Why This ConocoPhillips Analyst Downgrades The Stock And Slashes The Price Target By 11%

Shares of ConocoPhillips COP opened Monday’s trading on a negative note, just days after its analyst and investor meeting, where it presented its 10-year outlook.

Although the company’s outlook seems “compelling,” its cash generation is backend loaded from between 2029 to 2032, according to Mizuho Securities.

The ConocoPhillips Analyst: Nitin Kumar downgraded the rating for ConocoPhillips to Neutral, while lowering its price target by around 11% to $128.

The ConocoPhillips Thesis: The company’s 10-year outlook needs around a 7% CAGR (compounded annual growth rate) in the Permian, which is likely to require around 7,400 wells “to be drilled without loss of productivity over 10 years,” Kumar said in the downgrade note.

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“Further, with ~4,700 Permian locations remaining and ~1,115 wells drilled in 2032, the company will need to address longer-term production and capital efficiency post-2032,” the analyst further wrote.

“Although the base plan is modeled at $60/bbl WTI, it includes a 2.25% annual escalator,” Kumar stated. “Costs are also increased at this pace, but the company is assuming capital deflation from current levels to start the plan,” he added.

COP Price Action: Shares of ConocoPhillips had declined by 2.18% to $106.15 at the time of publishing Monday.

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Photo: Courtesy ConocoPhillips