Does ConocoPhillips Have the Balance Sheet to Handle Market Volatility?

ConocoPhillips COP is a leading exploration and production company and is highly exposed to oil and natural gas price volatility. However, unlike many upstream players, COP has the balance sheet strength to withstand unfavorable business scenarios. Thus, despite being vulnerable to extreme volatility in commodity prices, due to lower financial stress, the energy major is capable of continuing operations during periods of low oil prices.

The debt-to-capitalization of COP is 26.7%, much lower than the industry’s 49.8%. Thus, compared to composite stocks belonging to the industry, the company has significantly lower exposure to debt capital. By the end of the first quarter of 2025, COP had $7.5 billion in cash and short-term investments. On top of it, the oil and gas producer had $1 billion in long-term liquid investments, reflecting strong liquidity.

The company highlighted its balance sheet as A-rated and hence can get access to debt capital in favorable terms even during periods when the business environment becomes challenging. Thus, having presence in some of the prolific shale plays in the United States, along with a healthy balance sheet, ConocoPhillips will likely continue to generate handsome cash flows for shareholders.

XOM & CVX Also Have Healthy Balance Sheets

Like COP, Exxon Mobil Corporation XOM and Chevron Corporation CVX also have lower debt exposure.

The debt-to-capitalization of ExxonMobil is 12.2%, while CVX’s is 16.5%. Thus, despite having significant exposure to exploration and production activities, both XOM and Chevron can lean on their balance sheet to combat periods of low oil prices.

COP’s Price Performance, Valuation & Estimates

Shares of COP have plunged 10.7% over the past year compared with the 18.7% decline of the industry.

From a valuation standpoint, COP trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 5.31X. This is below the broader industry average of 10.89X.

The Zacks Consensus Estimate for COP’s 2025 earnings has been revised upward over the past seven days.

COP stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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