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Are Shares Of Conoco Phillips Attractive At Current Levels?

Conoco is a leader in the O&G space that is going through many changes in their business.

Shares appear to be trading below SOTP and replacement value.

Shares should be very appealing to income investors with a yield of 5.52%.

Profits at nearly every O&G company in the world are sharply lower with the collapse in energy prices - one of the world's most iconic companies is no exception in this environment. Conoco Phillips (NYSE:COP) pumping operations are making significantly less money than in years past. Although chemicals and refining are boosting performance from increased end-market demand and lower feedstock costs, profits are likely to show a significant decrease in the coming quarters.

Any glimpse of sunlight surrounding O&G companies is the assumption that oil and gas prices are in the bottoming process. Many argue that oil and gas are too far below their marginal cost of production and supply and demand will stabilize again at much higher prices as the supply gut works itself off. Of course, there are others who feel oil and gas prices will remain lower for an extended period of time due to a supply glut and better drilling technology (which brings about lower costs).

With shares having decreased 22% YTD, are shares attractive at current levels?

Oil prices came off over 20% in the third quarter, which is likely to depress margins. This is expected to continue through 2015 and into 2016, barring an abnormally cold winter. On the back of depressed energy prices, we would not be surprised to see large write downs coming for the O&G sector (Conoco is included). Regardless, Conoco is a leader in the O&G space and should be well positioned if/when oil prices bounce back. Being a low-cost provider and the quality of their assets should help them weather the storm.

Conoco is one of the largest oil and gas E&P companies in the world. They have operations in almost 30 countries. The company has proved reserves of 8.9 billion boe. The produce 1,540 million boe per day (liquids (69%) / gas (21% ) / LNG (10%)). Because of the company's business model, they have relatively low execution risk. In addition, they have key positions in the Eagle Ford and Bakken. Both of which offer decades of growth and low production costs.

Being a low cost producer provides many advantages:

Being a low-cost producer is one...