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This Dividend-Paying Oil Stock Is a Great Value for Generating Passive Income
COPConocoPhillips(COP) The Motley Fool·2025-02-24 15:15

Core Viewpoint - ConocoPhillips is positioned as a strong investment opportunity due to its recent acquisition of Marathon Oil and its focus on long-term growth while maintaining substantial shareholder returns, despite current oil price volatility [2][3][14]. Group 1: Acquisition and Production Growth - ConocoPhillips completed a 22.5billionacquisitionofMarathonOil,withexpectedproductiongrowthfrom1.987millionbarrelsofoilequivalentperday(boe/d)in2024to2.34to2.38millionboe/din2025,markingan18.822.5 billion acquisition of Marathon Oil, with expected production growth from 1.987 million barrels of oil equivalent per day (boe/d) in 2024 to 2.34 to 2.38 million boe/d in 2025, marking an 18.8% increase at the midpoint [3]. - The company is prioritizing cost reduction and incremental production increases in the low-single digits annually, with a planned 15% reduction in capital spending year over year due to synergies from the acquisition [4][5]. Group 2: Capital Expenditures and Long-Term Projects - ConocoPhillips is forecasting 12.9 billion in capital expenditures for 2025, the highest in over a decade, with a peak in long-cycle spending expected at around 3billion[7][8].−Thecompanyanticipatesgenerating3 billion [7][8]. - The company anticipates generating 3.5 billion in incremental cash flow from operations from new projects starting between 2026 and 2029, leading to approximately 6billioninincrementalannualsustainingfreecashflowrelativeto2025[8].Group3:ShareholderReturns−ConocoPhillipsplanstoreturn6 billion in incremental annual sustaining free cash flow relative to 2025 [8]. Group 3: Shareholder Returns - ConocoPhillips plans to return 10 billion to shareholders in 2025, comprising 6billioninstockrepurchasesand6 billion in stock repurchases and 4 billion in dividends, supported by an expected 8billioninfreecashflow[10].−Thecompanyaimstobuybackbetween8 billion in free cash flow [10]. - The company aims to buy back between 5 billion and 7billioninstockannuallyoverthreeyearsfollowingtheacquisition,withatargetof7 billion in stock annually over three years following the acquisition, with a target of 6 billion for 2025 [11][12]. Group 4: Investment Valuation - ConocoPhillips is viewed as an excellent value investment with a price-to-free cash flow ratio of 14.7 and a price-to-earnings ratio of 12.8, particularly for investors who support the Marathon acquisition as a strategic long-term move [14]. - The stock is currently at a two-year low, presenting a potential buying opportunity for long-term investors, although the inherent volatility of the energy sector should be considered [15].