ConocoPhillips Shows Bigger Isn't Better, as Big Oil, Exxon Lag

After the split, ConocoPhillips will be the largest independent exploration and production company in the U.S., with 56% of its 1.6 million barrels of oil equivalent a day in liquids and more than half of its oil and gas coming from North America. That oil and gas portfolio includes large Eagle Ford, Permian and Bakken liquids-rich shale assets and a significant stake in Canadian oil sands projects like Foster Creek-Christina Lake. Internationally, the company also has liquid natural gas production assets in Australia, oil investments in the North Sea and deepwater oil wells offshore of Malaysia.

After the split, ConocoPhillips is expected to have a market cap of $69 billion -- roughly the size of Occidental Petroleum (OXY) -- but it will possess double the oil and gas reserves, notes Gheit of Oppenheimer, who highlights the company's projected 4.9% dividend yield, $5 billion in first-half 2012 share repurchases and balance sheet leverage.

Meanwhile, the company's stated plan to divest slow-growing assets, a potential successful multi-billion arbitration claim on its seized Venezuelan energy assets and the lower valuation given to its oil reserves could be an added catalyst, in coming years, adds Gheit.

Phil Weiss, Argus Research analyst, said in a recent report, "COP is presenting itself as a new class of investment, largely due to its plans to provide sector-leading distributions and annual margin improvement, while also growing production at a more measured pace than peers. We reiterate our view that the upcoming spinoff will help to further unlock the shares underlying value."

The spun off refining and chemicals division Phillips 66 may also prove to be a winning oil-sector play. "The company will have substantial interests in the Chemicals and Midstream businesses, which are higher return than the core Refining & Marketing business," noted Jefferies analyst Iain Reid in an April research note. At a recent conference, Greg Garland, the CEO of Phillips 66, said he plans to grow those businesses using 50% of the company's expected capital expenditure, up from levels of 16%. While Reid expects that the newly split companies will continue to trade in line with peers, "we see good potential for the downstream company to improve this position over time."