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ConocoPhillips is Not so Pricey: Should Investors Bet on the Stock Now?
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Key Takeaways
ConocoPhillips trades at 5.24X EV/EBITDA, below the industry's 10.90X and key peers' valuations.
Marathon Oil assets add efficiency, with $1B+ in annual synergies expected by 2025-end.
COP sees $7B in yearly free cash flow from 2029, aided by LNG and Alaska projects.
ConocoPhillips (COP - Free Report) is currently trading at a 12-month enterprise value to EBITDA (EV/EBITDA) of 5.24X. This is below the broader industry average of 10.90X, Exxon Mobil Corporation’s (XOM - Free Report) 7.02X and EOG Resources Inc’s (EOG - Free Report) 5.42X. Notably, ExxonMobil and EOG are two other energy giants with a significant presence in upstream operations.
Image Source: Zacks Investment Research
Therefore, with the stock currently undervalued, should investors consider investing in the exploration and production stock now? However, before making any investment decisions, we should analyze the factors that should influence the upstream giant and its business fundamentals.
Marathon Oil’s Integration Makes COP’s Operations Cost-Effective
In its second-quarter 2025 earnings call transcript, COP mentioned the completion of the integration of Marathon Oil’s assets with its own resources and boasted that the result is overwhelming. The upstream giant has revised upward its estimate for key low-cost resources after the combination by 25%, thanks to the Permian, the most prolific basin in the United States.
During the call, ConocoPhillips revealed that its overall operations have become more efficient following the successful integration, as reflected by the global upstream giant expecting annual cost synergies of more than $1 billion by 2025-end. COP also made an impressive statement in the call that the acquisition has made it possible for the combined operations to produce more volumes while reducing the drilling rigs and crews' involvement by 30%.
Massive Cashflow Growth Awaits ConocoPhillips
As mentioned in the call, backed by key new developments in liquified natural gas (LNG) and Alaska, COP is expecting an additional annual free cash flow of $7 billion every year from 2029 onward. Thus, ConocoPhillips will likely be better positioned to allocate the incremental cash flows for rewarding shareholders, further increasing its balance sheet strength and investing in new growth projects. Notably, COP already has a strong balance sheet with a debt-to-capitalization of 26.4%. ExxonMobil and EOG Resources also have a strong balance sheet, with their debt-to-capitalization ratios being further lower than COP.
Image Source: Zacks Investment Research
ConocoPhillips is also diversifying its portfolio beyond oil and is strengthening its footing to capitalize on growing cleaner fuel demand. This initiative is getting reflected in the COP’s recent agreement to buy 4 million tonnes of LNG every year from the planned Port Arthur LNG Phase 2 project in Texas for a period of 20 years.
Should Investors Bet on COP Now?
Despite the positive developments, COP’s price chart is not so attractive. Over the past year, shares of the company lost 9.1% compared with a 12.8% dip of the industry’s composite stocks. Over the same time frame, XOM dipped 1.6%, while EOG gained a marginal 1%.
One-Year Price Chart
Image Source: Zacks Investment Research
The price chart signifies an uncertain business environment in the overall industry. Per the U.S. Energy Information Administration (“EIA”), expectations for inventory builds across the globe are leading to lower oil prices. In 2025, EIA projects the spot average price of West Texas Intermediate crude at $63.58 per barrel, lower than last year’s $76.60. Expectations for lower oil prices are likely to hurt COP’s bottom line as the company is a major producer of the commodity.
Thus, investors shouldn’t jump into betting on the stock right away. However, those who have already invested should continue to hold the stock, currently carrying 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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ConocoPhillips is Not so Pricey: Should Investors Bet on the Stock Now?
Key Takeaways
ConocoPhillips (COP - Free Report) is currently trading at a 12-month enterprise value to EBITDA (EV/EBITDA) of 5.24X. This is below the broader industry average of 10.90X, Exxon Mobil Corporation’s (XOM - Free Report) 7.02X and EOG Resources Inc’s (EOG - Free Report) 5.42X. Notably, ExxonMobil and EOG are two other energy giants with a significant presence in upstream operations.
Therefore, with the stock currently undervalued, should investors consider investing in the exploration and production stock now? However, before making any investment decisions, we should analyze the factors that should influence the upstream giant and its business fundamentals.
Marathon Oil’s Integration Makes COP’s Operations Cost-Effective
In its second-quarter 2025 earnings call transcript, COP mentioned the completion of the integration of Marathon Oil’s assets with its own resources and boasted that the result is overwhelming. The upstream giant has revised upward its estimate for key low-cost resources after the combination by 25%, thanks to the Permian, the most prolific basin in the United States.
During the call, ConocoPhillips revealed that its overall operations have become more efficient following the successful integration, as reflected by the global upstream giant expecting annual cost synergies of more than $1 billion by 2025-end. COP also made an impressive statement in the call that the acquisition has made it possible for the combined operations to produce more volumes while reducing the drilling rigs and crews' involvement by 30%.
Massive Cashflow Growth Awaits ConocoPhillips
As mentioned in the call, backed by key new developments in liquified natural gas (LNG) and Alaska, COP is expecting an additional annual free cash flow of $7 billion every year from 2029 onward. Thus, ConocoPhillips will likely be better positioned to allocate the incremental cash flows for rewarding shareholders, further increasing its balance sheet strength and investing in new growth projects. Notably, COP already has a strong balance sheet with a debt-to-capitalization of 26.4%. ExxonMobil and EOG Resources also have a strong balance sheet, with their debt-to-capitalization ratios being further lower than COP.
ConocoPhillips is also diversifying its portfolio beyond oil and is strengthening its footing to capitalize on growing cleaner fuel demand. This initiative is getting reflected in the COP’s recent agreement to buy 4 million tonnes of LNG every year from the planned Port Arthur LNG Phase 2 project in Texas for a period of 20 years.
Should Investors Bet on COP Now?
Despite the positive developments, COP’s price chart is not so attractive. Over the past year, shares of the company lost 9.1% compared with a 12.8% dip of the industry’s composite stocks. Over the same time frame, XOM dipped 1.6%, while EOG gained a marginal 1%.
One-Year Price Chart
The price chart signifies an uncertain business environment in the overall industry. Per the U.S. Energy Information Administration (“EIA”), expectations for inventory builds across the globe are leading to lower oil prices. In 2025, EIA projects the spot average price of West Texas Intermediate crude at $63.58 per barrel, lower than last year’s $76.60. Expectations for lower oil prices are likely to hurt COP’s bottom line as the company is a major producer of the commodity.
Thus, investors shouldn’t jump into betting on the stock right away. However, those who have already invested should continue to hold the stock, currently carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.