ConConchCOP: This Story Has Legs -- September 26, 2021

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here. 

Link here to SeekingAlpha. Archived.

The acquisition was brilliant.

Break-even price: $13 / bbl WTI.

• ConocoPhillips' acquisition of Royal Dutch Shell's Permian assets is an impressive acquisition decision that provides the company with billions in additional FCF.
• The headline price of $47,500 / barrel will cost $13 / barrel over the next decade.
• Going forward, we expect the company to use its FCF to generate substantial shareholder rewards making it a valuable long-term investment.

Other posts on the blog regarding this acquisition:

• October 4, 2021: primed for profit in the Permian. 
  
• September 23, 2021.
• September 22, 2021.
• Betting the farm.

If this turns out to be as good as the tea leaves suggest, Warren Buffett can add this to  his short list of worst mistakes: selling his huge position in COP some years ago. 

These are some of the "things" that people forget to mention -- and some things they do -- about the Concho acquisition and the RDShell acquisition:

• proven basins; COP knows exactly what they've got; no guesswork here;
• assets are not in a foreign country, thousands of miles away
• assets are in a free market, capitalistic politically-stable country, not the Mideast, Venezuela, Mexico
• assets are not subject to physical terrorist attacks
• assets are not landlocked; the pipeline infrastructure is already in place
• assets are in an oil-friendly state: Texas -- the metonym for US oil industry
• assets were bought when others were fearful
• near-term, assets were bought when oil and natural gas prices were surging
• long-term, the global shortage of oil / natural gas will make folks re-think fossil fuel and climate change
• with a break-even price of $45 this would have been a great acquisition; but this is a $13-WTI breakeven buy
• the acquisition, apparently, will be "immediately" accretive

For investors:

• does COP have a cash-flow problem with these acquisitions? COP announced it is increasing its dividend, and not be an insignificant amount.

Disclaimer: this is not an investment site.  Do not make any investment, financial, job, career, travel, or relationship decisions based on what you read here or think you may have read here.