ConocoPhillips Q4 FY2025 earnings call

• 2025 was a strong year with outperformance of major guidance drivers, production growth, capital and cost reductions, and successful integration of Marathon Oil.
• Launched a $1 billion cost reduction and margin enhancement initiative.
• Progressed commercial LNG strategy with offtake portfolio growing to ~10 million tonnes per annum.
• Improved Lower 48 drilling and completion efficiencies.
• Major projects expected to drive $7 billion free cash flow inflection by 2029.
• 2026 focus on $1 billion combined reduction in capital spending and operating costs while growing production, continuing to return 45% of CFO to shareholders, and having a high-quality asset base with diverse major projects.

In the fourth quarter, ConocoPhillips produced 2,320,000 barrels of oil equivalent per day, consistent with the midpoint of production guidance. They generated $1.02 per share in adjusted earnings and $4.3 billion of CFO. Capital expenditures were $3 billion for the quarter, with full-year capital spend at $12.6 billion. They returned $9 billion to shareholders, which was 45% of CFO. They closed over $3 billion of asset sales in 2025, paid down $900 million of debt, and cash balances were up $1 billion, resulting in net debt reductions of nearly $2 billion. The organic reserve replacement ratio for 2025 was just under 100%, and the trailing three years was 106%.

• 2026 capital spend guidance is ~$12 billion, down ~$600 million year-on-year due to capital efficiency gains in Lower 48 and reduced major project spending.
• 2026 operating cost guidance is ~$10.2 billion, down ~$400 million compared to 2025, driven by cost reduction program and full-year MAF and OL synergies.
• 2026 production guidance is 2,330,000 to 2,260,000 barrels of oil equivalent per day, with first-quarter production expected in the range of 2,300,000 to 2,340,000 boe/day.
• Progress on advantaged major projects in Alaska and international, including LNG projects nearing completion and Willow on track for first oil in early 2029.

Q: Neil Mehta from Goldman Sachs asked about whether Conoco is more of an organic story going forward or if it sees a role in consolidation.

A: Ryan Lance responded that they've done heavy lifting on M&A, have no strategic gaps, are globally diverse, and are focused on the organic opportunity set within their portfolio.

Q: Lloyd Byrne from Jefferies asked about updates on Venezuela and the Sitco sale.

A: Ryan Lance said they're focused on recovering owed money in Venezuela and see no change in the Sitco sale process.

Q: Steve Richardson from Evercore ISI asked about evaluating international options versus the current portfolio.

A: Ryan Lance said they evaluate opportunities based on risk-adjusted cost of supply and whether they can compete for capital within the portfolio.

Q: Betty Jiang from Barclays asked about the Alaska exploration program.

A: Ryan Lance discussed exploring west and south of Willow for tieback opportunities into existing infrastructure, with a multiyear plan.

Q: Arun Jayaram from JPMorgan asked about technology levers contributing to well productivity in the Lower 48.

A: Ryan Lance talked about benchmarking in basins, optimizing development strategies, and completion design improvements.

Q: Doug Leggett from Wolfe Research asked about the breakeven trajectory.

A: Ryan Lance explained the pre-dividend free cash flow breakeven, preproductive CapEx, and free cash flow improvement leading to low 30s WTI breakeven by end of decade.

Q: Devin McDermott from Morgan Stanley asked about Equatorial Guinea growth assets.

A: Ryan Lance and Kirk Johnson discussed working on HOAs with Equatorial Guinea and leveraging infrastructure for long-term asset development.

Q: Ryan Todd from Piper Sandler asked about Lower 48 activity levels and commodity price.

A: Ryan Lance said they're comfortable with current plans, see modest production growth, and are constructive on free cash flow trajectory over the decade.

Q: Nitin Kumar from Mizuho asked about WCS spreads and Venezuelan heavy crude.

A: Andy O'Brien said incremental Venezuelan barrels likely absorbed, with global demand growth needing incremental supply.

Q: Scott Hanold RBC Capital Markets asked about cash balance and shareholder return strategy.

A: Andy O'Brien said they have a strong balance sheet, 45% CFO return is sustainable across price ranges.

Q: Sam Margolin from Wells Fargo asked about free cash flow contribution in 2027-2028 and LNG exposure.

A: Andy O'Brien discussed $1 billion free cash flow improvement per year, LNG projects contributing to growth, and exposure to Henry Hub gas prices.

Q: Phillip Youngworth from BMO Capital Markets asked about Delaware gas contracts and acreage swap.

A: Kirk Johnson talked about midstream contracts and strategic trades increasing lateral length for capital efficiency.

Q: James West from Melius Research asked about reserve replacement ratio.

A: Andy O'Brien said organic reserve replacement was strong, with 106% trailing three-year ratio, driven by diversified portfolio.

Q: Paul Cheng from Scotiabank asked about capital allocation post-2030.

A: Ryan Lance said Lower 48 has over two decades of inventory, with multiple decades of growth opportunity and diverse major projects.

Q: Charles Meade from Johnson Rice asked about Alaska costs and rig loss.

A: Kirk Johnson said no impact on exploration or Willow, with Willow on track and costs tracking as guided.

Q: Kevin McCurdy from Pickering Energy Partners asked about Canada pad progress.

A: Kirk Johnson discussed Surmont pad ahead of schedule, with ongoing pads and moderate growth in production and capital deployment