ConocoPhillips (COP Quick QuoteCOP - Free Report) is a leading upstream energy firm in the world on the basis of production and reserves. Currently, the firm carries a Zacks Rank #3 (Hold).

Factors Working in Favor

West Texas Intermediate crude price, trading at more than $80 per barrel, is highly favorable for upstream activities. Being a leading exploration and production company, ConocoPhillips is well-positioned to capitalize on handsome crude prices.

ConocoPhillips has secured a solid production outlook, thanks to its decades of drilling inventories across its low-cost and diversified upstream asset base. The resource base represents the company’s strong footprint in prolific acres in the United States, comprising Eagle Ford shale, Permian Basin and Bakken shale. ConocoPhillips boasted that drilling and completion activities are increasingly becoming efficient in all the key U.S. basins.

Compared to composite stocks belonging to the industry, the leading upstream energy company has considerably lower exposure to debt capital. This reflects that COP is better positioned to rely on its strong balance sheet to withstand any adverse business scenario.

Risks

Being an upstream energy player, the overall operations of the company are exposed to volatility in oil and natural gas prices. Moreover, the company’s overall operating and production expenses continue to increase due to the inflationary market, hurting the bottom line.

Stocks to Consider

Two better-ranked players in the energy space are Kinder Morgan, Inc. (KMI Quick QuoteKMI - Free Report) and Exxon Mobil Corporation (XOM Quick QuoteXOM - Free Report) . Both the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.  

With its operating interests in oil and gas pipeline networks spread across 83,000 miles, Kinder Morgan is a leading energy infrastructure company in North America. It derives most of its earnings from take-or-pay contracts, generating stable fee-based revenues. 

In order to have a dominant presence in the Permian, ExxonMobil has entered into a staggering $59.5 billion all-stock deal to buy Pioneer Natural Resources (PXD Quick QuotePXD - Free Report) . Pioneer Natural is one of the foremost oil producers operating in the Permian Basin, the most prolific basin in the industry.