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Here's Why Retain Strategy is Apt for ConocoPhillips (COP) Now

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ConocoPhillips (COP - Free Report) witnessed upward estimate revisions for 2023 earnings in the past 30 days. Further, the leading upstream energy firm, carrying a Zacks Rank #3 (Hold), is likely to record earnings growth of 134.4% in 2022.

Factors Working in Favor

West Texas Intermediate crude price, trading at more than $75 per barrel, is extremely favorable for upstream activities. Being a leading exploration and production company globally, ConocoPhillips is well-positioned to capitalize on handsome crude prices. ConocoPhillips has a strong footprint in prolific oil-rich plays like the Permian Basin, Eagle Ford and Bakken, brightening up the company’s production outlook. For 2022, the company expects production at 1.74 million barrels of oil equivalent per day (MMBoE/D), suggesting an improvement from 1.6 MMBoE/D for 2021

COP is strongly focused on returning capital to shareholders. Apart from increasing quarterly ordinary dividend by 11%, ConocoPhillips also lifted its share buyback authorization by $20 billion.

Risks

Being an upstream energy player, the overall operations of the company are strongly exposed to volatility in oil and natural gas prices. Moreover, significantly increasing expenses related to purchased commodities are hurting its bottom line.

Stocks to Consider

Some better-ranked players in the energy space are Phillips 66 (PSX - Free Report) , Precision Drilling Corporation (PDS - Free Report) and NexTier Oilfield Solutions Inc. . All the stocks carry a Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

To make its operations more stable, Phillips 66 is giving more attention to midstream (pipelines), renewables and chemicals businesses. It also has strong refining operations.

Precision Drilling is a well-known name in the energy space for offering its clients access to an extensive fleet of Super Series drilling rigs. Its services also include offering well-service rigs. With high commodity prices, demand for PDS’ drilling rigs is favorable.

NexTier Oilfield Solutionsis also a well-known U.S. land oilfield service player. With higher exploration and production by upstream companies, demand for NexTier Oilfield’s diverse set of well completion and production services is handsome.


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