Wednesday, January 11, 2012

Conoco Phillips (COP) 2012 Review

Conoco Phillips (COP)  is an integrated oil and petrochemicals company which focuses primarily on exploration and production (E&P) and refining and marketing. 

Profits and dividends have grown approximately 11-13% annually over the last 10 years. In the same time frame, COP has earned between a 10-20% return on equity. The company should continue to make progress as a result of:

(1) its exposure to promising fields should allow the company to replace reserves and sustain production,

(2) its capital expenditures will focus the development of Eagle Ford Shale, Permian, Bakken and Barnett fields,

(3) splitting the exploration and production from the refining and marketing should unlock value for shareholders,

(4) utilize its strong cash flow to pay down debt, raise dividends and buy back stock.


(1) short term, its production will be impacted by the shut down of its Libyan production,

(2) price fluctuations of oil and natural gas,

(3) its international operations are subject to political risks.

Conoco is rated A++ by Value Line, has a 25% debt to equity ratio and its stock yields approximately 4.1%.

Statistical Summary

Stock Yield Dividend Growth Rate Payout Ratio # Increases Since 2002
COP 4.1% 10% 31% 10
IND 3.6 5 31 NA

Debt/Equity ROE EPS Down Since 2002 Net Margin Value Line Rating
COP 25% 19% 2 5% A++
IND 14 6 NA 7 NA


Note: COP stock made good progress off its March 2009 low, quickly surpassing the down trend off its June 2008 high (red line) and the November 2008 trading high (green line). Long term the stock is in an up trend (straight blue lines); it is also in an intermediate term up trend (purple lines). The wiggly blue line is on balance volume. The Dividend Growth Portfolio owns a 75% position in COP by virtue of having Sold Half in 2005 and appreciation has resulted in the growth of the size of the holding.

Steve Cook received his education in investments from Harvard, where he earned an MBA, New York University, where he did post graduate work in economics and financial analysis and the CFA Institute, where he earned the Chartered Financial Analysts designation in 1973. His 40 years of investment experience includes institutional portfolio management at Scudder, Stevens and Clark and Bear Stearns. Steve's goal at Strategic Stock Investments is to help other investors build wealth and benefit from the investing lessons he learned the hard way.