ClearBridge Value Strategy on ConocoPhillips
Thesis
ClearBridge maintains a constructive view of ConocoPhillips based on its potential for increasing free cash flow over the next several years. The company has benefited from higher oil prices as conflict in the Middle East raises energy supply concerns. The managers expect depleted inventories, energy security and industry capital discipline to support cash generation for well-capitalized producers. ConocoPhillips offers exposure to these conditions alongside expectations of improving free cash flow.
“ConocoPhillips is also drawing more interest for a free cash flow profile we believe should ramp up over the next several years.”
Key risks
- Oil-price volatility could materially affect future earnings.
- Changes in the Iran conflict could reduce crude supply concerns.
- Rising interest rates and volatile funding conditions could weigh on equity valuations.