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ConocoPhillips (COP) Resumes Stock Repurchases: Here's Why

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ConocoPhillips (COP - Free Report) recently announced the resumption of share repurchase program.

The leading upstream energy player expects to repurchase stocks at an annual rate of $1.5 billion and is planning to accomplish the stock buyback ratably across all four quarters of this year. In the wake of the company’s deal to buy Concho Resources, the program was suspended in the December quarter of 2020.

ConocoPhillips added that the annualized stock repurchase rate suggests an increase of 50% from the prior program. It can be said that the resumption of stock buyback suggests the company’s confidence in the overall business scenario, since the energy sector is now in a better footing, as reflected by the rebound of oil price to pre-pandemic levels.

ConocoPhillips believes that via dividend payments and the recently announced share repurchases, it will be able to return 30% of cash from operations to shareholders every year.

It is to be also noted that despite the rally in crude prices, the upstream company is not opting to increase operating capital budget — projected at $5.5 billion — for 2021. Thus, ConocoPhillips is following the footsteps of energy majors like Exxon Mobil Corporation (XOM - Free Report) and Chevron Corporation (CVX - Free Report) that have also decided to keep capital outlays in check, while preserving returns for stockholders. Following poor returns from the energy sector over a long term, investors now prefer companies that are showing discipline about spending capital.

ConocoPhillips currently carries a Zacks Rank #2 (Buy). Another prospective player in the energy space is EOG Resources, Inc. (EOG - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EOG Resources is likely to see earnings growth of 206% in 2021.

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