We recently published a list of Top 12 Oil and Gas Stocks To Invest In According to Hedge Funds. In this article, we are going to take a look at where ConocoPhillips (NYSE:COP) stands against oil and gas stocks to invest in according to hedge funds.
With a record average production of 12.9 million barrels per day in 2023, the United States is the Biggest Oil Producing Country in the World. Every year, the indigenous production of oil and gas helps save American consumers an estimated $203 billion, or $2,500 for each family of four. Moreover, the oil and gas industry supports over 12 million American jobs, provides billions of dollars in tax revenue, and ensures energy security.
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Global Demand for Oil in 2023
According to OPEC, the global oil demand increased by 2.5 million barrels per day (mb/d) in 2023 to average 102.2 mb/d, surpassing pre-pandemic levels for the first time. The major part of this uptick came from the non-OECD countries, which posted YoY growth of about 2.4 mb/d to average 56.4 mb/d, surpassing pre-pandemic levels for the second consecutive year.
As per the IEA’s recent market outlook, growth in the global demand for oil is expected to slow down in the coming years as energy transitions advance. However, despite the sluggish growth, the world oil demand is still forecast to be 3.2 mb/d higher in 2030 than in 2023, unless stronger policy measures are implemented or changes in behavior take hold.
Future Outlook of the Global Oil Industry
As 2024 comes to a close, oil prices have moved in the narrowest range this year since 2019, with Brent crude oil prices exhibiting a minimal average monthly change and a monthly range-bound movement between $69 and $90. The general opinion is that a soft demand, coupled with an abundant supply, even on hold, has contributed to the relative stability we witnessed this year.
China’s faltering economy and its shift towards electric vehicles and LNG-fueled trucks weighed heavily on the crude oil demand this year. According to a recent report by the state-owned China National Petroleum Corporation, the world’s largest oil-importing country may see its demand peak in 2025, five years earlier than expected, as the shift away from fossil fuels accelerates. The report reveals that China’s oil demand could reach 770 million tons next year, before gradually falling to 240 million tons by 2060.
As a consequence of the slowdown in the global oil demand, Brent futures prices have shed more than 5% so far this year, setting up a second consecutive annual loss. J.P. Morgan analysts have predicted that the global oil market is widely expected to be in a surplus in 2025, as supply will outpace demand to the tune of 1.2 million b/d. Brent crude prices are forecast to average around $73 a barrel next year, according to a Reuters tally of 11 brokerages that have issued price targets.
The bleak outlook has inevitably caused the oil and gas stocks to tumble and the broader market’s Energy sector has dropped by 13.42% over the last month, while the overall market has stayed relatively stable and lost only 0.3% during the same period.
However, despite the falling prices and decreasing margins, the oil and gas industry is contributing massively to the global economy and shareholder return. A recent report from Deloitte has revealed that the O&G sector distributed nearly $213 billion in dividends and $136 billion in buybacks between January 2024 and mid-November 2024. Also, over the last four years, the industry’s capital expenditures have increased by 53%, while its net profit has risen by nearly 16%. Moreover, an increasing number of oil majors are now investing in low-carbon technology projects to help balance the risks associated with the traditional fossil fuel market.
Methodology
To collect data for this article, we scanned Insider Monkey’s database of 900 hedge funds and picked the top 8 companies operating in the oil and gas sector with the highest number of hedge fund investors. When two or more companies had the same number of hedge funds investing in them, we ranked them by the revenue of their last financial year instead. Following are the Best Energy Stocks Held by the Most Hedge Funds.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An underground network of pipelines transporting oil through an expansive terrain.
ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 66
Founded in 1875, ConocoPhillips (NYSE:COP) is an independent company that explores, produces, transports, and markets crude oil, bitumen, natural gas, natural gas liquids, and LNG worldwide.
ConocoPhillips (NYSE:COP) announced last month that it has completed the $22.5 billion acquisition of Marathon Oil, making it the third-largest oil and natural gas producer in America. And importantly, the resources that ConocoPhillips has added have a fairly low average cost of around $30 per barrel of oil. The company also stated that it would significantly increase its dividends and share buybacks after the deal.
Ryan Lance, Chairman and CEO of ConocoPhillips (NYSE:COP) said regarding the deal:
“This acquisition of Marathon Oil is a perfect fit for ConocoPhillips, adding to our deep, durable and diverse portfolio while meeting our strict financial framework. Marathon Oil adds high-quality, low cost of supply inventory adjacent to our leading U.S. unconventional position. We have a strong history of seamlessly integrating assets and we expect to deliver synergies of over $1 billion on a run rate basis in the next 12 months.”
In Q3 of 2024, ConocoPhillips (NYSE:COP) reported a revenue of $13.6 billion. Although it beat the analysts’ estimates by over $32 million, it was down by almost 8.5% from the same period last year, primarily due to the decrease in prices. Meanwhile, cash generated from operating activities was $5.8 billion and the company ended the quarter with cash and short-term investments of $7.1 billion and long-term investments of $1 billion. More significantly, ConocoPhillips (NYSE:COP) raised its ordinary dividend by 34% to $0.78 per share and increased existing share repurchase authorization by up to $20 billion, effectively living up to its promises.
ConocoPhillips (NYSE:COP) is also well-positioned to capitalize on several growth opportunities, including Qatar’s North Field East & South LNG projects, the Port Arthur project in Texas, and the Willow project in Alaska. These major investments, coupled with the Marathon Oil acquisition, are expected to substantially grow its cash flow in the coming years.
Shares of ConocoPhillips (NYSE:COP) were held by 66 hedge funds at the end of Q3 2024, according to IM’s database. The largest stake of over 15.2 million shares, valued at more than $1.6 billion, was held by Eagle Capital Management.
Overall, COP ranks 3rd on our list of oil and gas stocks to invest in according to hedge funds. While we acknowledge the potential for COP to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than COP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
