One of the biggest strengths of ConocoPhillips is its huge size standing as second largest American oil company. With its operation expanded to more than 30 countries, the company owns about 10,000 outlets to distribute gasoline. This huge size financial size of the company also allows it to explore, extract, produce, refine, market and distribute at various sites thereby giving rise to the increasing income.
The company adopts the principle of diversifying risk. LUKOIL, which undertakes risky projects like exploration of Russian Blocs, is a company in which ConocoPhillips owns a 20 % stake. This 20% of investment in LUKOIL allows companies to reap the benefit by undertaking risky projects without has taken considerable amount of high risk. By providing technical expertise to LUKOIL, the company have maintained good and cordial relationship with the government of Russia.
The major weakness of ConocoPhillips is not having a stable income or earnings. The oil price is highly affected by small change in economic phenomena of the world so this high volatility of price will often make the earning prediction wrong. The unlevered beta of the ConocoPhillips is comparatively higher than that of industry with 1.21, which shows that the company is highly susceptible to market conditions. When the economic conditions are well above the normal, then price of oil upsurges thereby increasing the profits above expectations while negative is the case in poor economic condition. This dependence of income on oil prices possess risk to company’s business model and shows that the business is exposed to a higher degree of risk. Having almost complete dependence on oil for business, there is no way that company can shield its risk due to price fluctuations.
In the oil and gas industry, there are many companies involved in downstream or midstream activities as compared to companies involved in upstream activities. Therefore, in this context ConocoPhillips can grab this opportunity to lead the industry in E&P and experience the growth. ConocoPhillips, as the part of its principal business activity, are now investing its major chunk of earnings for E&P activities. With the slowing down of the commodities market, ConocoPhillips has focused on E&P and in the year 2009, the company invested around $11.5 billion for E&P.
Not only E&P, ConocoPhillips have many opportunities to enter into new and emerging business sectors like power generations, trading, fuel technology as well as gas to liquid generation. In year 2009, ConocoPhillips invested in power plant “Immingham project” adding 450MW electricity and around 200 tons of hot steam power at Huber Refinery, UK and the total capacity of touched the scale of 1,180 MW. E-gas technology was another project of ConocoPhillips that produced electric power as well as was a chemical manufacturing plant that produced chemicals by synthetic gas.
The ConocoPhillips, while...