Q Why haven’t my ConocoPhillips shares done better this year? They had been great.
A Oil and gas price movements are the overriding consideration for this company, one of the nation’s largest oil companies and refiners.
It also must cope with oil-producing nations that can extract better contracts from it than before energy prices began their dramatic run.
ConocoPhillips, the result of the 2002 merger of Conoco and Phillips, owns a 20 percent equity stake in Russia’s Lukoil, giving it access to significant hydrocarbon reserves but also political risk.
Meanwhile, it is in talks with Iraq about possible projects, perhaps in partnership with Lukoil. In China it is battling a windfall tax on oil sales, while in Venezuela the government’s national oil company has taken over as operator of its projects.
ConocoPhillips earned a record $15.55 billion last year, yet it must constantly battle larger competitors. Earnings were up 8 percent in the first quarter, thanks mostly to the sale of assets.
Shares of ConocoPhillips are down 2 percent this year. Maybe they need a breather since they rose 24 percent last year, 34 percent in 2005, 32 percent in 2004 and 35 percent in 2003, when adjusted for stock splits.
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The quarterly dividend was boosted to 41 cents a share from 36 cents, and the company intends to repurchase as much as $4 billion of its common stock this year. Warren Buffett’s Berkshire Hathaway has taken a 1 percent stake in the company.
With the world oil market still volatile enough to indicate high prices, the consensus analyst rating on ConocoPhillips shares is “buy,” according to Thomson Financial. That consists of six “strong buys,” five “buys,” eight “holds” and one “underperform.”
Regarding global warming, the firm intends to increase spending on alternative energy research to $150 million this year. It was the first major U.S. oil company to call for a federal greenhouse-gases-emission cap. It is believed across-the-board federal regulations would be more advantageous to energy companies than a patchwork of state laws.
ConocoPhillips earnings are expected to decline 16 percent this year, versus the 8 percent drop predicted for the major integrated oil and gas industry. Next year’s earnings are expected to be flat, versus a roughly 2 percent gain projected industrywide. The five-year annualized growth rate of 9 percent compares with 8 percent for its peers.
Chief Executive James Mulva, who received a $1.5 million salary last year, also pulled in about $30 million from exercising previously awarded stock options and stock awards.
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Andrew Leckey is a Tribune Media Services columnist. E-mail him at yourmoney @tribune.com.