7. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Investors in Q1 2024: 62
3 Yr Revenue Growth: 44.04%
Fisher Investments’ Q1 2024 Stake: $958 million
ConocoPhillips (NYSE:COP) is an American oil and gas exploration and production firm headquartered in Houston, Texas. When compared to big ticket oil names like Chevron or Exxon, ConocoPhillips (NYSE:COP)’s valuation depends a lot more on its inventory and the lifetime of its drilling projects. This is because a large portion of its oil production is from US shale, and it also means that any changes to the lifetime estimates of its projects can affect the share price negatively or positively. ConocoPhillips (NYSE:COP) is also making big moves as it plans to acquire Marathon Petroleum (another shale producer) for a whopping $22.5 billion price tag. While the deal is yet to receive FTC clearance if approved, it would make ConocoPhillips (NYSE:COP) America’s largest independent oil and gas producer. However, it might not provide the firm with a lot of production boost, since Marathon’s production focuses on the mature regions of Eagle Ford and Bakken in the US. However, the deal will help beef up ConocoPhillips (NYSE:COP)’s income statement, and add 3% to its EPS in 2025 and 2026 along with contributing $500 million in synergies.
ConocoPhillips (NYSE:COP)’s management commented on the crucial question of the firm’s cost control with respect to drilling laterals, sharing during the Q1 2024 earnings call that it is aiming to increase lateral length for better cost management:
“Let’s start on some of the longer laterals. I talked a little about previously on the operating efficiency on the frac spreads and drilling. Again, our teams are very focused on long lateral development, as we go forward. As a reminder for the group on the phone, if you look at our Permian inventory, 80% of the laterals are 1.5 miles or greater and we got 60% 2 miles or greater. If you look specifically at 2024, again 80% of the wells or 1.5 miles or greater and about 20% are 3-mile laterals. And we’ve got – as I mentioned before, we got some of those longer laterals coming online in the second half of this year. We see up to that 30% to 40% improvement on cost of supply when you move from a 1-mile lateral to a 3-mile lateral.
So we’re seeing those efficiency improvements out there. Maybe just staying on the drilling side, specifically in the Midland Basin, we’ve had some recent success there, where we’ve had internal record wells. We look from spud to rig release so very favorable performance over the last three months and we continue to see that on the drilling side. And the bottom line is, it does translate as we focus in on more feet per day, more stages per day more pumping hours per day. And we’ve seen that 10% to 15% improvement of pumping hours from 2022 to 2033. That all translates to improved capital efficiency and therefore lowering your cost supply. So it’s very encouraging across all fronts.”
