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ConocoPhillips (COP) in Dispute Over Alaska Road Access

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ConocoPhillips COP is involved in a dispute with Australia-based energy company Santos Ltd. regarding road access in Alaska, per a report by Reuters.

The dispute could cause setbacks for one of the state’s major North Slope oil developments — the Pikka project. It is the largest oil prospect on Alaska state land in decades.

ConocoPhillips operates the Kuparuk River Unit (“KRU”) on Alaska's North Slope. The $3-billion Pikka project is adjacent to the company’s KRU oil field. Notably, Santos requires access to Kuparuk roads to conduct its operations.

In 2021, Santos assumed operatorship of the Pikka project during its acquisition of Oil Search. The project could enhance the oil flow down the trans-Alaska pipeline by 25%. It faces less opposition from environmentalists and indigenous groups than other major North Slope developments.

In February, Santos offered its 51% stake in the Pikka project for sale. The latest dispute could delay Santos’ divestment of its majority stake in the project, hampering its plan to raise $2-$3 billion from asset divestments this year. ConocoPhillips is considered a potential buyer of that stake.

ConocoPhillips proposed a $95-million one-time payment for longer use of its Kuparuk roads. However, Oil Search rejected ConocoPhillips’ proposal to pay for using the latter’s roads. After that, Oil Search requested the Department of Natural Resources for access permits on the roads, which are on state land.

Per ConocoPhillips, Oil Search was stressing that the commercial costs of using KRU road were hindering the Pikka Unit project from a final investment decision. The company required free access to proceed with the project, added ConocoPhillips.

The Department of Natural Resources recently approved the land use permit to facilitate the Pikka project development until the companies negotiate an agreement. Notably, ConocoPhillips has the right to appeal the issue of the land permit by Apr 18.

Company Profile & Price Performance

Headquartered in Houston, TX, ConocoPhillips is a leading upstream energy company.

Shares of COP have outperformed the industry in the past six months. The stock has gained 42.6% compared with the industry's 36.9% growth.

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Zacks Rank & Other Stocks to Consider

ConocoPhillips currently carries a Zack Rank #2 (Buy).

Investors interested in the energy sector might look at the following companies that presently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

PDC Energy, Inc. PDCE is an independent upstream operator engaged in exploring, developing and producing natural gas, crude oil and natural gas liquids. As of Dec 31, 2021, PDCE's total estimated proved reserves were 213,845 thousand barrels of oil, 240,389 MBbls of natural gas liquids and 2,159,725 million cubic feet of natural gas.

PDC Energy's earnings for 2022 are expected to increase 74.2% year over year. As of Dec 31, 2021, PDCE had $1.5 billion in total liquidity, while its credit facility currently has a total borrowing base of $2.4 billion. Moreover, PDC Energy’s debt maturity profile is favorable.

Petrobras PBR is one of the largest publicly-traded Latin American oil companies, dominating Brazil’s oil and gas sector. At the end of 2021, Petrobras had cash and cash equivalents of $10,480 million. Free cash flow for 2021 was up 36.7% year over year to $31,466 million.

Petrobras’ earnings for 2022 are expected to grow 55.5% year over year. In fourth-quarter 2021, PBR generated positive free cash flow for the 27th consecutive quarter, with the metric marginally rising to $7,511 million from $5,684 million recorded in last year’s corresponding period.

Oasis Petroleum OAS is an independent explorer engaged in acquiring and developing oil and natural gas resources. As of 2021-end, OAS had a proved reserve base of 250.8 million barrels of oil equivalent in the Williston Basin.

Oasis Petroleum is expected to see earnings growth of 205% in 2022. OAS currently pays a quarterly dividend of 58.5 cents ($2.34 annualized). It recently completed a $100-million share repurchase program.


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