Please ensure Javascript is enabled for purposes of website accessibility

Why ConocoPhillips Shares Jumped 36.7% in April

By John Bromels - May 6, 2020 at 9:51AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The oil and gas driller's stock outperformed the market as oil prices recovered.

What happened

Shares of the ConocoPhillips (COP 0.25%), the largest U.S. oil and gas exploration and production company (E&P), rose 36.7% in April, according to data provided by S&P Global Market Intelligence. The move partially reversed the losses the company experienced in March, when its shares fell by 36.4%. 

However, even though April's percentage gain was nearly identical to March's percentage loss, the April percentage comes from a lower baseline, so Conoco's price declined by 13.1% over the combined two-month period. Since the beginning of the year, the company's shares have lost 37.1% of their value. 

Brown liquid pours from a golden oil drum.

Image source: Getty Images.

So what

ConocoPhillips' move was part of a larger recovery in the broader oil industry, which was hammered in March, first as a price war broke out between Saudi Arabia and Russia, and then as coronavirus-related travel restrictions caused demand for automobile and jet fuel to dry up. Crude oil prices lost about half their value in March. 

The severity of March's price downturn combined with questions about the severity and duration of coronavirus-related shutdowns caused ConocoPhillips to take drastic action. It cut its 2020 capital spending budget by 10% and reduced its share repurchases by two-thirds. Those actions were mild compared to the deep cuts made by some of its E&P peers.

On April 12, Saudi Arabia and Russia called at least a temporary halt to their price war, and together with other OPEC and non-OPEC nations, including the U.S., agreed to a 9.7 million barrel/day reduction in global crude output. News of the deal, combined with moves by several U.S. governors to begin easing restrictions, cheered energy investors, who bid up ConocoPhillips' share price. 

Now what

The oil market is still a volatile and uncertain place for investors. While ConocoPhillips is one of the largest E&Ps, with a stronger balance sheet than most, it's still beholden to oil prices, which are currently hovering at levels we haven't seen since the 1990s. Meanwhile, there's a global shortage in oil storage, and demand is still weak. 

Investors will probably want to stay away from oil producers, including ConocoPhillips, until the situation improves in the oil patch.

John Bromels has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

ConocoPhillips Stock Quote
ConocoPhillips
COP
$105.14 (0.25%) $0.26

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
397%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.