How Will ConocoPhillips (COP) Stock Be Affected by New Oil Discovery in Senegal?

2014-10-10

NEW YORK (TheStreet) -- ConocoPhillips (COP) announced today that it discovered oil off the coast of Senegal in West Africa. Initial estimates point to between 250 million and 2.5 billion barrels of oil, with a mid-range estimate of 950 million barrels, according to the Financial Times.

The oil was discovered in the FAN-1 exploration well, located in the Sangomar Deep block about 60 miles offshore Senegal. ConocoPhillips holds a 35% working interest in the FAN-1 well.

Further evaluation is required in order to determine commerciality, the company said.  

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Shares of ConocoPhillips are up 0.22% to $74.07 in after-hours trading.

TheStreet Ratings team rates CONOCOPHILLIPS as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CONOCOPHILLIPS (COP) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, increase in net income, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • COP's revenue growth has slightly outpaced the industry average of 3.0%. Since the same quarter one year prior, revenues slightly increased by 3.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • CONOCOPHILLIPS reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CONOCOPHILLIPS increased its bottom line by earning $6.43 versus $5.90 in the prior year. This year, the market expects an improvement in earnings ($6.44 versus $6.43).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the Oil, Gas & Consumable Fuels industry average. The net income increased by 1.5% when compared to the same quarter one year prior, going from $2,050.00 million to $2,081.00 million.
  • The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.90 is somewhat weak and could be cause for future problems.