What happened
Shares of crude oil producer ConocoPhillips (COP +1.57%) climbed 55% in the first half of the year, according to data provided by S&P Global Market Intelligence, due primarily to rising oil prices. ConocoPhillips is an exploration and production company, meaning it makes money by drilling for oil and natural gas, then selling those resources. The market price of crude oil is one of the primary factors that drive revenue.
Stock prices were down across the energy sector following a very challenging 2020, but the steady recovery of crude oil prices has pulled many energy stocks up with it. ConocoPhillips' price chart looks very similar to the United States Oil Fund (USO +11.14%), an ETF designed to track crude oil's price.
COP Total Return Level data by YCharts
So what
Exploration and production companies have always reflected crude oil prices. ConocoPhillips reported better-than-expected earnings in February and May. It also repurchased $375 million of shares in the first quarter, part of a planned $1.5 billion in buybacks for the full year.
Company-specific news has been positive, but this story is all about crude oil prices right now. Spot prices started the year below $50 and are now around $75. That's been far more influential for ConocoPhillips than any financial results.
Image source: Getty Images.
Now what
ConocoPhillips is paying a 2.9% dividend yield, and its valuation ratios fall well within the recent historical range for most of those metrics. There's nothing special indicating that the stock is particularly cheap or expensive. It would have room to move up or down, depending on important news or market conditions.
COP Dividend Yield data by YCharts
Crude prices should continue to be the biggest catalyst for ConocoPhillips stock, with some modest additional support from ongoing share repurchases and debt reduction. Most analysts are projecting continued recovery in demand for petroleum, though supply is expected to increase even more. That makes it unclear where prices will go from here.
Analysts and major banks are projecting oil prices to rise to anywhere from $80 to $100 over the next year, which should deliver proportionate growth for ConocoPhillips shareholders. However, this is all dependent on factors including OPEC policy and recovery from the global pandemic. There are significant unknowns for a stock that's basically a bet on oil at the moment.
