It doesn’t take a genius to figure out that as the Chinese economy swings away from an export dependent model to a more services and consumer oriented one that demand for energy will increase. In fact, oil imports into China jumped a staggering 39.5% year over year in May. Now, it should be noted that the prior year was especially low, but imports are up 16.5% in 2016. With the barriers to U.S. exports removed, and car sales in China up 10.5% year over year, the demand should continue to grow.
Again, while U.S. exports are just starting to ramp up, exports from other countries will increase, and it makes sense that the big international integrateds will be the ones that the Chinese look to for product. We screened the Merrill Lynch research database and found three that make sense now that could help to fill the growing demand.
This stock may offer investors solid upside potential despite the big dividend cut earlier this year. ConocoPhillips (NYSE: COP) is the world’s largest independent exploration and production company, based on production and proved reserves. Headquartered in Houston, ConocoPhillips had operations and activities in 21 countries, $30 billion in annual revenue, $97.5 billion of total assets and approximately 15,900 employees as of the end of 2015. Production averaged 1,589 thousand barrels of oil equivalents in 2015, and proved reserves were 8.2 billion barrels of oil equivalents as of last December 31.
Many Wall Street analysts feel Conoco can accelerate growth from a reloaded portfolio depth in the Bakken and Eagle Ford, with visibility on future growth from a sizable position in the Permian. The company remains the one of the best values as short sellers circled after the dividend cut as many growth and income managers sold shares.
Conoco investors are paid a 2.15% dividend. The Merrill Lynch price target on the stock is $71. The Thomson/First Call consensus price target is much lower at $51.23. The stock closed most recently at $46.57 per share.