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Is ConocoPhillips (COP) A Bargain On Its New LNG Supply Deal?

Simply Wall St · 3d ago

ConocoPhillips (COP) is back in focus after signing a long term agreement to purchase 1 million tons of LNG annually from Venture Global, supporting its effort to expand LNG exposure.

Recent LNG headlines land on top of a strong run for ConocoPhillips, with the share price up 18.41% over the past 90 days and the total shareholder return at 39.55% over the last year. Momentum has eased slightly with a 1 month share price return that declined 4.36%, although the stock is still trading at US$128.40 after a 1 day share price return of 1.30%. Investors are weighing long term LNG growth prospects against shorter term volatility.

Scan how ConocoPhillips compares with other LNG focused producers by reviewing the hand picked list of solid balance sheet and fundamentals (25 results) that could benefit if long term gas demand stays firm.

The sharp move in ConocoPhillips, backed by only modest recent earnings growth, raises a simple tension. Are you paying for a sturdier LNG centric business, or for a sentiment swing around long term gas demand expectations?

Most Popular Narrative: 12% Undervalued

Against a last close of $128.40, the most followed narrative pegs ConocoPhillips at a fair value of $146.08, implying upside that hinges on LNG build out, lower breakeven costs and large project execution over the next few years.

The company’s outlined path to a $7b free cash flow uplift by 2029, helped by lower free cash flow breakevens from the mid US$40s WTI range today to the low US$30s, suggests that margin expansion and higher earnings power are still ahead of what recent results fully capture. Progress on long life conventional and international projects, including the Willow development at roughly 50% completion and the planned Iraq Kirkuk stake with around 3b barrels of initial gross recoverable resources at an expected US$30 per barrel cost of supply, could add durable production and support structurally higher net margins.

See why 103 investors see ConocoPhillips as 12% undervalued.

Result: Fair Value of $146.08 (UNDERVALUED)

Still, the ConocoPhillips narrative can crack if large projects like Willow or Port Arthur slip on timing or if higher capital spending erodes free cash flow.

Find out about the key risks to this ConocoPhillips narrative.

Next Steps

Sentiment around ConocoPhillips is split, which is exactly why you should move quickly, review the full picture, and weigh the 1 key reward and 2 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.