Bullish On Energy + COP

Some interesting investing notes about one of my favorite integrated oil plays, Conoco Phillips (COP). Data courtesy of Wikipedia.com + Conoco's very own Investor Relations link below:

*MATURE, CHEAP + NOT COMPLACENT --> COP is a MATURE $120 Billion market cap company + stock ($1000 invested in COP 20 years ago would be worth around $24,000 as of year end 2007) currently trading at a P/E of roughly 10 x earnings (and 9 x forward 2008 projected earnings). While the company's been around since the late 1800's, you should not confuse them with another larger and arguably lazier peer (Exxon Mobil...XOM's marketcap is currently $460 Billion). Unlike Exxon and some of the other larger oil companies, Conoco continues to actively invest a significant portion of its free cash flow enabled capital back into oil exploration + drilling. For example, during their March 12th Analyst Day, COP announced they would increase their 'new play' budget spend (capital allocated to newer, relatively unexplored geographic areas) in 2008 by 33% to $800 million.

*NATURAL GAS EXPOSURE --> COP is the 2nd largest U.S. natural gas producer (purchased Burlington Northern Resources in 2006 for $35.6 Billion). According to the Wall Street Journal, gas produces about 20% of the nation's electricity and heats about half of the country's homes.

*OIL REFINING LEADERSHIP --> COP is the 2nd largest U.S. oil refiner with 12 U.S. refineries combining to process a crude capacity of about 2.2M barrels per day. Worldwide, the company has a combined crude processing capacity of about 2.9 million barrels per day making it the 5th largest refiner IN THE WORLD.

*LARGE CANADA TARSANDS POSITION --> They are the largest U.S. energy company stakeholder of the Canadian Athabasca oil sand reserves + is targetting a long term annual production growth rate of 30%.

*LUKOIL STAKE --> Russia holds the world's largest reserves of natural gas and Lukoil is Russia's largest oil company and producer. The Strategic 20% ownership stake in Russian Lukoil accounted for 19% of Conoco's total 4Q07 oil + natural gas production (426 million barrels per day/2,261 million barrels per day) !

*CASH FLOW, BUYBACK + YIELD --> Per its analyst day on 3/12/08, COP is expecting itself to generate approx $28 Billion in free cash flow during 2008...they plan to use $10 Billion of this cash to repurchase its own shares (including dividends, COP plans to return a total of $13 Billion directly to shareholders). Currently COP sports a pretty attractive 2.5% dividend yield.

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Breakdown of Conoco's 4Q07 profits by business unit:
1.) Exploration + Production --> $2.6 Billion (60% of earnings)
2.) Refining + Marketing --> $1.1 Billion (25% of earnings)
3.) Lukoil, etc. --> $641 million (15% of earnings)

Breakdown of Conoco's 2008 E+P total oil + nat gas production OUTLOOK by geo:
1.) US --> 46%
2.) Middle East, Russia/Caspian, Africa, etc. --> 27%
3.) North Sea --> 18%
4.) Asia Pacific --> 9%

http://www.conocophillips.com/investor/financial_reports/index.htm

Data Courtesy: Wikipedia.com and COP Investor Relations, snagged on 3/24/08.
Full Disclosure: I own shares of COP.