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ConocoPhillips COP

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ConocoPhillips Grows in the Permian With Cheap Shell Deal, Bumps Dividend 7%

Allen Good, CFA Sector Strategist

Analyst Note

| Allen Good, CFA |

For the second time in a year, ConocoPhillips is enlarging its holdings in the Permian, with the acquisition of Shell’s shale assets there in a $9.5 billion all-cash transaction expected to close in the fourth quarter of 2021. Conoco is getting a good deal. The $42,000 per net acre places it slightly above recent deals in the region. Meanwhile, adjusting for production value assuming $30,000 per barrel of oil equivalent, the net acre price of $15,600 is higher than its Concho acquisition at approximately $10,000 per net acre. However, the higher valuation accounts for the maturity and high portion of proved developed reserves of the position. Compared with Rystad’s estimated value of $14.7 billion, assuming $60/bbl, it’s a steal. We maintain our fair value estimate and narrow moat rating.

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Company Profile

Business Description

ConocoPhillips is a U.S.-based independent exploration and production firm. At the end of 2020, it produced 727,000 barrels per day of oil and natural gas liquids and 2.4 billion cubic feet per day of natural gas, primarily from Alaska and the Lower 48 in the United States and Norway in Europe and several countries in Asia-Pacific and the Middle East. Proven reserves at year-end 2020 were 4.5 billion barrels of oil equivalent.

925 North Eldridge Parkway
Houston, TX, 77079
T +1 281 293-1000
Sector Energy
Industry Oil & Gas E&P
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2020
Stock Type Hard Assets
Employees 10,100