With oil prices soaring 18 percent in the last year, recently reaching a 2½ year high of $114 per barrel, it’s a good time to be a major oil company. And ConocoPhillips (COP), while it has hit a few bumps, is reaping the rewards of the price move.
ConocoPhillips, the third-largest U.S. oil company, reported that profit soared 44 percent in the first quarter to $3.03 billion from $2.1 billion a year earlier. Revenue climbed 27 percent to $58.2 billion.
Rising oil prices helped ConocoPhillips withstand a 6.9 percent drop in production caused by the civil war in Libya and unplanned maintenance at two Texas refineries.
An increase in refining margins also helped. Refining margins are the difference between the price a refiner pays for its crude oil and the price it charges for the products it refines from crude, including gasoline, diesel oil, and jet fuel.
Share buybacks coming
Going forward, ConocoPhillips shares should benefit as the company expects to complete assets sales of $5 billion to $10 billion through this year and next. As a result, it plans to execute $5 billion to $10 billion of share repurchases this year.
Standard & Poor’s analyst Michael Kay upgraded ConocoPhillips to buy from hold after its earnings report. He raised his share-price target to $93 from $74 previously. The stock recently traded at $73.72.
“We expect COP to benefit from strong global oil and gas markets, as 63 percent of production is overseas, where Brent (North Sea) crude trades at a premium to WTI,” Kay writes. He’s referring to West Texas Intermediate, the main U.S. crude oil.
“Also, with 66 percent of its natural-gas production coming from international basins, COP is less exposed to weak U.S. market,” Kay says. He raised his estimate for this year’s earnings by 20 percent and for next year’s by 18 percent.
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