Morningstar | ConocoPhillips Turns in Strong 3Q; Sell-Off Has Shares Looking More Attractive
ConocoPhillips turned in a strong quarter, with adjusted earnings rising to $1.6 billion from $0.2 billion a year ago, largely the result of higher oil and gas prices. Production totaled 1,224 mboed, an increase of 6% excluding the impact of dispositions, thanks to a 48% increase in volumes from its unconventional portfolio and new project startups in its international conventional portfolio. Operating cash flow totaled $3.5 billion, easily covering capital investment and dividends. The company repurchased nearly $1 billion in shares during the quarter, bringing its year-to-date total to $2.1 billion and leaving it on track to achieve its full-year $3 billion target. Full-year capital guidance was raised slightly to $6.1 billion from $6 billion, but all other guidance was left intact. Management indicated that spending in 2019 should remain roughly in line with 2018 levels. Our fair value estimate and narrow moat rating are unchanged.Recent pressure on shares has left ConocoPhillips trading at over a 10% discount to our fair value estimate, which should pique investors' interest. Although the quarter wasn’t newsworthy, it demonstrated why investors should be interested in owning ConocoPhillips as offers an attractive mix of growth and cash returns to shareholders with upside exposure to oil prices. We also recently upgraded its moat rating to narrow based on a reformed portfolio. We think a pullback in oil prices remains a risk, as current prices are well above our $60/bbl long-term estimate, which could weigh on ConocoPhillips shares. However, we’d stress the company’s model is built to do well in a $60/bbl environment, leaving further pullbacks a buying opportunity, in our view.
ConocoPhillips is an exploration and production company engaged in exploring for, producing, transporting and marketing crude oil, bitumen, natural gas, liquefied natural gas and natural gas liquids. The company's segments include: Alaska, which operates in Alaska; Lower 48, which operates in the United States and the Gulf of Mexico; Canada, which operates in Alberta and British Columbia; Europe and North Africa, which consists of operations and exploration activities in Norway, the United Kingdom and Libya; Asia Pacific and Middle East, which operates in China, Indonesia, Malaysia, Australia, Qatar, and Timor-Leste; and Other International, which operates in Colombia, Chile and Argentina.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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