NEW YORK (TheStreet) -- Shares of ConocoPhillips (COP) - Get ConocoPhillips Report are sinking, down 2.31% to $66.28 in early market trading Monday, after the oil and gas producer announced it will cut its 2015 capital budget by 20% from a year ago to $13.5 billion.
The reduction in capital reflects the company's decision to lower spending on major projects, as global crude oil prices continue to decline.
ConocoPhillips said it would "defer significant investment" in oil fields across North America.
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Brent crude oil fell below $67 per barrel on Monday to a new five year low after Morgan Stanley cut its 2015 forecast, citing oversupply.
Morgan Stanley analysts said crude prices could decline to as low as $53 per barrel in 2015, although its base case scenario was for $70, down from its previous estimate of $98.
The firm believes global oversupply would keep building until next year due to OPEC's decision to maintain its output ceiling of oil.
Houston, TX-based ConocoPhillips is the world's largest independent E&P company based on production and proved reserves, with operations in 27 countries.
Separately, TheStreet Ratings team rates CONOCOPHILLIPS as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate CONOCOPHILLIPS (COP) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its increase in net income, reasonable valuation levels, expanding profit margins, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Oil, Gas & Consumable Fuels industry average. The net income increased by 9.0% when compared to the same quarter one year prior, going from $2,480.00 million to $2,704.00 million.
- 40.09% is the gross profit margin for CONOCOPHILLIPS which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.38% significantly outperformed against the industry average.
- Net operating cash flow has increased to $4,180.00 million or 12.82% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -1.72%.
- The current debt-to-equity ratio, 0.38, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.94 is somewhat weak and could be cause for future problems.
- You can view the full analysis from the report here: COP Ratings Report