) shares to underperform from neutral, citing the company's plans announced this week to buy Burlington Resources (BR
) for $35.6 billion.
Analyst Mark Flannery says the news comes less than four weeks after the company's analysts' meeting, in which management described upstream acquisitions as challenging and said it's a seller's market. Flannery thinks this raises questions on interpreting ConocoPhillips statements. He finds it difficult to see strategic or economic rationale for the deal, as Burlington Resources is mainly composed of mature and low-growth North American natural gas assets, which are of little help to ConocoPhillips's medium-term growth problem. He believes the deal brings greater size to ConocoPhillips at unacceptable cost.