From the 10-K, the COP is engaged in the following businesses.
Exploration and Production (E&P) —This segment primarily explores for, produces and markets crude oil, natural gas, and natural gas liquids on a worldwide basis.
Midstream—This segment gathers and processes natural gas produced by ConocoPhillips and others, and fractionates and markets natural gas liquids, primarily in the United States, Canada and Trinidad. The Midstream segment primarily consists of our 50 percent equity investment in Duke Energy Field Services, LLC (DEFS), a joint venture with Duke Energy Corporation.
Refining and Marketing (R&M) —This segment purchases, refines, markets and transports crude oil and petroleum products, mainly in the United States, Europe and Asia.
LUKOIL Investment—This segment consists of our equity investment in the ordinary shares of OAO LUKOIL (LUKOIL), an international, integrated oil and gas company headquartered in Russia. Our investment was 16.1 percent at December 31, 2005.
Chemicals—This segment manufactures and markets petrochemicals and plastics on a worldwide basis. The Chemicals segment consists of our 50 percent equity investment in Chevron Phillips Chemical Company LLC (CPChem), a joint venture with Chevron Corporation.
E&P is 57% of COP assets and 62% of net income. COP owns E&P facilities in many parts of the world.
Midstream has 2% of COP assets and 5% of income.
R&M makes up 29% of COP assets and 32% of income. The company is planning on investing more money in the next five years to handle heavy sour crude oil which should increase profit margins.
Lukoil constitutes 5% of COP assets and 5% of income.
Emerging businesses constitute 1% of COP assets and income.
COP has investments in the Canadian Tar Sands and quite a few international properties from Africa, Russia, South America and Asia. The company is very diverse. Although the current oil prices have pushed up the revenues and profits of all oil companies, a comparison of XOM and COP show that COP is mispriced compared to XOM.
As an online article comparing XOM and IBM shows that XOM outperformed IBM for a period of a about fifty years. The article has the following to say about IBM vs XOM.
In his new book to be released this spring professor and author Jeremy Siegal argues that one of the biggest mistakes made by investors is overpaying for stocks. In their enthusiasm to embrace the latest rage or fad, investors pay too high a price resulting in poor returns. Siegal illustrates this by comparing the total return on IBM and Standard Oil of New Jersey–now ExxonMobil–going back to 1950. Both stocks did well over this time period, however the returns on ExxonMobil were 14.4% per year versus IBM’s 13.8%. IBM was considered to be the premier growth stock of that era. Nevertheless, a $1,000 investment in IBM grew to 958,000. The same $1,000 invested in ExxonMobil grew to $1,260,000 some 25% greater.
The reason ExxonMobil outperformed IBM was because Exxon paid a higher return and sold for a much lower P/E multiple than IBM. The average P/E for Exxon was half of IBM’s. In addition to a lower P/E multiple, ExxonMobil (then Standard Oil of New Jersey) offered a higher dividend yield enabling an investor who reinvested those dividends to accumulate 15 times as many shares. The combination of higher dividends and lower P/E multiple resulted in far superior returns with less risk.
This is no secret to seasoned investors - the Warren Buffett formula is to be patient - patiently watch and jump in when the time is right.
XOM's market cap exceeds its enterprise value by about 6%. COP's trails by about 26%. If COP is to trade at XOM levels, we are talking of a stock price in the nineties. Given the white hot emerging markets, it is unlikely that the oil and natural gas prices will decline substantially over the next several years. The analyst estimates for 2007 expect the oil prices to decline but this is not likely. As Warren Buffett has rightly noticed, energy is a requisite for modern civilization and an energy company on the cheap is something to grab. COP is trading for a trailing P/E of 6 compared to XOM's 11 and PTR's 12. COP clearly fits the bill as the company to buy for the long term.
*Fixed the link to Hilary's post.