ConocoPhillips COP reported first-quarter earnings that indicated its shift to higher-margin assets continues at a healthy pace. Specifically, production from the Eagle Ford, Bakken and Permian was 182 mboe/d in the first quarter, a 42% increase over last year. The increase in production for these plays along with increased oil sands production in Canada shifted ConocoPhillips’ North American oil exposure (excluding Alaska) to 51% from 45% a year ago. For the total company, oil exposure increased to 57% during the quarter from 55% a year ago. During the quarter cash margins improved to $26.53/boe from $25.05/boe a year earlier thanks in part to higher natural gas prices and greater production from lower tax regions despite a drop in oil and NGL price realizations. We except the improvement to continue over the next few years, though results could be variable depending on oil prices. We think, however, the improvement is largely reflected in the shares which are fully valued in our opinion.

Adjusted earnings for the quarter were unchanged from a year ago, at $1.8 billion. Production from continuing operations was in line with guidance at 1,555 mboe/d during the quarter, compared to 1,581 a year earlier. Absent dispositions, production grew 19 mboe/d. Production for the second quarter is expected to fall to between 1,440 and 1,470 mboe/d as a result of downtime and turnaround activity. ConocoPhillips narrowed its full-year guidance range to between 1,485 and 1,520 mboe/d, which still implies essentially flat production in 2013. We plan to incorporate the latest guidance and results into our model, but do not expect any changes to our $59 fair value estimate, or narrow-moat rating.