ConocoPhillips Q3 FY2025 earnings call

• Third quarter was a strong execution quarter with production exceeding guidance, CapEx and operating costs declining. Full-year production and operating cost guidance were improved.
• Willow project: Capital estimate increased to $8.5 billion to $9 billion due to higher inflation and localized cost escalation. First oil narrowed to early 2029. 2025 Willow capital forecast ~$2 billion, 2026-2028 ~$1.7 billion/year, post-first oil ~$500 million/year.
• LNG projects: Total project capital estimate reduced from $4 billion to $3.4 billion. ~80% complete with three LNG projects, first LNG from NFE in 2026, Port Arthur in 2027, NFS after that.
• Dividend: Base dividend raised by 8%, sustainable with free cash flow breakeven declining.

In the third quarter, ConocoPhillips produced 2,399,000 barrels of oil equivalent per day, exceeding production guidance. Third quarter financials included $1.61 per share in adjusted earnings and $5.4 billion of CFO. Capital expenditures were $2.9 billion, down quarter on quarter. For 2025, full-year production guidance was raised to 2,375,000 barrels of oil equivalent per day, and operating cost guidance was reduced to $10.6 billion. Revenue contribution details weren't explicitly broken down by product segment in a percentage, but production and financials were highlighted.

• 2025: Raised full-year production guidance to 2,375,000 BOE/day, reduced operating cost guidance to $10.6 billion.
• 2026: Significant reduction in CapEx and OpEx, combined ~$1 billion lower than 2025, production flat to up 2%. Oil mix ~53% total company, ~50% Lower 48.
• Multiyear: $7 billion free cash flow inflection by 2029, with $1 billion annually from 2026-2028 and $4 billion in 2029 from Willow.

• Inflation: Higher than expected general inflation and localized North Slope cost escalation impacted project capital estimates for Willow and LNG projects.
• Permitting: Challenges in Alaska could affect project timelines and costs.
• Macro volatility: Uncertainty in commodity prices and demand affecting production and cash flow.

Q: Unpack Willow project cost overrun and timing.

A: Kirk Johnson discussed that higher inflation post-FID, localized North Slope cost escalation due to overlapping construction seasons, and decisions to mitigate risk led to the capital estimate increase, but execution milestones were on track with first oil narrowed to early 2029.

Q: Follow-up on Willow impact on returns.

A: Ryan Lance mentioned Willow still fits competitively within the portfolio with attractive margins due to Alaska's oil selling at a Brent premium.

Q: Lower 48 CapEx trajectory.

A: Nick Olds and Andy O'Brien talked about efficiency improvements in the Lower 48, moving from 34 rigs to 24 rigs, with capital expected to be similar to 3Q 2025 in 2026 with a level-loaded steady-state program.

Q: Willow CapEx post-first oil and dividend breakeven.

A: Andy O'Brien and Ryan Lance discussed cash flow inflection from Willow contributing to a sustainable dividend with breakeven declining into the low thirties WTI by the end of the decade.

Q: LNG strategy and commercial vs resource.

A: Andy O'Brien explained the distinction between resource LNG (historical stranded gas assets) and commercial LNG (lower 48 gas leveraging low cost to access international pricing), with the two complementing each other.