Is ConocoPhillips' Operation Resistant to Oil Price Volatility?

ConocoPhillips COP has a strong production outlook, backed by its decades of low-cost inventory of drilling sites. The upstream energy giant added that the costs are even lower than $40 per barrel, allowing it to continue producing oil at low prices for years to come. The low-cost resources of COP are spread across the Lower 48, which comprises prolific shale plays like the Permian, Eagle Ford and Bakken.

Thus, the energy major’s business model is largely immune to commodity price volatility. This is because ConocoPhillips can produce oil at such low costs that even when prices fall, the company can maintain its upstream operations and turn a profit. With the current West Texas Intermediate (WTI) crude price around $65 per barrel and break-even costs much lower, COP’s operations are highly profitable at present.

This seems very reassuring for investors, since, unlike COP, upstream players are generally significantly vulnerable to the fluctuations in oil prices. Thus, ConocoPhillips is better placed and hence can sustain its operations through the ups and downs of the market and can generate handsome cash flows for shareholders.

Are XOM & EOG’s Businesses Vulnerable to Oil Price?

Exxon Mobil Corporation XOM and EOG Resources, Inc. EOG are two leading energy players that can survive low oil prices.

ExxonMobil 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. Thus, this level of costs will be highly beneficial for XOM’s bottom line. In other words, ExxonMobil will remain profitable even if crude oil prices drop significantly and stand to earn substantially more when prices climb.

EOG Resources has a strong balance sheet and is committed to maintaining robust financials. EOG added that even if oil prices decline to below $45 per barrel, it aims to lean on its balance sheet strengths to navigate a challenging business environment.

COP’s Price Performance, Valuation & Estimates

Shares of COP have declined 19.1% over the past year against the 16.7% fall 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 5.02X. This is above the broader industry average of 11.15X.

The Zacks Consensus Estimate for COP’s 2025 earnings hasn’t been revised 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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