As 2018 begins, the oil and gas industry seems to be caught in an upward trend for a change. Oil prices are rising, and so are company share prices.

Take, for instance, British oil major BP (BP -3.91%) and U.S. independent producer ConocoPhillips (COP -3.89%). Both have seen double-digit share price increases in the past year, with BP and Conoco both higher by about 12%. The companies' managements have high hopes for 2018. 

Let's compare these companies on three metrics to try to determine which is the better buy heading into the new year.

A row of pump-style oil wells in a desert landscape

BP and Conoco shares have been outperforming the S&P for the past six months. Is this the start of a trend? Image source: Getty Images.

Dividend: more than yield

A dividend is an important piece of the value equation for an oil and gas company, and luckily for investors, both BP and Conoco reward shareholders through dividends. But BP's yield is fully three times what Conoco is yielding: 5.7%, to Conoco's 1.9%. Both yields have dropped a bit as the companies' stock prices have risen, but that's still a huge difference.

It's not all about current yield, though. A company's payout history is important, too, and both of these companies have slashed their dividends in recent memory. BP, of course, was forced to cut its payout in the wake of the Deepwater Horizon oil spill in the Gulf of Mexico in 2010. ConocoPhillips cut its dividend by nearly two-thirds more recently, in 2015 as a result of the oil price slump. 

So neither company is a stranger to a cut, and both have had a spotty history in recent quarters as far as dividend coverage is concerned. Given these similarities, the superiority of BP's yield has to carry the day. 

Winner: BP.

Returns: an unfair advantage

Metrics such as return on capital employed (ROCE), return on invested capital (ROIC), and return on equity (ROE) measure how successful a company's management has been in deploying investors' cash. And in all three of these metrics, you'll notice something very different about BP's numbers vs. Conoco's:

Metric BP Conoco
ROCE 3.8% (3.6%)
ROIC 2.4% (4.2%)
ROE 4% (7.4%)

Data source: YCharts. All figures on a trailing-12-month basis. Chart by author.

BP's return metrics are all positive, while Conoco's returns are all negative. That would seem to indicate that BP's management has been doing a far better job of managing the company's capital than Conoco's has. But those numbers don't tell the whole story.

As an independent oil and gas exploration and production company, Conoco's business was hit particularly hard by the oil price downturn. While the larger BP had a profitable downstream refining and marketing business to help buoy the company's finances, Conoco did not. So while both companies' returns have taken a hit since 2014, Conoco's were hit far harder. Both companies have improved their returns since mid-2016, but Conoco has had a deeper hole to climb out of. In other words, this may say less about Conoco's management than it does about the inherent strength of diversification at BP. 

Still, whether it's coming from better management, a better business model, or luck of the draw, BP still comes out ahead in this category.

Winner: BP.

Plans: what to expect

Past returns and current yield can only tell us so much, though. Investors should also consider what these companies are planning for the future. 

Conoco is definitely looking to turn the page on an unprofitable couple of years. The company has made big strides since 2015 to right its business model, selling off underperforming Canadian assets and introducing a shareholder-friendly business plan. It's hoping to grow its dividend, buy back shares, and continue reducing its debt. Those plans have already been rewarded, as the market has bid up the company's stock by about 25% in the past six months alone. 

But BP has big plans, too, recently announcing plans to restart its share-buyback program, making it the first of the oil majors to do so. It's seeing big production gains from some major projects it began in 2017, including big gas projects in Egypt and offshore Trinidad, which should also pay off for investors. 

This one's a tough call, but I'm going to give it to Conoco because of the level of detail in its plan.

Winner: ConocoPhillips.

A lopsided contest

BP has by far the better dividend yield and return metrics, and a comparable plan to reward shareholders in the future. And while it's tough to compare the companies' valuations because of recent gaps in positive quarterly earnings or positive quarterly free cash flow, BP's enterprise value-to-EBITDA ratio -- another valuation metric -- is more favorable than Conoco's on both a forward and trailing basis. In light of all that, BP is clearly the better buy right now.

That said, it's entirely possible that Conoco will flawlessly execute its plan while BP stumbles. And, of course, there's always the possibility that some unforeseen event -- a la Deepwater Horizon -- could come along and derail either company. Oil and gas investors should keep an eye on both companies, but for those buying in now, BP looks like the best bet.