Evaluating ConocoPhillips (COP) Stock's Actual Performance

ConocoPhillips (NYSE: COP) is one of the country's largest oil and gas producers. It has one of the largest and most diversified portfolios in the industry, with operations spanning the globe and encompassing a wide range of production techniques.

Here's a look at how the oil stock has performed compared to the S&P 500 over the last five years.

Image source: Getty Images.

Drilling down into ConocoPhillips' five-year returns

The following table shows the performance of ConocoPhillips' stock price and its total return over the past one-, three-, and five-year periods compared to the S&P 500:

Data source: Ycharts.

On the one hand, the oil company has badly trailed the market over the past one- and three-year periods, even when adding in its attractive dividend (3.5% current yield). However, it has crushed the S&P 500 over the last five years, even more so when adding in reinvested dividends.

Oil prices have had a meaningful impact on its returns. Brent oil, the global benchmark price, is down 14% over the past year and more than 25% during the last three years, essentially matching the decline in the company's stock price. The price of crude oil has performed much better over the last five years, rallying nearly 33%.

Oil isn't the only story here

The price of crude oil can clearly impact ConocoPhillips' stock price. However, it's not the only factor fueling its monster outperformance over the last five years. ConocoPhillips has spent that period building a better oil company.

The oil giant has closed a series of strategic acquisitions over the past few years, increasing its scale in several low-cost operating areas. In late 2020, it agreed to acquire Concho Resources in an all-stock deal valued at $9.7 billion. It followed that up the following year by purchasing Shell's position in the prolific Delaware basin for $9.5 billion in cash. In 2023, ConocoPhillips bought out its joint venture partner's 50% interest in the Surmont Canadian oil sands facility for $2.7 billion. Finally, last year, the company acquired Marathon Oil in a $22.5 billion deal.

The oil company capitalized on lower crude prices coming out of the pandemic to add a massive amount of low-cost oil and gas resources. It has continued to bolster its low-cost operations over the past couple of years. These moves have positioned ConocoPhillips to generate more free cash flow at lower oil prices, enabling it to pay a growing dividend and repurchase shares.

Oil prices are only part of the equation

Crude prices can clearly have a meaningful impact on an oil company's stock price in the near term. However, over the long term, what matters even more are the moves it makes to grow shareholder value. In ConocoPhillips' case, it has made several deals that have meaningfully improved its portfolio, putting it in a better position to produce more cash at lower oil prices. That should allow it to create more value for investors in the future.

Matt DiLallo has positions in ConocoPhillips. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.