ConocoPhillips (NYSE:COP) has finally returned to growth mode. The Houston-based upstream oil company took heavy losses during the 2014-16 downturn in oil prices. Now, as crude prices above $60 per barrel continue to hold, investors can once again profit from a position in COP stock.

Slow Demand for Oil Drilling Hammered COP Stock

The decline in oil prices hit COP stock especially hard. COP focuses on the upstream (exploration and production) side of the business. Integrated companies such as Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX) also focus on downstream and other aspects of the oil and gas industry. The downstream business shielded XOM and CVX from taking big losses when oil prices tumbled.

ConocoPhillips was not so fortunate. When prices fell to low levels, both drilling and company earnings dried up. Not only did COP stock lose over 50% of its value at one point, but revenue also fell by about the same percentage and the company lost $11 billion over three years as a result.

Upstream peers such as Marathon Oil Corporation (NYSE:MRO) and Occidental Petroleum Corporation (NYSE:OXY) suffered about the same amount in losses. Apache Corporation (NYSE:APA), whose losses in the same period topped $30 billion, fared much worse.

COP Stock Is Now Poised for Profits

Fortunately, analysts expect profits to return in 2018. With COP being an upstream business only, the huge losses suffered in the downturn now become outsized gains in the recovery. Wall Street expects profit growth to ramp up along with it. Consensus forecasts place earnings at $2.10 per share for 2018. This is expected to increase to $2.41 in 2019 and $3.56 in 2020.

Dividends remain another good reason to own COP stock. Before the downturn, ConocoPhillips enjoyed a long history of annual dividend increases. After profits dried up during the downturn, COP slashed its annual dividend from $2.94 per share to $1.00 per share in 2016. The company appears ready to resume its annual tradition of increases, as the dividend rose to $1.06 in 2017. The dividend yield of just over 1.75% remains at an average level compared to the S&P 500. However, with a growing dividend, that percentage will rise from the original price basis if purchased today.

COP Stock vs. Its Peers

To be sure, other upstream players have also reported improved numbers. However, analysts expect both Apache and Marathon to experience lower profits in 2019. The only one of COP’s peers that will enjoy increasing profit growth is Occidental Petroleum.

OXY has a 4% dividend yield and a lower debt level, so I can’t argue against buying OXY stock. However, it also owns some midstream and chemical assets. COP’s spinoff of Phillips 66 (NYSE:PSX) in 2012 made the company a pure upstream play. COP also produces more. Hence, for investors who want a solid equity dedicated to the upstream business, the bull case rests with COP stock.

Growth in oil prices should continue. The world economy has again begun to boom. Increases in other raw materials such as aluminum and copper confirm this increased economic output. Also, oil prices began to rise when OPEC imposed a production cut in late 2016. Both OPEC and Russia seem content to hold to their current output limits. While U.S. production has risen, demand from China has also increased. Prices have also risen faster than forecast. In December, Goldman Sachs forecasted crude would rise to $57.50 per barrel in 2018.

Less than a month into the new year, oil trades at over $63 per barrel.

Final Thoughts on COP Stock

Rising oil demand and higher prices position COP stock to return to high growth levels. The company depends on upstream activity to remain profitable. That activity dried up in the middle of the decade.

Now, with crude trading above $60 per barrel, production has resumed. COP again earns profits and has resumed dividend increases. Investors wanting a part of the now-lucrative upstream business would do well to open a position in ConocoPhillips stock.

As of this writing, Will Healy did not hold a position in any of the aforementioned stocks.