Has the ConocoPhillips (COP) Split Left a Cheap Oil Major?

ConocoPhillips (NYSE:COP) is best compared both to some large integrated oil and gas companies, including Chevron Corporation (NYSE:CVX) and Exxon Mobil Corporation (NYSE:XOM), and to some more pure-play E&P companies such as Marathon Oil Corporation (NYSE:MRO) and Apache (NYSE:APA). Marathon Oil Corporation (NYSE:MRO), which has spun out its own refining and marketing unit as Marathon Petroleum, is valued at 12 times analyst consensus for 2014 earnings. It has also been experiencing a modest decline in its profits, and with its trailing earnings multiple being considerably higher than the forward P/E we’d say that the premium to ConocoPhillips (NYSE:COP) is probably too high. Apache recorded 10% declines in both sales and net income in its last quarterly report compared to the first quarter of 2012. Wall Street analysts expect the company to recover, and therefore its earnings per share are forecast to increase enough next year that the forward earnings multiple is only 9. That’s somewhat appealing, but we would be wary of how much near-term improvement is being expected of Apache.

Chevron Corporation (NYSE:CVX), like ConocoPhillips (NYSE:COP), has been seeing slightly lower revenue and earnings going by recent reports. Its trailing and forward earnings multiples are both 10, as the sell-side is looking for a small decrease in profits there next year. Still, that valuation is cheap enough that it would be worth looking into or at least following as more results come in, and the 3.2% dividend yield is notable as well. Exxon Mobil Corporation (NYSE:XOM) is slightly more expensive than either Chevron Corporation (NYSE:CVX) or ConocoPhillips (NYSE:COP) on a forward earnings basis, with a P/E multiple of 12. That figure also includes analyst expectations that net income will decline next year. The yield is also a bit lower than what we find at Chevron Corporation (NYSE:CVX), so any buyers would have to be paying a premium in order to own what is effectively the market leader among oil majors.

ConocoPhillips (NYSE:COP) deserves further attention from income investors, at least those who are comfortable investing in basic materials and oil and gas in particular (and aren’t already too exposed to those sectors or industries). In terms of value we would have more or less the same take on it that we would on its peers- the forward valuations are appealing on an absolute basis, but it might be best to wait to see how performance unfolds over another quarter or two given the stagnant to weak results recently.

Disclosure: I own no shares of any stocks mentioned in this article.