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Why ConocoPhillips Stock Rocketed Nearly 30% in February

By Matthew DiLallo - Mar 4, 2021 at 9:41AM

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The oil giant gained almost $20 billion in market value last month.

What happened

Shares of ConocoPhillips (COP 0.39%) surged 29.9% in February, according to data provided by S&P Global Market Intelligence. Fueling the oil stock were higher oil prices and its fourth-quarter results.  

So what

Crude prices continued rallying last month. West Texas Intermediate (WTI), the primary U.S. oil benchmark, rose almost 20% during the month, closing above $60 a barrel and nearly at a two-year high. Several factors drove up the price of oil, including OPEC's decision to continue holding back supply and improving demand as vaccines roll out to combat the coronavirus pandemic. Those higher oil prices are a boon for producers like ConocoPhillips, enabling them to generate more cash flow. 

An oil pump with the sun bursting behind it.

Image source: Getty Images.

The other factor fueling ConocoPhillips' rally last month was its fourth-quarter results. While the oil giant reported a loss of $0.19 per share, that beat analysts' expectations by $0.06 per share. Weighing on the company's results were lower oil prices and production volumes, which it lessened by reducing costs. ConocoPhillips generated $1.7 billion of operating cash flow during the quarter, which was enough to cover the $1.1 billion it spent on capital projects and its $500 million dividend outlay with room to spare. 

ConocoPhillips also revealed its operating plans for 2021. The oil giant, which closed its merger with Concho Resources in January, expects to spend $5.5 billion on capital projects this year. That should enable the combined company to produce about 1.5 million barrels of oil equivalent per day. ConocoPhillips projects that it will generate between $10.5 billion and $10.8 billion of operating cash flow this year at $50 oil and even more if oil stays above $60 a barrel. That has it on track to produce a gusher of excess cash after paying its dividend. Because of that, the company could return even more money to investors this year via share buybacks and additional dividends. 

Now what

ConocoPhillips is starting to cash in on higher oil prices. The oil giant has spent several years reducing costs, which should continue in 2021 as it integrates Concho Resources. Because of that, it's on track to collect a windfall of cash if oil prices cooperate that it could use to reward investors.

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