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ConocoPhillips (COP) Acquires Concho, Creates Permian Giant

Zacks Equity Research
·3-min read

ConocoPhillips COP recently announced the completion of the Concho Resources acquisition, following the receipt of shareholder approvals from both the companies. Amid the coronavirus pandemic, this has been one of the largest oil accords in the United States. The move drastically boosted ConocoPhillips’ Permian Basin footprint.

Last October, it announced a deal to buy Concho Resources in an all-stock transaction valued at $9.7 billion. Per the deal, Concho Resources shareholders were supposed to receive 1.46 ConocoPhillips common shares for each share of Concho Resources they held. The transaction has created an upstream giant, with a combined enterprise value of $60 billion.

Importantly, by 2022, the company is expected to save cost and capital of $500 million through disciplined capital allocation. As of now, the combined company has a resource base of 23 billion barrels of oil equivalent. It boasts an average cost of supply below $30 per barrel in the WTI price index. ConocoPhillips has welcomed Tim Leach to the board of directors and executive leadership team.

Headquartered in Houston, TX, ConocoPhillips’ balance sheet has been strong. Markedly, the acquisition is not expected to have affected its financial flexibility. At third quarter-end, the company had $2,490 million in total cash and cash equivalents, and long-term debt of nearly $14,905 million. Importantly, its massive liquidity position will enable it to pay off short-term debt of only $482 million. Also, the company has a debt to capitalization of 33%, lower than the industry average of 44%.

Price Performance

Its shares have gained 14.7% in the past six months compared with 50% rise of the industry it belongs to.

Zacks Rank & Stocks to Consider

ConocoPhillips currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Cactus, Inc. WHD, Suncor Energy Inc. SU and Summit Midstream Partners, LP SMLP, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Cactus’ bottom-line estimates for 2021 have increased nearly 14% in the past 60 days.

Suncor’s sales for 2021 are expected to increase 16.5% year over year.

Summit Midstream’s bottom-line estimates for 2021 have increased 12.4% in the past 60 days.

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ConocoPhillips (COP) : Free Stock Analysis Report
 
Suncor Energy Inc. (SU) : Free Stock Analysis Report
 
Summit Midstream Partners, LP (SMLP) : Free Stock Analysis Report
 
Cactus, Inc. (WHD) : Free Stock Analysis Report
 
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