Mizuho Upgrades ConocoPhillips (COP) to Outperform

Mizuho analyst Nitin Kumar upgraded ConocoPhillips (NYSE: COP) from Neutral to Outperform with a price target of $134.00 (from $132.00).

The analyst comments "COP offers an enviable combination of long-duration inventory, a fortress balance sheet and peer-leading cash returns. While we took a cautious view of the Marathon acquisition earlier this, COP shares are down ~15% since announcing the deal (lagging peers by ~600bps), which in our view has sufficiently priced in the moderate inventory dilution associated with the deal. Moreover, with the acquisition now closed, COP is increasingly confident it can significantly over-deliver on deal synergies, with line of sight to capturing ~$1 billion of annual synergies (double its initial $500mm target). The company also indicated that the 2025 capital plan would be below $13bn - well inside consensus expectations and supportive of free cash generation. COP has also indicated a willingness to moderate shale activity levels if commodity prices are not supportive, although we would note that despite some fixed, long-cycle spending the company has plenty of margin of safety given its low corporate FCF breakevens. Meanwhile, as we take a more constructive view on longerterm natural gas prices, we believe COP’s expanding LNG footprint and advantaged commercial marketing business leave it favorably positioned to benefit from growing global LNG demand and international pricing. Futhermore, in 2025 the company should benefit from a wider differential between international LNG gas prices (TTF/NBP and JKM) and U.S. gas prices (Henry Hub) given its integrated LNG platform. At its recent Capital Plan Update, XOM indicated that Qatar NFE LNG would be online by YE25, slightly ahead of expectations. As a partner in the project, COP should benefit as well. COP shares are now trading at a modest discount to key large-cap E&P/Major peers on EV/EBITDA (~5.0x/4.2x on our 2025/26 estimates vs. peers at ~6.6/5.1x) and offers a higher FCF/EV (~7.0%/9.0% in 2025/26e vs. peers at 6.3%/9.0%) despite investing key projects and lower oil prices particularly in 2025 Thus, we see a compelling entry point. We raise our PT to $134 (from $132) and upgrade shares to Outperform."

For an analyst ratings summary and ratings history on ConocoPhillips click here. For more ratings news on ConocoPhillips click here.

Shares of ConocoPhillips closed at $101.02 yesterday.

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