The extension of production cuts by OPEC and lower levels of crude oil inventories pushed up benchmark prices. Thus, the actions of the leading upstream company, ConocoPhillips (NYSE: COP) reached pre-Covid levels thanks to additional cash generation from benchmark price growth. According to recent documents, the company announced a debt reduction plan along with quarterly dividends and share buybacks. Given the current 3% dividend yield, the stock offers economic returns to investors keen to preserve their wealth from market volatility. We highlight historical revenue, earnings and ConocoPhillips share price trends in interactive dashboard analysis, ConocoPhillips (COP) stock has lost 11% between end of 2018 and now.
Low production costs to help generate cash and pay dividends
In 2020, the company’s three heads of costs, production, direct taxes and depreciation, were $ 10.99, $ 1.91 and $ 15.54 per barrel, respectively. On average, the company incurs a total production cost of $ 27 per barrel. Given the large margin difference between the benchmark WTI and the total cost of production, the company expects strong cash generation in 2021.
Supported by production cuts and reduced investment in 2020, the company funded $ 4.7 billion in capital expenditures on $ 4.8 billion in operating cash. Although dividends were supported by asset disposals last year, generating excess cash is essential for share buybacks and dividend growth in 2021.
Crude oil prices have seen a sharp increase over the past month, as commercial crude oil inventories have reached their pre-Covid levels. In addition, OPEC did not indicate reducing production cuts to alleviate the price hike. Thus, the EIA’s projections for the benchmark WTI and the Henry Hub spot price should be revised in the near term. Globally, petroleum, coal and natural gas represent respectively 32%, 27% and 24% of global energy consumption. With industry leaders including Exxon, Chevron, BP and Royal Dutch Shell strengthening their portfolio of renewable and low-carbon energy, the share of natural gas is expected to increase in the long term.
Is there a better alternative to ConocoPhillips? Comparison of ConocoPhillips’ shares with peers summarizes how COP compares to its peers on important metrics. You can find other useful comparisons at Peer comparisons.
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