ConocoPhillips: Top Oil Stock to Watch in 2025

Investing.com reports that ConocoPhillips (NYSE:COP) is deemed the leading oil stock by Jefferies analysts in a recent note.

Analysts emphasize ConocoPhillips' favorable asset duration, scale, and diversified portfolio, spotlighting its significant presence in the Permian Basin and recent asset additions through the Marathon Oil Corporation (NYSE:MRO) merger.

Moreover, growth projects like the Willow project in Alaska and Surmont in Canada, along with integrated gas-to-LNG initiatives, are anticipated to boost production and earnings by 2026 and beyond, as noted by analysts led by Lloyd Byrne.

Jefferies' team believes the market is currently undervaluing ConocoPhillips' free cash flow (FCF) yield, attributing it to miscalculations of the company's maintenance capital expenditures.

The firm estimates the capital needed to sustain a production level of 1.20 million barrels of oil per day (mmbopd) to be around $10.25 billion, lower than the market's expectation of over $12.0 billion. This reduction is expected to yield approximately 11% FCF based on current oil and gas prices.

Analysts also examined the projected growth capital for key ConocoPhillips projects. In the Permian Basin, the growth capital is estimated at around $900 million, while maintaining a production level of approximately 450 mmbopd requires about $4.1 billion.

The Montney project in Canada is expected to necessitate a new processing facility every two years to support a 25% compound liquids growth over the next five years, with near-term drilling and completion (D&C) growth spending of $100 million, alongside an additional $150 million for facilities.

For the Willow project, Jefferies forecasts an average run rate of $1.15 billion from 2026 to 2028 to achieve 200 mmbopd growth.

Jefferies values ConocoPhillips at approximately 5.9 times the enterprise value to EBITDA (EV/EBITDA) multiple concerning its 2027 EBITDA estimate, leading to a price target of $146 for the stock.

The firm has also identified several catalysts that could positively influence the stock, including:
1. Clearer capital trajectory post-2025;
2. Higher MRO synergies;
3. Additional announcements regarding Permian acreage coring;
4. Increase in base dividends.