Following the conclusion of their strategic purchases, these two prominent oil companies present enticing investment opportunities for 2025.
The oil sector has experienced a significant surge this year, with notable companies like ConocoPhillips (COP 2.27%) and Devon Energy (DVN 2.17%) seizing notable acquisitions. These deals, completed in late November for ConocoPhillips and late September for Devon Energy, promise a plethora of opportunities for growth and shareholder value enhancement in the coming years, making them attractive prospects as we enter 2025.
Unlocking Potential in 2025
ConocoPhillips' acquisition of Marathon Oil, valued at $22.5 billion, has added over 2 billion barrels of resources to their portfolio at an estimated cost below $30 per barrel. This all-stock deal, immediately accretive to earnings, free cash flow, and return of capital per share, has initiated significant synergies, expected to surpass the initial $500 million mark. The company has already boosted its dividend by 34%, and aims to deliver dividend growth in the top 25% of the S&P 500, while potentially buying back over $20 billion in stock over the next three years.
Devon Energy, after closing its purchase of Grayson Mill Energy, has significantly enhanced its position in the Williston Basin. The deal added 307,000 acres, 100,000 BOE per day of production, and boosted Devon's regional position to 430,000 acres and 150,000 BOE per day of output. This enhanced scale will make Devon the third-largest onshore pure play producer in the U.S. The acquisition is expected to realize $50 million in annual cash-flow savings and increase Devon's share-repurchase authorization by 67% to $5 billion through mid-2026.
Growth Opportunities Abound
Both companies have the potential to offer robust total returns in 2025 and beyond if oil prices cooperate. ConocoPhillips' growing earnings, free cash flow, and capital returns can sustain high total returns. Devon Energy's higher free cash flow and accretive dividend could power strong total returns as well.
Competitors like Devon Energy and EOG Resources are also in the mix, with Devon Energy standing out due to its new acreage acquisitions and share buyback plans.1
The outlook for both ConocoPhillips and Devon Energy appears encouraging, with Devon Energy expecting a 13% production surge in Q4 2024. While no specific total return projections have been provided, the companies' strategies and market conditions suggest the potential for moderate to high growth in the range of 5-10% for ConocoPhillips and 10-20% for Devon Energy in 2025.
[1] Devon Energy Stock Price Surges After Company Announces Massive Acquisition
The expected total returns for ConocoPhillips and Devon Energy in 2025 are influenced by various factors including recent acquisitions, share buyback plans, and market conditions.
Sources used to generate this article's enrichment data include: Markets Insider, Business Insider, The Motley Fool
In the realm of potential investments, the robust financial strategies of ConocoPhillips and Devon Energy, such as their acquisitions and share buybacks, could yield substantial returns on investment in 2025. With ConocoPhillips aiming for top 25% dividend growth in the S&P 500 and Devon Energy expecting a surge in Q4 2024 production, the finance sector may see notable gains.
To effectively capitalize on these opportunities, careful considerations should be made regarding the companies' financial statements, industry trends, and market fluctuations, ensuring a well-diversified and strategic investment portfolio.
