ConocoPhillips (COP -0.07%) has six operating segments: Lower 48; Europe; Middle East and North Africa, Asia Pacific; Alaska; Canada; and Other International. It just received an unsolicited offer to buy some of its European assets, which may be valued at as much as $7 billion. Does that make ConocoPhillips more interesting than other energy stocks?
ConocoPhillips is looking into the deal
Like all companies, ConocoPhillips has a fiduciary duty to its shareholders. When it receives a legitimate offer to buy part of its energy portfolio, it has to take it seriously. Although the company offering to buy ConocoPhillips’ Norway business and Teesside, U.K., assets hasn’t been identified, the offer is under review. That suggests that it is a legitimate offer.
Image source: Getty Images.
However, ConocoPhillips made it very clear that “If we do not receive an offer that meets the company’s expectations for value, ConocoPhillips will retain the assets.” In other words, this is nowhere near close to a done deal. And while, if completed, it would free up an estimated $7 billion in capital that the energy giant could put toward other investments, that figure has to be put into perspective. ConocoPhillips’ market cap is over $160 billion as of this writing.
Today’s Change
(-0.07%) $-0.09
Current Price
$134.10
Key Data Points
Market Cap
Day’s Range
$132.94 – $135.56
52wk Range
$85.57 – $141.62
Volume
3.8M
Avg Vol
6.6M
Gross Margin
27.18%
Dividend Yield
2.50%
Selling the Norway business and Teesside is a big deal, but it is still just a small piece of the pie at ConocoPhillips. So, when investors step back and look at the big picture, this is an interesting development, but one that isn’t likely to materially move the needle for the company. And it probably won’t dramatically change ConocoPhillips’ industry position relative to its peers.
ConocoPhillips is doing the right thing
Just because this globally diversified oil company has a possible offer to buy some of its assets isn’t really enough to make it more interesting than any other energy company. In fact, the bigger story for ConocoPhillips, and the entire energy sector, is still the volatile price of oil, which has been driven higher by the geopolitical conflict in the Middle East.
For most investors, monitoring the Middle East is likely to be more valuable than focusing too much on ConocoPhillips’s receipt of an unsolicited offer to buy some of its assets. In fact, even if it agrees to the deal, it will be months before it is completed. Don’t ignore the deal, but don’t spend too much time thinking about it, either.