ConocoPhillips (NYSE: COP) stock performed in line with expectations in fiscal 2019. Fortunately, the largest U.S. oil & gas exploration and production company stunned investors with its operational and capital allocation strategies. The company had significantly declined its breakeven point along with giving a substantial boost to free cash flows in 2019.
Consequently, the company appears in a strong position to boost cash returns for investors in 2020. The E&P company currently offers a dividend yield of more than 3%.
It recently raised the quarterly dividend by 37.7% to $0.42 per share. In addition, COP announced to repurchase $3 billion of common stock to give a further boost to earnings and cash generation.
Market Fundamentals are Strong for ConocoPhillips Stock Price
The market fundamentals turned bullish for the oil & gas industry after the latest U.S. airstrikes in Iraq and Iran. The threats of war escalation could push oil prices higher in 2020. This is because Iran and Iraq are among the largest oil producers in the world.
Oil prices are currently trading around the highest level in the last eight months. At present, Brent crude stands around $70 a barrel while U.S. West Texas Intermediate is at $63.05 per barrel.
Meanwhile, ConocoPhillips has the potential to generate positive earnings and free cash flows at $40 per barrel. It has been aggressively working on declining its costs and boosting its earnings potential to cope with cyclical headwinds.
Ten Year Plan Exhibits Massive Returns and growth
The company’s 10-year business plan shows $50 billion in free cash flows along with the plan of returning $30 billion in share buybacks and $20 billion in cash dividends. It expects an annual production growth rate in the range of low mid-single digit.
The company anticipates the average capital investment of $7 billion in growth opportunities to sustain the growth trends. Overall, COP appears in a solid position to generate big returns for investors. ConocoPhillips’ stock price is also well set to increase the investor’s initial capital investments.
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