Crude oil reserves have depleted more than expected, a government report released Wednesday found. This development lifted oil prices slightly and OPEC, at its meeting in Abuja (ah-boo-ja), Nigeria last Thursday, announced it would wait until after peak winter demands had subsided before implementing additional production cuts. Light crude January futures rose 92 cents to settle at $63.43 a barrel on the New York Mercantile Exchange on Friday.
Saudi Oil Minister Ali Naimi (NAH-mee) said, “What we’re working toward is to rebalance the market and this decision does this.” Many analysts feel this could drive crude prices back above $70 a barrel. Other analysts speculate this may affect short-term prices and the growing supply from non-OPEC sources may erase the cartel’s ability to control oil prices.
The Energy Information Administration, in its report, said crude inventories sank by 4.3 million barrels last week. Reuters news service reported analysts anticipated a drop of 600,000 barrels, for a difference of 3.5 million barrels.
Conoco Reduces Capital Spending:
Conoco Phillips (COP) announced Thursday it would reduce its 2007 capital spending budget to an estimated $13.5 billion.Company CEO and Chairman Jim Mulva said, “The reduction in the 2007 capital program versus the 2006 capital program primarily reflects the company’s completion of our planned 20 percent equity investment in Lukoil.” Around 4/5 of Conoco’s budget is to be spent on exploration and production, while the remaining 1/5 will go into refining and marketing segment.
Mulva went on to say, “Given the increasingly challenging business environment, which has been marked by rising costs, greater discipline in capital spending is warranted to better ensure value delivery over the long term. Accordingly, we have prioritized our capital projects in 2007.” Conoco’s trading volume was up 26% on Friday, with a price decrease of 0.4%.
One of Fortune’s Best Stocks of the Year:
A Fortune magazine report posted on CNN’s Money website last Thursday touted ConocoPhillips as one of the best stock picks of the coming year stating, “Barring an unforeseen collapse in commodity prices, ConocoPhillips should turn in a solid erformance.” ConocoPhillips is the third-largest U.S. oil company, behind Exxon (XOM) and Chevron (CVX).
The article went on to say one of the more attractive attributes of Conoco stock is its low price to earnings ratio of just under 7. Rivals Exxon and Chevron have P/E’s lingering at 12 and 9 respectively. Many analysts consider the difference in the P/E’s among the 3 US leader’s stems from Conoco’s unwillingness to take on a large debt burden as evidenced by CEO comments noted earlier in this piece.
Competitors
Competitors for COP include: BP plc (BP), Chevron Corp. (CVX), Exxon Mobil Corp. (XOM), Anadarko Petroleum Corp. (APC), Chesapeake Energy Corp. (CHK), Devon Energy Corp. (DVN), Hess Corp. (HES), Quicksilver Resources Inc. (KWK), and Western Refining Inc. (WNR).
Company Profile:
ConocoPhillips conducts exploration, production, refining, marketing, petrochemical and plastics manufacturing, and develops emerging businesses, such as natural gas, worldwide. As of February 2006, Conoco had 9.4 billion barrels of total proved reserves. The company also holds a 16.1% stake in LUKOIL. LUKOIL is an international, integrated oil and gas company. ConocoPhillips was founded in 1917 and is headquartered in Houston, Texas.
Potential Trades:
The following stock options trade scenarios were discovered using PowerOptions’ powerful web based search tools. PowerOptions quickly provides the data needed to make clear and informed decisions.
Covered Call
| ConocoPhillips (COP) $ 72.77 (33 days to expiration) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Expiration /Strike |
Opt. Bid |
%Dnsd. Prot |
%If Unch. |
%If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| COPAN | 07 JAN 70.00 | $3.90 | 5.40% | 1.60% | 1.60% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Bull-Call Debit Spread
| Bull-Call Debit Spread CONOCOPHILLIPS (COP) $72.77 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SELL | Expiration /Strike |
Opt. Bid |
BUY | Expiration /Strike |
Opt. Ask |
%Return | Break Even |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| COPAN | 07 JAN 70.0 | $3.90 | COPAZ | 07 JAN 62.50 | $10.70 | 10.30% | $69.30 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The Conoco covered calls stock options position gives +5.4% downside protection with a potential profit of +1.6% over the 33 days before option expiration. The second Conoco trade described is a bull-call debit spread. This trade offers a potential profit of +10.30% in the same period of time. However, with the spread trade, an investor will lose money if the stock goes below $69.30 and will lose the entire investment if the stock goes below the lower call option‘s $65 strike price.
An audio podcast of this article is available at: http://www.poweropt.com/podcasts/2006_12_18_Conoco.mp3 .
For more information about how to identify and research great option trades, visit the PowerOptions website. PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades and you will find the data you need to make quick, clear, and informed decisions. With PowerOptions tools, you can trade knowing you have found the best investment for your risk/reward profile. PowerOptions provides a toll-free number (1-877-992-7971) for customer support (PowerOptions’s customer support is second to none in the industry) for answering customer questions.
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PowerOptions provides Internet based tools for analyzing stock options with specific search criteria and for finding potentially lucrative option income. For those seeking to execute a covered call investment strategy for their personal portfolios, PowerOptions provides an Internet based search engine for finding potentially lucrative income producing stock options positions.
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[tags]Crude oil, OPEC, Abuja, Nigeria, New York Mercantile Exchange, Ali Naimi, Energy Information Administration, Reuters, Jim Mulva, Lukoil, APC, Anadarko Petroleum Corp., BP, British Petroleum Co., CHK, Chesapeake Energy Corp., COP, ConocoPhillips, CVX, ChevronTexaco, DVN, Devon Energy Corp., HES, Hess Corp., KWK, Quicksilver Resources Inc., WNR, Western Refining Inc., XOM, Exxon Mobil Corp., covered call investment strategy, investment strategy, iron condor, option income, poweroptions, selling naked puts, stock option trading, stock options[/tags]