ConocoPhilips (NYSE: COP) is the third largest oil company in the United States. With proven reserves of 35 billion barrels of oil, COP has the oil assets, upstream production and -- equally important -- downstream refining capacity to benefit from both oil's current high price and its likely, continued ascent, long-term.
Further, COP's 12 U.S. refineries represent the most compelling operations positive for the next 3-5 years ahead. In addition, COP has a $3 billion plan in place to expand the company's ability to refine heavy sour crude oils.
The refinery operation's significance: U.S. refinery capacity remains barely adequate, particularly for gasoline. The Reuters FY 2008/FY 2009 EPS consensus estimates for COP are $10.47 to $10.25.
The risks? Analysts are keeping an eye on COP's production levels. A sustained, large reduction in U.S. gasoline consumption would also hurt COP's results.
The First Call mean rating for COP is: Hold [17 firms]. Mean 2008 target: $83 [high: $112, low: $73.00].
Stock Analysis: ConocoPhilips is moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon of at least 2 years should benefit from COP's shares. Sell/Stop Loss if you were to purchase shares in this company: $63.
Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.
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