Can ConocoPhillips Sail Through Oil and Natural Gas Price Volatility?

ConocoPhillips COP is an exploration and production giant. Hence, by the very nature of its operations, and like any other upstream player, its overall business is vulnerable to the extreme volatility in oil and natural gas prices. Now, the question is: Can COP sail through the business uncertainty?

It is worth noting that ConocoPhillips can rely on its strong balance sheet to navigate unfavorable or uncertain business conditions. The company has significantly lower exposure to debt capital compared to its peers. COP’s total debt-to-capitalization of 26.4% is markedly lower than the 49.1% of the industry’s composite stocks.

Additionally, the company operates in areas where the cost of production is low. ConocoPhillips’ operations in the Lower 48 comprise the major shale plays like the Permian Basin, Bakken and Eagle Ford. Also, by acquiring Marathon Oil, COP has markedly strengthened its footprint in the Lower 48. Thus, if the oil price turns low, the company’s operations will remain profitable, considering low break-even prices.

EOG & XOM Also Have Strong Balance Sheets

Like COP, EOG Resources Inc. EOG and Exxon Mobil Corporation XOM also have low debt capital exposure. Thus, both EOG & XOM can combat periods of low oil prices while relying on their balance sheet strengths.

While EOG has a debt-to-capitalization of 12.7%, ExxonMobil’s debt-to-capitalization stands at 12.6%.

COP’s Price Performance, Valuation & Estimates

Shares of COP have declined 10% over the past year compared with the 13.9% plunge of the composite stocks belonging to the industry.

From a valuation standpoint, COP trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 5.33X. This is below the broader industry average of 10.98X.

The Zacks Consensus Estimate for COP’s 2025 earnings has seen downward revisions over the past seven days.

ConocoPhillips 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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