ConocoPhillips Faces Environmental Concerns Over Permian Basin Wastewater Disposal

ConocoPhillips has raised environmental concerns over Pilot Water Solutions' proposed wastewater disposal wells in the Permian Basin, which could impact nearby oil reserves. Analysts predict a 23.27% upside potential for the company, with an average target price of $115.30 and a "Outperform" rating from 27 brokerage firms. The GF Value estimate of $105.84 suggests a 13.16% upside from the current share price.

ConocoPhillips (COP) reported its second-quarter 2025 earnings, which exceeded expectations, driven by higher oil-equivalent production volumes, particularly from the Lower 48. The company reported adjusted earnings per share of $1.42, surpassing the Zacks Consensus Estimate of $1.36. Although the bottom line decreased from the prior-year level of $1.98, revenues of $14.74 billion increased from $14.14 billion year-over-year, missing the Zacks Consensus Estimate of $14.93 billion [1].

The acquisition of Marathon Oil last year has significantly strengthened ConocoPhillips' upstream presence, enhancing its scale, production capacity, and operational efficiencies. The integration of Marathon Oil's resources has led to a revised upward estimate of 2.5 billion barrels of oil equivalent, up from the initial estimate of 2 billion barrels. Additionally, the company expects to achieve more than $1 billion in yearly savings from the Marathon Oil acquisition by the end of 2025, with another $1 billion per year in cost savings projected by the end of 2026 [1].

Analysts predict a 23.27% upside potential for ConocoPhillips, with an average target price of $115.30 and a "Outperform" rating from 27 brokerage firms. The GF Value estimate of $105.84 suggests a 13.16% upside from the current share price. Despite the positive developments, ConocoPhillips has plunged 11.6% over the past year, outperforming the 19.9% decline of the industry's composite stocks. The stock is currently undervalued, trading at a 5.27x trailing 12-month Enterprise Value to Earnings Before Interest, Taxes, Depreciation and Amortization (EV/EBITDA) ratio, compared to the broader industry average of 9.03x [1].

However, several business uncertainties surround ConocoPhillips. A significant portion of the $7 billion future cash flow increase is expected to come from projects and developments that will not start generating at full capacity until 2027-2029, such as Alaska’s Willow project. Delays or cost overruns could adversely impact returns. Therefore, investors should exercise caution and wait for the uncertainties to subside before considering a position in the stock.

ConocoPhillips has also raised environmental concerns over Pilot Water Solutions' proposed wastewater disposal wells in the Permian Basin, which could impact nearby oil reserves [2]. This development adds another layer of uncertainty for investors to consider.

References:
[1] https://finance.yahoo.com/news/q2-rearview-cop-smart-hold-135500122.html
[2] https://www.ainvest.com/news/conocophillips-sells-oklahoma-energy-assets-stone-ridge-1-3-billion-2508/