Oil Giant: ConocoPhillips (COP)

ConocoPhillips (COP) is a major gloval integrated production and exploration company based on oil production and reserves. The firm searches for gas and oil in more than 30 countries and has reserves of 8.4 billion barrels of oil equivalent..

Business

Although earnings were impacted by lower oil and gas prices, ConocoPhillip had some positive news about recent performance. The company is beefing itself up in Eagle Ford and Bakken and also expects growth from the Canadian oil sands.

Recetnly, ConocoPhillips has notified government authorities in Kazakhstan and its co-venturers of the company’s intent to sell its 8.4 percent interest in the North Caspian Sea Production Sharing Agreement (Kashagan) to ONGC Videsh Limited. Expected proceeds are approximately $5 billion, which represents the purchase price plus expected working capital and customary adjustments at closing. This marks Conoco’s ongoing effort to offload its non-core properties while investing in new high-margin areas and boosting profitability.

Valuation
P/E 6.92
P/E Growth Ratio  
P/BV 1.44
P/S 0.30
P/CF 4.30
 

Financials

EPS 8.140
Book Value (p.s.) 39.050
Profit Margin 4.53
Operating Margin 9.21
Return on Assets (ttm) 9.8
Return on Equity (ttm) 21.4

 

ConocoPhillips has demonstrated massive revenue growth during the past three years.The company generated $2 billion in proceeds from asset distribution which has helped its balance sheet to a small extent. The company reported third-quarter 2012 earnings of $1.8 billion, or $1.46 per share, compared with third-quarter 2011 earnings of $2.6 billion, or $1.91 per share.

 Based on the P/E, which is less than the industry average of 9.6, we can think that the company would be undervalued at currently price. A change in the business model and a shift towards oil will improve the earnings of the company and help it reward its shareholders in the long term. 

Technicals

At the current price of around $56, COP has a market capitalization of around $68 billion. From atechnical standpoint, this stock is currently trading above both its 100-day of $55.94 and 250day moving averages of $54.29. It has been showing support around $53.95 and resistance in the $56.95 price range. MACD (12,26) and RSI(14) are  increasing. The overall technical indicator shows a buy with the $66.51 target price in short term.

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