ConocoPhillips: A January Rally & Some Curious Geopolitics

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So, ConocoPhillips, that rather substantial oil and gas concern, enjoyed a bit of a surge in January – a respectable 11.3% leap, if you’re keeping score. Which, as a rule, I’m not. But numbers have a way of asserting themselves, don’t they? It’s always mildly startling when a company with a name like that actually does something interesting.

The earnings report didn’t arrive until February, which always feels a bit like presenting the bill after everyone’s already left the party. But January, it turns out, was a month brimming with…well, let’s call them ‘developments’ in the oil patch. Two rather large geopolitical events, specifically, provided a bit of lift to most companies involved in extracting stuff from the ground. It’s a reminder that the price of petrol isn’t determined by supply and demand so much as by who’s currently having a disagreement with whom.

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Venezuela, Iran, and the Peculiarities of Regime Change

The price of oil ticked upwards, from around $57 to $65 a barrel, and it’s hard to say if that’s entirely down to the laws of physics. The first bit of excitement involved Venezuela. Apparently, a change in leadership occurred, and the former president was, shall we say, relocated to the United States. A rather decisive move, and one that raises a fascinating question: what does one do with a deposed leader? Anyway, this is a mixed bag for oil. Venezuela possesses, astonishingly, the largest oil reserves in the world. More than Saudi Arabia, even. The problem is, they currently manage to extract about 1% of the global total. It’s like owning a vast gold mine and using it to grow particularly robust turnips.

The previous regime, under Hugo Chávez, decided to nationalize the oil industry back in 2007. A perfectly reasonable thing to do, if your goal is to discourage foreign investment and leave vast resources untapped. ConocoPhillips, along with other companies, found their assets…appropriated. They continued to operate, but on terms that were, let’s say, less than ideal. The result? A country swimming in potential, yet producing barely a ripple in the global oil supply. It’s a cautionary tale, really.

Now, with a potential change of government, ConocoPhillips is hoping to recover around $10 billion awarded by an international arbitration court in 2019. A significant sum, to be sure – roughly 7.4% of their current market capitalization. It’s the sort of figure that makes you realize just how much money is sloshing around in the energy sector. And, naturally, everyone hopes for a quick resolution. Though, if history is any guide, it will likely involve years of legal wrangling and a lot of very expensive lawyers.

Adding to the fun, protests erupted in Iran at the end of December, escalating throughout January into what appears to be a serious challenge to the ruling regime. Iran, as it happens, is the world’s ninth-largest oil producer, accounting for around 4% of global supply. So, more potential disruption. It’s a bit like a global game of geopolitical Jenga. You pull one block, and who knows what will happen?

ConocoPhillips’ Earnings & a Word About Reality

Last week, ConocoPhillips reported earnings. Adjusted earnings per share came in at $1.02, a smidge below analyst expectations. But the stock didn’t flinch. Why not? Because those earnings reflect fourth-quarter oil prices, which were in the $50-ish range. Today, it’s $65. It’s a reminder that financial forecasts are, at best, educated guesses. And at worst, elaborate works of fiction.

During the earnings call, CEO Ryan Lance mentioned that ConocoPhillips would first seek to recover that $10 billion owed by Venezuela before even considering re-entering the country. A perfectly sensible position, given the current level of uncertainty. It’s like saying you’ll pay the plumber after he’s fixed the leak. A novel concept, I know.

So, with oil prices creeping upwards, political instability worsening, and the prospect of ConocoPhillips recovering a rather substantial sum, it’s not entirely surprising that the stock performed well in January and has held those gains. Despite the slightly disappointing earnings. It just goes to show that in the world of investing, sometimes, the most rational thing to do is to ignore the numbers and follow the chaos. Which, frankly, is a rather comforting thought.

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2026-02-10 11:22