Oil Stocks Poised for Takeoff in 2025
A wave of consolidation has swept through the oil industry this year, with several major players making significant acquisitions. Two oil companies, ConocoPhillips and Devon Energy, have recently closed their deals, positioning themselves for robust growth and increased shareholder value in 2025 and beyond.
ConocoPhillips: A Perfect Fit
ConocoPhillips completed its acquisition of Marathon Oil in late November, adding over 2 billion barrels of resources at an estimated cost of supply below $30 per barrel. The deal is expected to be immediately accretive to earnings, free cash flow, and return of capital per share. The company anticipates capturing significant synergies, with cost and capital synergies expected to exceed $1 billion over the next 12 months.
As a result, ConocoPhillips has increased its dividend by 34% and plans to ramp up its share-repurchase pace from $5 billion annually to $7 billion. The company expects to buy back over $20 billion in stock over the next three years, allowing it to retire the equivalent amount of equity it issued to close the deal within two to three years.
Devon Energy: Enhanced Scale and Profitability
Devon Energy closed its purchase of Grayson Mill Energy in late September, adding 307,000 acres and 100,000 barrels of oil equivalent (BOE) per day of production. The deal has significantly enhanced the company’s position in the Williston Basin, making it the third-largest onshore pure play producer in the U.S.
The acquisition is highly accretive, boosting earnings and free cash flow per share. Devon expects the enhanced scale to enable it to realize $50 million in annual cash-flow savings, while Grayson Mills’ midstream infrastructure will help boost margins by $125 million.
Fuel for Growth
Both ConocoPhillips and Devon Energy are poised for strong growth and increased cash returns in 2025 and beyond. With their needle-moving acquisitions now closed, these two top oil stocks look like great buys heading into the new year. The combination of growing earnings, free cash flow, and capital returns could drive robust total returns, making them attractive investment opportunities.
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