The WACC of ConocoPhillips (COP) is 7.6%.
Range | Selected | |
Cost of equity | 7.6% - 9.6% | 8.6% |
Tax rate | 32.6% - 33.2% | 32.9% |
Cost of debt | 4.5% - 4.7% | 4.6% |
WACC | 6.8% - 8.4% | 7.6% |
Category | Low | High |
Long-term bond rate | 3.9% | 4.4% |
Equity market risk premium | 4.6% | 5.6% |
Adjusted beta | 0.81 | 0.84 |
Additional risk adjustments | 0.0% | 0.5% |
Cost of equity | 7.6% | 9.6% |
Tax rate | 32.6% | 33.2% |
Debt/Equity ratio | 0.23 | 0.23 |
Cost of debt | 4.5% | 4.7% |
After-tax WACC | 6.8% | 8.4% |
Selected WACC | 7.6% | |
Debt/Equity | Unlevered | |||
Peers | Company Name | ratio | Beta | beta |
COP | ConocoPhillips | 0.23 | 0.71 | 0.62 |
APA | APA Corp (US) | 0.99 | 1.05 | 0.63 |
CNQ.TO | Canadian Natural Resources Ltd | 0.23 | 1.08 | 0.93 |
DVN | Devon Energy Corp | 0.46 | 0.73 | 0.56 |
EOG | EOG Resources Inc | 0.08 | 0.73 | 0.7 |
FANG | Diamondback Energy Inc | 0.32 | 0.94 | 0.77 |
HES | Hess Corp | 0.21 | 0.72 | 0.63 |
MRO | Marathon Oil Corp | 0.34 | 0.32 | 0.26 |
OVV | Ovintiv Inc | 0.58 | 1.11 | 0.8 |
PXD | Pioneer Natural Resources Co | 0.08 | 0.34 | 0.32 |
Low | High | |
Unlevered beta | 0.63 | 0.66 |
Relevered beta | 0.72 | 0.76 |
Adjusted relevered beta | 0.81 | 0.84 |
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for ConocoPhillips:
cost_of_equity (8.60%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.81) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.