ConocoPhillips Plays Defense, Preps For Offense With $9B Cash Return On Deck: Analyst

Group 1 - JPMorgan initiated coverage of ConocoPhillips with a Neutral rating and a price target of $126, down from $139, reflecting a cautious outlook on oil fundamentals due to geopolitical and market uncertainties [1] - ConocoPhillips is well-positioned with a strong balance sheet and low sustaining capital requirements, allowing it to capitalize on potential upside in oil prices [1][3] - The pending merger with Marathon Oil Corp is expected to increase ConocoPhillips' oil beta and enhance its growth capacity [1] Group 2 - ConocoPhillips plans to return $9 billion in cash to shareholders in 2024, with $5 billion allocated for buybacks, potentially increasing to $11 billion in 2025 post-merger [2] - In a cautious scenario, total cash returns to shareholders over the next two years are expected to be $9-10 billion, representing nearly half of the forecasted operating cash flow [2] Group 3 - The company's long-cycle investments, including the Willow and Port Arthur projects, are expected to generate strong free cash flow and production growth, with a forecasted annual production increase of 4% to 3.1 million barrels of oil equivalent per day by 2032 [3] - Cumulative free cash flow is projected to reach $99 billion by 2032, indicating solid long-term prospects despite near-term uncertainties [3] Group 4 - Despite a Neutral rating, ConocoPhillips is considered a core holding in the E&P sector due to its robust portfolio and shareholder-friendly cash return strategy [4] - The company is expected to offer attractive cash returns with yields of 7% in 2025-26, while remaining cautious amid potential oil price volatility [4]