Lex Column on COP

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Here I go spend a considerable amount of time on research to pick my energy portfolio and guess what happens first thing on Monday morning! I pick up Monday's FT outside my apt door and flip to the back cover and Voila! the Lex column devoted one-third of it's content to COP (ConocoPhillips). The piece was mostly critical of COP's future. There were some positives too. The commonly held perception amongst the financial professionals is that the Lex column is the most revered piece of writing in FT. So much for that huh!

COP went down 3.37% today.

Anyway here are the highlights of the Lex article:

Positives about COP:
-$15 Billion share buyback (1/10th of Shares)
-Share price trading at a ~20% discount to the oil sector in terms of P/E multiple

Critique of COP:
-Upstream production comes from mature regions in the North Sea and US.
-High price of oil is hiding the lenient fiscal policies at company (wonder how they know this?)
-High capital intensity needed to meet 3% upstream production growth target (again?)
-Last month's nationilazation of 10% COP's reserves by Venezuela (read Chavez) diluted COP's reserves
-Susceptible to the volatile refining margins in the US (due to low reserves)

Well, that's their opinion. If I look at the fundamentals, it is not so gloomy. Cash flow is good; so is the operating margin; EPS (earnings per share) is better than the sector although this probably got boosted by the buyback recently. There are issues though.

I will ride this until the oil bubble bursts. Holding on for now.