ConocoPhillips

In recent months, lawmakers from both parties have been an unusually high amount of Conoco Phillips (COP) shares. These lawmakers include Michael McCaul, Josh Gottheimer, and Lois Frankel. These purchases come as lawmakers trimmed their exposure to the sector in recent months, as oil & gas prices continue to tread water well below their summer 2022 highs.

This buying activity comes as The Biden Administration approved Conoco Phillips's move ahead with The Willow Project earlier this month. The Willow Project is a $6 billion oil and gas program located on Alaska's north slope. While Conoco Phillips originally got approval for the project from The Trump Administration, however, this was blocked by a federal judge in 2021, citing environmental concerns, resulting in a 2-year legal battle.

It's worth noting that Alaskan oil production is at it's lowest level in more than 40 years, as most major companies have reduced or abandoned their projects in the state due to challenging conditions and environmental pushback,

However, the project's approval came with a contingency: Conoco may only move ahead with three drill pads rather than the five drill pads initially planned. This ruling appears to be a significant blow to Conoco when considering that each drill pad typically contains 50 oil wells. Therefore, reducing the number to just three drill pads equates to 100 fewer oil wells, cutting Conoco's ambitious plans for the north slope appears to be cut by 40%.

As a result, investors appear to Conoco Phillips shares have slipped in recent weeks, dropping 10% since the decision. However, mischaracterization of the situation might present an investment opportunity.

In the 1970s, a typical drill pad had an above-ground footprint of 65 acres and an accessible drilling area underground of just 3 square miles. However, modern drilling technology has improved substantially. Today a drill pad requires just 12 acres of land and has an accessible drilling area of 154 square miles underground:

Because of this, Conoco will still be able to access the oil and gas underneath the drill pads that they had to relinquish, despite being unable to access the ground above it.

Furthermore, while headlines suggest that The Willow Project could produce up to 600 million barrels of oil over its 30-year timeline, some sources indicate the number is far larger. In a conference call in 2021, Conoco’s head of Global Operations stated that they identified more than 3 billion barrels of oil nearby that they could extract at the cost of approximately $35 a barrel. Assuming an average sale price of $60 a barrel, this results in $75 billion in free cash flow over the next 30 years. If we forecast with a more conservative $ 50-a-barrel sale price, that number is $45 billion.

For these reasons, The Willow Project remains a potential major catalyst for Conoco, which remains one of the few major oil and gas companies operating in northern Alaska. At the same time, Russia continues to invest billions into numerous oil and gas projects in the Arctic. While it's yet to be seen how this project plays out, lawmakers appear to be enthusiastic about the company as they continue to buy shares hand over fist.

Disclosure: The content is for informational purposes only; you should not construe any such information as investment, financial, or other advice. I/We have no business relationship with any company whose stock is mentioned in this article.