ConocoPhilips Gets First Upgrade Of The Year From JPMorgan

ConocoPhillips COP shares have lost 9 percent year-to-date. JPMorgan’s Phil Gresh upgraded the rating for the company from Underweight to Neutral, saying that the stock has been “a relative laggard” among peers year-to-date, despite having no downstream exposure and an improved upstream pricing environment. The price target has been maintained at $44.

Lower Project Spend, But High Leverage

Analyst Phil Gresh expects ConocoPhillips to grow production at a ~0.5 percent CAGR [ex-Libya and including asset sales] during FY14-18. The rate is at the low end of the group, “driven by long-life capital projects (LNG, oil sands).”

ConocoPhillips exhibited capital discipline, lowering its 2015 and 2016 capital budgets significantly. The company may enjoy increased flexibility in 2016-2017, with the winding down of major project spend, Gresh mentioned. He added, however, that ConocoPhillips’ peer-high leverage left little room for error.

“In our view, COP’s stock has continued to lag peers even though the macro environment has improved for E&P and COP lacks a downstream business, and valuation now seems fair relative to our group,” the analyst added.

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Lower Project Spend, But High Leverage