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Oil Above $90: Is ExxonMobil a Better Buy Than ConocoPhillips?
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Key Takeaways
WTI crude above $90 keeps ExxonMobil and ConocoPhillips in focus as investors chase energy stocks.
XOM targets 1.8M oil-equivalent barrels from the Permian, using lightweight proppant to lift recoveries.
ConocoPhillips has low-cost drilling in Permian, Eagle Ford and Bakken; its debt-to-cap is 26.55%.
Oil prices remain in bullish territory, keeping energy companies in the spotlight. Many investors are looking to capitalize on elevated oil prices by betting on energy stocks. Against this backdrop, let us compare two energy giants, Exxon Mobil Corporation (XOM - Free Report) and ConocoPhillips (COP - Free Report) , to determine which stock offers a better buying opportunity now.
High Oil Price to Aid Upstream Operations of XOM, COP
West Texas Intermediate (“WTI”) crude is trading at more than the $90-per-barrel mark. The high price is being backed by ongoing tensions in the Middle East. The U.S. Energy Information Administration (“EIA”) in its latest short-term energy outlook projected WTI at $85.68 per barrel for this year, higher than $65.40 last year. A highly favorable pricing environment for the commodity is likely to continue supporting ExxonMobil's exploration and production activities, which contribute to the majority of its earnings.
To provide a glimpse of the upstream assets, the company has a massive footprint in the Permian, the most prolific oil and gas play in the United States, and offshore Guyana. In the Permian, the integrated giant has been employing lightweight proppant technology and hence is capable of boosting its well recoveries by up to as much as 20%. On the first quarter earnings call, XOM mentioned that it is staying aligned with its plan of growing its production in the most prolific basin to 1.8 million oil equivalent barrels this year.
In Guyana, XOM has made several oil and gas discoveries, further highlighting its solid production outlook. Record production from both resources has been aiding its top and bottom lines. In both resources, the breakeven costs are low.
With its solid portfolio of upstream assets, COP is well-positioned to gain. The upstream energy giant has low-cost drilling opportunities across Permian, Eagle Ford and Bakken that could be successfully developed over two decades. The outlook for ConocoPhillips’ upstream operations also looks highly profitable.
Low Debt Burden of XOM & COP a Savior During Uncertainty
Both ConocoPhillips and XOM have strong balance sheets that they could rely on during an unfavorable business environment. The debt-to-capitalization of ExxonMobil is only 15.44%, lower than COP’s 26.55%.
Image Source: Zacks Investment Research
Thus, both the energy giants could rely on their balance sheet strengths to run their operations smoothly when the business scenario turns unfavorable.
XOM vs. COP: Which is a Better Stock?
Coming to the price chart, both ExxonMobil and ConocoPhillips have had a strong run-up over the past year. Over the period, XOM has jumped 50.3%, while COP gained 41.4%.
Image Source: Zacks Investment Research
On a relative basis, XOM is trading at a 10.24x trailing 12-month Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortization (EV/EBITDA), which is a discount compared with COP’s 6.59x.
Image Source: Zacks Investment Research
Thus, it has become evident that investors are willing to pay a premium for XOM over COP. This is because, although both XOM and COP are benefiting from the ongoing strength in oil prices, being an integrated energy player with a footprint in refining and chemicals businesses, ExxonMobil’s operation is relatively more stable, making it a better investment pick. Currently, XOM sports a Zacks Rank #1 (Strong Buy).
However, investors willing to take on more risk to capitalize primarily on high oil prices may consider ConocoPhillips, which currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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Oil Above $90: Is ExxonMobil a Better Buy Than ConocoPhillips?
Key Takeaways
Oil prices remain in bullish territory, keeping energy companies in the spotlight. Many investors are looking to capitalize on elevated oil prices by betting on energy stocks. Against this backdrop, let us compare two energy giants, Exxon Mobil Corporation (XOM - Free Report) and ConocoPhillips (COP - Free Report) , to determine which stock offers a better buying opportunity now.
High Oil Price to Aid Upstream Operations of XOM, COP
West Texas Intermediate (“WTI”) crude is trading at more than the $90-per-barrel mark. The high price is being backed by ongoing tensions in the Middle East. The U.S. Energy Information Administration (“EIA”) in its latest short-term energy outlook projected WTI at $85.68 per barrel for this year, higher than $65.40 last year. A highly favorable pricing environment for the commodity is likely to continue supporting ExxonMobil's exploration and production activities, which contribute to the majority of its earnings.
To provide a glimpse of the upstream assets, the company has a massive footprint in the Permian, the most prolific oil and gas play in the United States, and offshore Guyana. In the Permian, the integrated giant has been employing lightweight proppant technology and hence is capable of boosting its well recoveries by up to as much as 20%. On the first quarter earnings call, XOM mentioned that it is staying aligned with its plan of growing its production in the most prolific basin to 1.8 million oil equivalent barrels this year.
In Guyana, XOM has made several oil and gas discoveries, further highlighting its solid production outlook. Record production from both resources has been aiding its top and bottom lines. In both resources, the breakeven costs are low.
With its solid portfolio of upstream assets, COP is well-positioned to gain. The upstream energy giant has low-cost drilling opportunities across Permian, Eagle Ford and Bakken that could be successfully developed over two decades. The outlook for ConocoPhillips’ upstream operations also looks highly profitable.
Low Debt Burden of XOM & COP a Savior During Uncertainty
Both ConocoPhillips and XOM have strong balance sheets that they could rely on during an unfavorable business environment. The debt-to-capitalization of ExxonMobil is only 15.44%, lower than COP’s 26.55%.
Thus, both the energy giants could rely on their balance sheet strengths to run their operations smoothly when the business scenario turns unfavorable.
XOM vs. COP: Which is a Better Stock?
Coming to the price chart, both ExxonMobil and ConocoPhillips have had a strong run-up over the past year. Over the period, XOM has jumped 50.3%, while COP gained 41.4%.
On a relative basis, XOM is trading at a 10.24x trailing 12-month Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortization (EV/EBITDA), which is a discount compared with COP’s 6.59x.
Thus, it has become evident that investors are willing to pay a premium for XOM over COP. This is because, although both XOM and COP are benefiting from the ongoing strength in oil prices, being an integrated energy player with a footprint in refining and chemicals businesses, ExxonMobil’s operation is relatively more stable, making it a better investment pick. Currently, XOM sports a Zacks Rank #1 (Strong Buy).
However, investors willing to take on more risk to capitalize primarily on high oil prices may consider ConocoPhillips, which currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.