If there is one thing that investors need to understand about the energy sector, it is that oil and natural gas prices are inherently volatile. But there's a somewhat counterintuitive takeaway here. Sometimes the best investment opportunities arise when business in the oil space isn't going so well.
Which is why investors might want to buy ConocoPhillips (COP -2.80%) today. Indeed, the company's successful business overhaul is so obvious that it is hard not to notice (at least partly because the company is so happy to point it out).
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Not such a great quarter for sales and earnings
ConcoPhillips' earnings in the second quarter of 2025 weren't great when you compare it to the same quarter in 2024, with a drop from $1.98 per share last year down to just $1.56 this year. But that doesn't even do justice to the energy company's earnings decline, since pulling out a one-time gain in the second quarter of 2025 drops the total down to $1.42 per share. That's the worst quarterly earnings outcome in over a year and down sequentially from even the first quarter.
But that's kind of how things go in the energy sector, where oil and natural gas prices drive the top and bottom lines of the income statement. In fact, it isn't even remotely unusual for ConocoPhillips' earnings to be volatile from quarter to quarter. That said, the energy sector is, generally, not in the best place today relative to the highs achieved in the price rebound coming out of the coronavirus pandemic.
For example, ConocoPhillips' share price has fallen around 25% from its late 2022 highs. For comparison, Brent Crude, a key international oil benchmark, and West Texas Intermediate Crude, a key U.S. oil benchmark, have both lost about a third of their value over the same span. This could actually be a good time for more aggressive investors to consider buying ConocoPhillips.
An obvious reason to like ConocoPhillips
Assuming you can stomach the uncertainty of a commodity-based business like ConocoPhillips, there are good things happening at the company. Notably, it has been integrating the acquisition of Marathon Oil and executing above expectations. For example, it added 25% more resources than projected when the deal was inked. Despite that, it also managed to reduce the number of rigs it was operating on the added properties by 30%. All in, it was able to double the business synergies it projected, saving $1 billion in costs annually. And management managed to set up $2.5 billion in dispositions in nine months, when it had previously been looking to shed $2 billion in assets over a two-year period.
The dispositions are a special consideration. ConocoPhillips isn't looking to get big for the sake of getting big. It is attempting to optimize its portfolio of assets so it can focus on only its best properties. That, in turn, should help to improve profitability over the long term. To be fair, even the best properties won't change the variability in energy prices. But wider profit margins means the company will make more money when times are good and have more downside leeway when times are bad. ConocoPhillips isn't hiding its success, it is proudly telling investors all about what it has achieved. In other words, there are obvious improvements taking shape at the business.
This is the setup for better performance in the future
To state the obvious again, as an energy company, energy prices are going to dictate ConocoPhillips' financial results. Conservative investors looking for consistent earnings or reliable dividends (the company pays a dividend regularly, but the amount of the dividend is highly variable) probably shouldn't buy the stock.
But if you are looking for direct exposure to energy prices, ConocoPhillips could be a solid choice given management's efforts to overhaul the business. When commodity prices take off again, the upgrades made to the portfolio will help supercharge ConocoPhillips' financial results. And Wall Street will almost certainly reward the stock for that.
