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Here's Why Hold Strategy is Apt for ConocoPhillips (COP) Now

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ConocoPhillips (COP - Free Report) is a leading upstream energy firm in the world on the basis of production and reserves. Currently, the firm carries a Zacks Rank #3 (Hold).

Factors Working in Favor

West Texas Intermediate crude price, trading at more than $65 per barrel, is still favorable for upstream activities. Being a leading exploration and production company globally, ConocoPhillips is well-positioned to capitalize on handsome crude prices. It has a strong footprint in prolific oil-rich plays like the Permian Basin, Eagle Ford and Bakken, brightening the company’s production outlook. For 2023, ConocoPhillips expects production at 1.78 to 1.80 million barrels of oil equivalent per day (MMBoE/D), suggesting an improvement from 1.74 MMBoE/D for 2022.

COP is strongly focused on returning capital to shareholders. Last year, the upstream firm returned as high as $15 billion to shareholders. The company employed a three-tier framework that comprised $5.7 billion in cash distributions through the ordinary dividend and variable return of cash route, while the remaining $9.3 billion was distributed through share repurchases.

ConocoPhillips is currently paying a dividend yield of 2.01%, higher than 1.97% yield of the composite stocks belonging to the industry.

Risks

Being an upstream energy player, the overall operations of the company are exposed to volatility in oil and natural gas prices. Moreover, increasing production and operating expenses are hurting its bottom line.

Stocks to Consider

Better-ranked players in the energy space include Evolution Petroleum Corporation (EPM - Free Report) , Global PartnersLP (GLP - Free Report) and PHX MINERALS INC. (PHX - Free Report) . While Evolution Petroleum and Global Partners sport a Zacks Rank #1 (Strong Buy), PHX MINERALS carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Through its ownership interests in onshore oil and natural gas properties in the United States, Evolution Petroleum is touted as a key independent energy player.

Global Partners is a leading operator of gasoline stations and convenience stores, having roughly 1,700 locations majorly in the Northeast. Over the past 60 days, Global Partners has witnessed upward earnings estimate revisions for 2023 and 2024, respectively.

The royalty interest production figures of PHX MINERALS, for the last four reported figures, depict significant improvement. With new wells coming online in the prolific Haynesville Shale and Bakken plays, PHX MINERALS is witnessing a production increase in royalty volumes.

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