ConocoPhillips To Buy Back $1.5B In Stock; Shares Gain 3%

Shares of ConocoPhillips closed 2.6% higher on Wednesday after the natural gas company announced the resumption of its stock repurchase program.

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ConocoPhillips (COP) resumed its share repurchase program at an annualized level of $1.5 billion. This reflects a 50% increase compared to the level of buyback activity in the fourth quarter of 2020. Notably, the buyback program was suspended due to the Concho transaction.

ConocoPhillips CEO Ryan Lance said, “It’s still early in the new year, but commodity prices have strengthened such that our dividend alone may not be sufficient to meet our return of capital commitment.”

“While today’s action reflects a more constructive outlook on 2021, we do not intend to increase our previously announced operating capital program of $5.5 billion,” Lance added. (See ConocoPhillips stock analysis on TipRanks)

Based on the company’s current outlook for 2021 commodity prices, the level of share repurchases announced and the ordinary dividend payments, ConocoPhillips is likely to return greater than 30% of cash from operations to shareholders annually, the company said.

On Feb. 3, Goldman Sachs analyst Neil Mehta resumed coverage of the stock with a Buy rating and a price target of $52 (12.5% downside potential) following the company’s “completed acquisition of Concho Resources.”

The analyst remains “constructive on the free cash flow power of the combined business and sees a compelling valuation at current levels after ConocoPhillips shares have underperformed peers over the last year.”

ConocoPhillips shares have surged 82.5% over the past year, while the stock still scores a Strong Buy consensus rating based on 12 Buys and 1 Hold. That’s alongside an average analyst price target of $57, which implies 4% downside potential to current levels.

Additionally, ConocoPhillips scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.