Can COP's Low-Cost Asset Portfolio Survive Oil Price Volatility?

ConocoPhillips COP is a leading player in the energy sector, primarily involved in exploration and production activities with a strong global presence.The company’s involvement in the upstream segment makes it extremely vulnerable to the volatility in oil and gas prices. The global economic growth and demand-supply dynamics influence oil and gas prices, which may significantly impact the financial performance of ConocoPhillips.

However, ConocoPhillips’ high-quality, low-cost and diversified upstream asset portfolio is capable of supporting its operations even during periods of low commodity prices. Notably, the energy firm’s presence in the prolific shale basins of the United States, like the Permian Basin, Eagle Ford Basin and the Bakken Shale, with low production costs, should enable it to stay resilient during tough commodity price environments. The company highlights that its durable and resilient portfolio of assets has breakeven costs as low as $40 per barrel, both in the United States and internationally. This allows it to maintain stable performance and sustainable cash flows even when oil prices are low.

Furthermore, ConocoPhillips’ all-stock acquisition of Marathon Oil in November 2024 expands its presence in the U.S. Lower 48 and adds significant high-quality, low-cost inventory, close to COP’s existing operations in the Permian Basin and the Bakken Shale, thereby strengthening its upstream asset base that can support low-cost production for several years. These factors provide ConocoPhillips with a competitive advantage to navigate challenging commodity price environments.

High-Quality Inventories Give XOM and EOG a Competitive Edge

Exxon Mobil Corporation XOM and EOG Resources, Inc. EOG are two global energy firms that can thrive even during periods of low oil prices.

ExxonMobil’s advantaged assets in the Permian Basin of the United States and Guyana, with low breakeven costs, should support its bottom-line profitability. The company mentioned on its recent earnings call that it plans to lower its break-even costs to $35 per barrel by 2027 and $30 per barrel by 2030. In other words, even if crude oil prices reduce significantly, XOM will be able to maintain its financial performance and generate profits.

EOG Resources is a leading independent exploration and production company, with operations focused on the prolific acres in the United States as well as several resource-rich international basins. EOG boasts a high-return, low-decline asset base and stands out among the low-cost producers in the United States. The company focuses on maintaining a resilient balance sheet and lowering production costs, which should enable it to withstand challenging commodity price environments.  

COP’s Price Performance, Valuation & Estimates

Shares of COP have plunged 10.8% over the past year compared with the 17.5% decline of the industry.

From a valuation standpoint, COP trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 5.36X. This is below the broader industry average of 11.07X.

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

COP, XOM and EOG currently carry a Zacks Rank #3 (Hold), each. 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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