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Investment Thesis – ConocoPhillips is the largest independent oil and gas producer with a major new opportunity in LNG. It has a well-balanced portfolio, which generates a top quartile return on capital in its peer group. COP has a 2025 target price of $148/share (+35%) based on its 4 year average 6.3x multiple on 2025E cash flow of $23.54/share, which generates a free cash flow yield of 9%.
COP plans to grow production at a 4-5% rate 2023-2032. It expects to grow cash flow from operations a rate ~6% in a flat $60/B real WTI oil price environment. Oil & gas prices will likely be much higher over the period.
The WTI oil price is forecast to average ~$79/B in 2024 and ~$89/B in 2025. COP does not hedge its production, unlike most E&Ps.
COP returned 51% ($11.0 bn) of 2023 non-GAAP cash flow to shareholders in buybacks and dividends. It indicates it will return ~44% ($9 bn) in 2024.