Release Date: May 08, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• ConocoPhillips (COP, Financial) exceeded the high end of its production guidance for the first quarter, producing 2,389,000 barrels of oil equivalent per day.
• The company successfully integrated Marathon Oil ahead of schedule, finding additional opportunities to enhance capital efficiency and reduce costs.
• ConocoPhillips (COP) reduced its capital spending guidance by $0.5 billion and operating costs by $200 million while maintaining its production guidance.
• The company returned $2.5 billion to shareholders in the first quarter, consistent with its long-term track record of distributing 45% of its annual cash flow from operations.
• ConocoPhillips (COP) has a deep, durable, and diverse portfolio with decades of high-quality, low-cost supply inventory, positioning it well for long-term free cash flow growth.

Negative Points

• The macro environment is marked by uncertainty and volatility, with revised lower outlooks for global economic growth and oil demand.
• OPEC Plus is unwinding voluntary cuts quicker than expected, leading to softened oil prices relative to the first quarter.
• The company's full-year effective corporate tax rate is expected to be higher than prior guidance due to geographic income mix.
• Full-year APLNG distributions are expected to be lower than initially anticipated, primarily due to lower pricing.
• ConocoPhillips (COP) anticipates a modest use of cash on a full-year basis due to normal timing of tax payments and unwinding of first-quarter working capital tailwinds.

Q & A Highlights

Q: With the current softer commodity macro environment, do you still view the $10 billion capital return as attainable, and would you consider taking on debt to support share buybacks? A: Ryan Lance, CEO, stated that their CFO-based distribution framework remains unchanged, with a consistent 45% return of capital to shareholders. They are willing to use cash on the balance sheet if needed and plan to reduce second-quarter buybacks by $200 million compared to the first quarter, reflecting the current macro environment.

Q: Can you elaborate on the drivers behind the capital budget reduction and how you view flexibility in your capital program? A: Andrew O'Brien, Senior VP, explained that the $0.5 billion reduction is due to capital efficiency improvements and plan optimization, with no material changes to Lower 48 scope. They are taking a measured approach to understand potential commodity price weakness before making any program changes.

Q: How do you view the cost structure and opportunities for further improvement, especially as the industry matures? A: Ryan Lance, CEO, emphasized that cost management is part of their DNA, with constant benchmarking and efficiency improvements. They are leveraging the Marathon integration to drive efficiencies and maintain a competitive edge.

Q: Given the low-cost supply in your core basins, how do you balance this with the macro environment and inventory preservation? A: Ryan Lance, CEO, stated that low-cost supply is crucial, and they focus on maximizing returns on capital through the cycle. They are not trying to time the market but are capturing opportunities for lower capital and operating costs.

Q: Can you provide more details on the progress and future outlook for the Willow project in Alaska? A: Kirk Johnson, Senior VP of Global Operations, reported that the Willow project is on track for first oil in 2029, with significant progress in winter construction and infrastructure development. Capital spending is expected to taper down through the remainder of the year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.