. The customized software is called the Plunger Lift Optimization Tool, or PLOT. The company's legacy production base was split about 50/50 between lower priced natural gas and NGLs and oil.
It is turning its focus to the development of the Eagle Ford shale formation where it has around 227,000 net acres with reserves of around 1.8 billion barrels of oil equivalent. It is planning to shed out around $8 billion through 2017 to develop its acreage in the counties of La Salle, McMullen, Live Oak, Karnes, and DeWitt to increase the production from this region by around 130,000 barrels of oil equivalent per day.
To Wrap Things Up
It is hard on the investors’ part to choose one energy company for investment especially with so many energy companies vying for investors’ attention . ConocoPhillips has been on an impressive run. This year, shares have jumped almost 27%. ConocoPhillips has a bright future, and its stock is still worth holding . Dividends and dividend growth are the primary reasons why major oil companies are bought for. This oil giant is currently in a position to provide investors with these.
The company has earmarked 75% of capital expenditures to develop high return on investment plays , particularly shale plays in the United States. Besides possessing an incredible portfolio of oil assets, Conoco pays a strong dividend, and with production and margin growth, shareholders can continue to load up on this stable oil producer.
Stocks Discussed: COP, XOM, CVX,