ConocoPhillips (COP – Free Report) stock has risen 3.9% year to date (YTD), outperforming both the Zacks Oil and Gas — Exploration and Production industry’s 17.5% dip and the broader S&P 500’s 3.7% decline. COP has also surpassed key industry peers, including Northern Oil and Gas, Inc. (NOG – Free Report) , which has moved down 16.7%, and APA Corporation (APA – Free Report) , which has slipped 8.7%.
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This relative strength is driven not only by favorable commodity pricing but also by ConocoPhillips’ solid fundamentals and effective strategic execution, which have cemented its status as a leading player in the energy sector. However, before betting on a stock, we need to check its fundamentals to justify its investment potential.
Marathon Oil Acquisition Expands COP’s Footprint
ConocoPhillips finalized its acquisition of Marathon Oil in late 2024, significantly enhancing its Lower 48 portfolio. This move added more than 2 billion barrels of low-cost resources across top-tier basins in the United States, including Eagle Ford, Bakken, Delaware and Permian.
The company has consistently pursued acquisitions that align with its long-term goal of maximizing shareholder value. The Marathon Oil deal adds scale to its U.S. operations, and management expects to realize more than $1 billion in annual synergies by the end of 2025.
COP Prioritizes Financial Discipline & Shareholder Returns
In 2024, COP delivered a 14% return on capital employed (ROCE), or 15% on a cash-adjusted basis, highlighting efficient capital usage. Shareholder returns totaled $9.1 billion, surpassing its target of returning 30% of cash flow from operations, demonstrating strong cash generation and balance sheet health.
In 2025, the company plans to return $10 billion to shareholders — $4 billion through dividends and $6 billion via share repurchases — assuming current commodity price levels hold. The company exited 2024 with more than $7.5 billion in cash and long-term investments, providing a robust financial cushion.
COP’s Strategic Investments & Reserves Support Growth
ConocoPhillips continues to invest in large-scale, high-impact projects like Willow, LNG infrastructure and Port Arthur. These initiatives are expected to deliver an additional $6 billion in cash flow annually between 2026 and 2029, supporting long-term growth and reinforcing its global presence.
The company’s strategy of focusing on low-cost, high-return assets allows it to remain resilient in a fluctuating price environment. In 2024, COP achieved a 123% organic reserve replacement ratio, adding 1 billion barrels of oil equivalent. This strengthens its ability to sustain and grow production for years to come while maintaining a diversified portfolio of both short and long-cycle projects.
Is it the Right Time to Bet on ConocoPhillips?
While COP’s recent acquisitions, including those of Concho Resources and Shell’s Permian assets, have increased its debt, the company remains in a healthier financial position than many of its peers. Its debt-to-capitalization ratio stands at roughly 27%, below the industry average of 51%, and has consistently been lowered over the past few years.
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This financial strength equips COP to withstand oil price volatility and economic downturns better, giving it a competitive edge in the sector. All these positive developments have already been reflected in the year-to-date price chart.
The company has an attractive valuation. COP is currently trading at a 5.51X trailing 12-month enterprise value to earnings before interest, taxes, depreciation and amortization, which is a discount compared with the broader industry average of 12.12X.
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Despite its strengths, ConocoPhillips is vulnerable to regulatory risks, particularly in politically sensitive regions like Alaska and Equatorial Guinea.
Moreover, large-scale, long-cycle projects like Willow come with inherent risks, including potential cost overruns and delays. While 2025 marks peak capital spending on such projects, successful execution will be critical. COP must also navigate the broader energy transition and meet its emissions reduction goals without sacrificing capital efficiency.
Thus, although the upstream player’s long-term prospect looks bright, investors should stay away from betting on the undervalued upstream stock right away unless there is some clarity on the company-specific risk fronts. However, those who already own the stock should consider retaining their position. At present, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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