We recently published a list of 11 Best Crude Oil Stocks To Buy Right Now. In this article, we are going to take a look at where ConocoPhillips (NYSE:COP) stands against other best crude oil stocks to buy right now.
Crude oil markets have seen extreme volatility over the past year, fueled by a variety of economic, geopolitical, and supply and demand factors. Prices fell at the end of 2023, when international demand faltered and supply remained strong from key regions, before rebounding in early 2024 as leading oil-producing countries implemented supply cuts to stabilize the market. Meanwhile, demand signals have been mixed — industrial activity in major economies has improved, but high interest rates and inflationary pressures have limited overall energy consumption. After the presidential elections in the US, the Trump 2.0 agenda appears to be driving cracks in the economic outlook, due to a plethora of initiatives such as tariffs, a fight with immigration, and significant cuts in government spending. Despite Republicans notoriously being pro-business and pro-carbon, as confirmed by an announced policy of encouraging energy exploration and production on Federal land and Outer Continental Shelf, the reaction of the stock market has been mixed, as many crude oil stocks have underperformed the broad market in the last couple of months.
The reluctance of the broad market to price in an acceleration in the crude oil space is likely due to expectations of lower oil prices, primarily driven by an uncertain economic and industrial outlook. A slowing economy generally consumes less oil, which coupled with an increasing supply should put downward pressure on prices. Optimism for the year ahead vanished and the outlook has become one of the gloomiest since the pandemic. Companies started to signal widespread concerns about the impact of government policies, ranging from spending cuts to tariffs and geopolitical developments. For instance, the US economic surprise index hit the lowest last week since September, while the business capex forecasts were abruptly cut at the beginning of the year. Small businesses reflect similar signals, by cutting their capex expectations (as per surveys), while consumers report deteriorating financial expectations going forward. All these developments don’t play out in favor of a strong economy in the following quarters.
Financial markets have reflected this turbulence, as energy stocks moved in tandem with the swings in oil prices, which retracted more than 10% since the inauguration day. While refiners and midstream companies have generally performed well due to resilient transportation and processing demand, exploration and production firms have faced challenges in securing new investments. Looking forward, macroeconomic and geopolitical factors will continue to shape the crude oil market. Geopolitical factors, particularly in key oil-producing regions, remain an ongoing concern – with the end of the Ukraine conflict becoming a reality, Russian oil will likely flow more freely abroad, putting even more downward pressure on global prices. Despite the aforementioned headwinds, there are also some positive takeaways for investors – while renewable energy investments continue to grow, the transition remains gradual, ensuring that crude oil will remain a critical component of the global energy mix in the future, especially under the carbon-friendly Trump 2.0 regime. Furthermore, with oil prices declining and many crude oil stocks being down from their mid-2024 highs, the current developments may turn out to be a great long-term buying opportunity.
Our Methodology
We used the Insider Monkey proprietary hedge fund holding database and identified the 11 most popular crude oil companies, ranked by the number of hedge funds that own the stock.
Why are we interested in 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 373.4% since May 2014, beating its benchmark by 218 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: 85
ConocoPhillips (NYSE:COP) is one of the largest independent exploration and production companies in the world, specializing in crude oil, natural gas, and natural gas liquids. With operations spanning North America, Europe, Asia, and Australia, the company focuses on developing high-margin, low-cost resources, particularly in key shale basins like the Permian, Eagle Ford, and Bakken. COP also has significant positions in LNG, oil sands, and conventional offshore production, contributing to a diversified asset portfolio. Unlike integrated oil majors, the company is purely upstream, concentrating on production efficiency, technological innovation, and disciplined capital allocation. Crude oil remains the dominant driver of its output and revenue.
ConocoPhillips (NYSE:COP) delivered a strong performance in 2024, achieving above-guidance production growth of 4% YoY on a standalone basis. The company demonstrated robust performance across its portfolio with 5% growth in the Lower 48 and 3% growth in Alaska and international operations. The company achieved a 123% preliminary organic reserve replacement ratio in 2024, with a 3-year average of 131%. A significant strategic move was the acquisition of Marathon in late November, which added high-quality, low-cost supply inventory, with expected synergies of more than $1 billion by the end of 2025. The company generated a trailing 12-month ROCE of 14%, or 15% on a cash-adjusted basis, while returning $9.1 billion to shareholders, representing 45% of operating cash flow.
Looking forward, ConocoPhillips (NYSE:COP) expects to deliver low single-digit production growth in 2025 with a capital budget of $12.9 billion. In the Lower 48, the company plans to reduce capital spending by over 15% YoY while still maintaining low single-digit production growth, primarily due to Marathon acquisition synergies and drilling efficiency gains. The company expects 2025 to be the peak year of long-cycle spending at around $3 billion, followed by project start-ups from 2026 to 2029. Once these projects are online, the company anticipates $3.5 billion of incremental operating cash flow from NFE, Port Arthur, NFS, and Willow projects at $70 WTI, leading to approximately $6 billion of incremental annual sustaining free cash flow relative to 2025. All in all, management expects strong performance if oil prices hold at the current level.
Overall, COP ranks 3rd on our list of best crude oil stocks to buy right now. While we acknowledge the potential of COP as an investment, our conviction lies in the belief that 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.