Here's Why Hold Strategy is Apt for ConocoPhillips Stock Now

ConocoPhillips COP, a leading upstream energy firm in terms of production and reserves, is well-positioned to capitalize on handsome crude prices. Currently, the stock carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Factors Working in Favor of COP

West Texas Intermediate crude price, currently trading above the $60-per-barrel mark, is still favorable for upstream activities, as the breakeven oil price is significantly lower for existing wells in the shale plays.

COP secured a solid production outlook thanks to its decades of drilling inventories across its low-cost and diversified upstream asset base. The resource base represents the company’s strong footprint in prolific acres in the United States, comprising Eagle Ford shale, the Permian Basin and Bakken shale. COP boasted that its drilling and completion activities are becoming more efficient in all key U.S. basins.

Compared with composite stocks belonging to the industry, the leading upstream energy company has considerably lower exposure to debt capital. This reflects that COP is better positioned to rely on its strong balance sheet to withstand any adverse business scenario.

Risks to the COP’s Business

Being an upstream energy player, the company’s overall operations are exposed to oil and natural gas price volatility. Other exploration and production players that are also exposed to commodity price volatility are EOG Resources EOG, Diamondback Energy, Inc. FANG and Matador Resources Company MTDR.

EOG Resources

In the United States, EOG Resources is one of the foremost explorers and producers of oil and gas. It has crude reserves across the United States and Trinidad.

Diamondback Energy

Diamondback Energy, a leading pure-play Permian operator, reported ongoing enhancements in the average productivity per well in the Midland Basin. Thus, the exploration and production company will likely continue witnessing increased production volumes.

Matador Resources

Matador Resources is a well-known exploration and production company with a strong footprint in the prolific Wolfcamp and Bone Spring plays in the oil-rich Delaware Basin.

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

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