Wells Fargo has published a research report upgrading ConocoPhillips (COP.US) from "Neutral" to "Overweight" and raising its price target from $100 to $132 per share, highlighting the stock's potential to deliver a sector-leading dividend compound annual growth rate in the coming years. Analyst Sam Margolin noted that ConocoPhillips' Willow oil field project, scheduled to commence production in 2029, represents a critical inflection point for the company's free cash flow. Under the assumption of Brent crude oil priced at $65 per barrel, the project is expected to generate approximately $4 billion in incremental net cash flow in its first year of operation. Furthermore, during the transitional period leading up to the project's start-up, multiple factors are set to collectively drive organic free cash flow growth and enhance dividend-paying capacity: firstly, the gradual conclusion of expenditures related to the Qatar LNG project; secondly, the sequential commissioning of various growth projects, including Qatar LNG and Port Arthur LNG; thirdly, the dividend income generated from the Port Arthur project in fiscal 2025 will support share repurchases, thereby alleviating total dividend payout pressure; and fourthly, the natural gas price differential in the Waha region is anticipated to narrow following the operational start of a gas export pipeline in 2027. The analyst estimates that ConocoPhillips' cumulative dividend-paying capacity will increase by more than $6 per share between 2026 and 2029. Referencing the company's 8% dividend increase following its Q3 2025 earnings report and a projected dividend of $3.36 per share for 2026, this growth trend demonstrates relatively strong defensiveness even in a declining crude oil price environment. Concurrently, Margolin downgraded Range Resources (RRC.US) from "Overweight" to "Neutral" and lowered its price target from $46 to $43. The rationale for the downgrade is that, based on free cash flow yield metrics, Range Resources' valuation carries a premium compared to its peers, a situation particularly evident when contrasted with direct competitor Antero Resources (AR.US). The analyst stated that while Range Resources' free cash flow valuation premium is somewhat justified by its superior balance sheet and cost control capabilities, the current premium has reached elevated levels. Against a backdrop of rising risks in the natural gas market, the potential for further stock price appreciation is expected to be constrained.
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