EIA Expects Oil Price to be Weaker: Can ConocoPhillips Survive?

ConocoPhillips COP is an exploration and production giant. Hence, by the very nature of its business model, COP is highly vulnerable to fluctuations in oil and gas prices. With the U.S. Energy Information Administration (“EIA”) expecting oil prices to decline significantly this year, can COP survive the low price?

EIA, in its latest short-term energy outlook, stated that the spot average price of West Texas Intermediate crude will be $64.16 per barrel this year, lower than the $76.60 per barrel recorded last year. EIA stated that rising worldwide oil inventory will hurt the commodity price. Lower oil price, thus, is unfavorable for exploration and production activities, and ConocoPhillips will not be an exception.

However, with operations in resources with low breakeven costs, ConocoPhillips is likely to sail through the expected lower oil prices. COP has operations in the Lower 48, which comprise Permian, the most prolific basin in the United States. Other low-cost shale plays in the Lower 48 include Bakken and Eagle Ford. Thus, it is expected that upstream operations will be profitable for COP even if the oil price remains low compared to the prior year.

XOM & CVX Also Have Permian Presence

Exxon Mobil Corporation XOM and Chevron Corporation CVX also have a strong presence in the Permian. Thus, even if the oil pricing environment remains weaker year over year, as projected by EIA, low breakeven costs of both CVX & XOM will be the savior.

COP’s Price Performance, Valuation & Estimates

Shares of COP have declined 12.8% over the past year compared with the 17.2% 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 5.20X. This is below the broader industry average of 10.87X.

The Zacks Consensus Estimate for COP’s 2025 earnings has seen downward revisions over the past 30 days.

ConocoPhillips 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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