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Sunday, 12/04/2005

“Rigged” for Gains
By Nich Sheldon
COP - ConocoPhilips

Company Description

ConocoPhillips is an international, integrated energy company. It is the third largest integrated energy company in the United States, based on market capitalization, oil and gas proved reserves and production; and the second largest refiner in the United States. Worldwide, of non-government controlled companies, ConocoPhillips has the eighth largest total of proved reserves and is the fifth largest refiner in the world.

ConocoPhillips is known worldwide for its technological expertise in deepwater exploration and production, reservoir management and exploitation, 3-D seismic technology, high-grade petroleum coke upgrading and sulfur removal.

[Source: Company Web Site]

Reasons to Invest:

With assets of approximately $104 billion and operations in more than 40 countries, this integrated energy company is making waves in “deepwaters” across the globe. ConocoPhillips (COP) has been drilling deeper, developing quality partnerships, and investing in improving their access to worldwide exploration and production resources. Furthermore, this energy mogul’s financial strategy includes a future dividend hike and share repurchasing programs, which is why COP is this week’s Drip of the Week.

COP focuses on four core activities: 1) petroleum exploration and production; 2) petroleum refining, marketing, supply and transportation; 3) natural gas gathering, processing and marketing, including a 50% interest in Duke Energy Field Services, LLC; and, 4) chemicals and plastics production and distribution through a 50% interest in Chevron Phillips Chemical Company LLC.

Even Mother Nature couldn’t slow down COP, as their largest Gulf Coast offshore asset only received minimal damage from hurricane Rita. Even more surprisingly, the onshore fields that were in Rita’s storm path received little or no damage, which bodes well for the company’s productivity.

On November 16, 2005, CEO Jim Mulva “outlined investment opportunities to further develop the company’s integrated energy portfolio and to build on its strong financial position” (ConocoPhillips Investing for Growth). He went on to state that the company would continue to provide value for shareholders through continued execution of strategy. The company has earmarked $12 billion for reinvestments in the company during 2006. COP also reduced its debt-to-capital ratio to 15 to 20 percent. In the same article Mulva stated, “We have the technological capabilities, financial resources and a talented, dedicated work force to support the company’s sustainable growth.”

Some of COP’s near, medium and long-term strategies for growth include: projects that will increase global gas supply; developments to bring arctic gas from Alaska and Canada’s Mackenzie Delta; liquid energy projects in the Timor Sea, Qatar, Russia, Nigeria and Venezuela; reserve and production projects in Russia and the Caspian Sea, including its interest in LUKOIL, the Asia Pacific region; and the Middle East. Furthermore, ConocoPhilips intends to maintain stable production in OECD countries, while managing cost and production efficiencies across the globe.

Ready for a little chart analysis? Since January 2003 COP has steadily climbed higher, moving through a tight regression channel, while using the middle bar of the channel as support for higher ground. A quick glance at the yearly chart and I note a strong buy signal on the MACD indicator.

For the first time in 13 quarters COP won’t close in the green. Speculation would suggest that it’s time for this energy giant to take a breather. Perhaps COP is just waiting for their batteries to recharge before making a move back to its all time high of 71.48, which was set a few months ago.

With the 200-DMA ($59.43) nestled just below the December 2nd close at $62.39, ownership in ConocoPhillips stock is a bargain. It’s safe to say that there will not be another opportunity to start a COP DRIP for this cheap. Nonetheless, if the stock does fail to use the 200-DMA (daily chart) or the 10-DMA (monthly chart) as support for higher ground, a drip investor should jump at the opportunity to increase their ownership. Do you need a little more fuel for the fire? How about a Point and Figure bullish price objective of $79?

Moreover, the monthly stochastics indicator is close to forming a bullish crossover, while the MACD indicator is close to retesting its bearish counterpart. That said it might be interesting to know that the monthly MACD indicator has never sported a bearish (sell) signal.

ConocoPhillips market cap is over 86 billion, and the company reported to make nearly 151 billion in revenue over the past year. COP gained more than six percent in past 52-weeks, with an average trading volume of 7.75M shares per day. The company expects to see an earnings growth rate of 9% over the next five years.

The five-year average dividend yield percentage rests at 2.5percent, while COP currently offers a 2% annual dividend yield, which tabulates out to a $1.24 per share owned, per year.

This ends another exciting episode of the Drip of the Week. Stay tuned next week, as we will spotlight another stock worthy of the limelight.

Plan your trade, and trade your plan.

Until Next Week,
Nich Sheldon
Editor In Chief

Broker Recommendations

Strong Buy:      12
Buy:              1
Hold:             5
Sell:             0
Strong Sell:      0

Total:           18

Transfer Agent:
Mellon Investor Services LLC
P.O. Box 3315
South Hackensack, NJ 07606-1915

Corporate Headquarters:
600 North Dairy Ashford
Houston, TX 77079
Phone: 281-293-1000
Fax: 281-293-1440


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