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Rare Open Market Buy Targets Cash-Rich Oil Major with Synergy Upside

by | Aug 12, 2021

Conoco Philips (COP) this week seeing the largest open market buy in over 20 years after director RA Walker bought 22,500 shares at $55.50, a $1.25M investment. COP has pulled back from recent highs and forming a nice base and higher low vs the April drawdown and earlier January pullback. The bigger weekly flag has upside to $75-$80. The $75.5B company trades 11.4X earnings, 2.6X sales, and 8.5X cash with a 3% yield. COP has been benefiting from better prices for crude this year as well as volume gains from their acquisition of Concho which expanded their overall base. The late 2020 deal made COP the top producer in the Permian basin and looks smart in hindsight given the low debt taken on, rebound in crude prices and valuable acreage added. COP talked a lot last week about execution and meeting their guidance laid out in early 2021 which has allowed them to boost capital return and with prices staying resilient they likely increase distributions throughout 2021. Analysts have an average target for shares of $72 with a Street High $86. Piper raising estimates to $80 on 7/23 as crude oil tightness adds further momentum to the robust free cash flow outlook and COP has upside due to accelerating shareholder distributions. Goldman Sachs positive on 7/1 as their 2022 capital spend guidance came in above initial estimates but it should be balanced out by a higher production outlook. Hedge fund ownership fell 5% last quarter. Short interest is 1.11%.

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