ConocoPhillips (COP -0.22%) has built one of the deepest, most durable, and diverse portfolios in the oil and gas sector. It has one of the lowest break-even levels in the industry at less than $40 a barrel, putting it in a strong position to navigate the sector's volatility.
One crucial component of the company's portfolio is its growing liquefied natural gas (LNG) business. Here's why it makes the oil stock a buy.
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Lots of LNG-fueled growth ahead
ConocoPhillips' global LNG portfolio includes equity interests in liquefaction facilities in Australia, Qatar, and Equatorial Guinea. These assets provide steady production and significant free cash flow.
The company is building upon that foundation by investing in three major global LNG development projects. It holds a 30% direct equity interest in Sempra's Port Arthur LNG facility on the U.S. Gulf Coast, which should start production in 2027. Additionally, the company formed two new joint ventures with QatarEnergy in 2022 to invest in the North Field East and North Field South projects.
Those projects should come online in phases, starting in 2026 and continuing through 2028. ConocoPhillips' trio of LNG projects will provide a meaningful boost to its free cash flow over the next several years.
The oil company has also been securing capacity from other LNG facilities. It recently inked a deal to buy 1 million tonnes of LNG per year from NextDecade's Rio Grande LNG project. That deal enabled the LNG developer to completely commercialize its fifth LNG liquefaction train at this site.
ConocoPhillips also recently signed a deal for 4 million tonnes per year for Port Arthur LNG Phase 2. While it won't be a direct equity investor, it will be a cornerstone customer. These deals are part of the company's strategy to secure additional LNG supply to sell globally.
ConocoPhillips' LNG investments are a key catalyst driving the company's view that it will deliver sector-leading free cash flow growth through the end of the decade. That robust growth rate makes it a top oil stock to buy right now.
