This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

ConocoPhillips Shows Bigger Isn't Better, as Big Oil, Exxon Lag

Stocks in this article: COP XOM

NEW YORK (TheStreet) -- The best Big Oil stock may be the one planning to become smaller.

Investors looking to find stock profits in the gargantuan but slow-growing earnings of Big Oil companies have been disappointed in 2012, but as May approaches, there's reason to focus on the upcoming split of ConocoPhillips (COP) over the earnings results of ExxonMobil (XOM), which again disappointed investors.

As industry giants like ExxonMobil, Chevron (CVX), BP (BP) and Royal Dutch Shell (RDS.A) lag rising markets, an ambitious breakup strategy by ConocoPhillip may be a strong target for those in search of a needle-moving investment within a Big Oil group of stocks that don't seem to budge.

After ExxonMobil reported that its first quarter profit dropped 11% to $9.45 billion, or $2 a share on Thursday -- missing Wall Street consensus of $2.09 -- it's hard for investors to be encouraged. Slowing energy production that is cutting into earnings and a share price not keeping pace with rising markets can make a profit that rivals the GDP of nations seem inconsequential. Even a 21% dividend raise by dividend laggard Exxon Mobil -- announced a day before the weak earnings -- wasn't enough to keep shares from selling off. ConocoPhillip's split into two separate oil exploration and refining companies, on the other hand, may be a worthwhile investment for Big Oil-inclined investors.

How to Turn Apple's Stock Into an Income Stream >>

According to Oppenheimer energy analyst Fadel Gheit, the move "will create two strong companies, including the largest E&P company in terms of production, proved reserves and market value, and the second-largest refiner in the US." Gheit estimates that after the split and previously announced asset divestiture programs, both companies will have stronger balance sheets and higher dividend yields than their new non-integrated oil industry peers.

" A successful implementation of the divestiture program and the use of proceeds to reduce debt and supplement operating cash flow in funding profitable growth could provide the needed catalyst to boost stock performance further."

On May 1, ConocoPhillips will spin its downstream unit that includes a chemicals and refining and marketing business into a new publicly traded stock, Phillips 66, ticker symbol "PSX." ConocoPhillips shareholders will get a share of PSX for every two shares of their existing shares, while retaining their interest in the company's upstream oil exploration business, which is among the largest in the U.S.

"COP will continue its 'shrink to grow' strategy by selling non-core assets and investing in high-return projects, while PSX will reduce its refining focus by selling assets and shifting capex to high-return petrochemicals and midstream projects," adds Gheit.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs