CONOCOPHILLIPS Q1 FY2025 earnings call

• Macro environment: Current environment has uncertainty and volatility with revised lower global economic growth and oil demand, and OPEC+ unwinding cuts. ConocoPhillips has a deep, durable, and diverse portfolio with decades of low-cost inventory.
• Integration: Integration of Marathon Oil is progressing ahead of schedule, with opportunities to enhance capital efficiency and reduce costs.
• Q1 execution: Strong execution across the portfolio, with production exceeding guidance, financials in line, and capital expenditures and return of capital to shareholders.

In the first quarter, ConocoPhillips produced 2.389 million barrels of oil equivalent per day (MBOE per day). In the Lower 48, production averaged 1.462 MBOE per day with 816,000 in the Permian, 379,000 in the Eagle Ford, and 212,000 in the Bakken. Internationally, production continued to ramp up at Surmont Pad 267 in Canada and Nuna in Alaska. First quarter financials included generating $2.09 per share in adjusted earnings, CFO of $5.5 billion, capital expenditures of $3.4 billion, and returning $2.5 billion to shareholders.

• Full year production guidance unchanged, expecting low single digit production growth. Second quarter production expected to be in the range of 2.34 to 2.38 MBOE per day with planned turnarounds.
• Capital spending revised to $12.3 billion to $12.6 billion, a $0.5 billion reduction due to capital efficiency improvements and plan optimization.
• Operating costs guidance lowered by $200 million to $10.7 billion to $10.9 billion.
• Full year effective tax rate expected to be higher than prior guidance due to geographic mix.

No detailed specific risks discussed, but mentions of macro uncertainties including revised lower global economic growth and oil demand, and OPEC+ unwinding cuts affecting oil prices.

Q: Neil Mehta asked about return of capital and cash flow in softer macro.

A: Ryan Lance said CFO based distribution framework unchanged, willing to use cash on balance sheet if needed, with second quarter likely a couple hundred million reduction relative to first quarter.

Q: Devin McDermott asked on capital side drivers and flexibility.

A: Andy O’Brien said reduction due to capital efficiency and plan optimization, measured approach, and no material scope change in Lower 48.

Q: Stephen Richardson asked about cost structure and improvement.

A: Ryan Lance said constantly looking at costs and benchmarking operations and G&A.

Q: Arun Jayaram asked about balancing low cost supply and preserving inventory.

A: Andy O’Brien said relentless focus on low cost supply, not timing market, and focusing on returns on free cash flow.

Q: Doug Leggate asked about breakeven and capital reduction.

A: Andy O’Brien said capital reduction from deferring discretionary capital, mix of things, and breakeven coming down into low 30s with projects coming on.

Q: Nitin Kumar asked about Willow project milestones and Alaska spending trend.

A: Kirk Johnson said Willow project had critical milestones, peak winter construction, and capital expected to taper down.

Q: Lloyd Byrne asked about using balance sheet to go above 45% return.

A: Ryan Lance said anchored on mid-45% of CFO, not intending to borrow gross debt.

Q: Scott Hanold asked about industry response to weaker macro.

A: Ryan Lance said companies with higher cost of supply will be cash strapped, and ConocoPhillips built for volatility with strong balance sheet.

Q: Ryan Todd asked about Marathon integration.

A: Andy O’Brien said integration tracking ahead of schedule, achieving capital synergies, and Nick Olds mentioned tax benefits from the transaction.

Q: Betty Jiang asked about reinvestment rate.

A: Ryan Lance said not trying to whipsaw long cycle investments, reinvestment rate will vary with CFO and free cash flow.

Q: Paul Cheng asked about diversifying away from Lower 48.

A: Ryan Lance said cost of supply is North Star, focused on delivering plans and executing in diverse portfolio.

Q: Josh Silverstein asked about capital allocation to long cycle projects.

A: Ryan Lance said capital expected to ramp down with completion of projects, CFO and free cash flow to increase.

Q: Kevin McCurdy asked about cash flows missing mark due to cash taxes.

A: Bill Bullock said deferred tax movement, effective tax rate in high 30s due to geographic mix, and discrete items in Lower 48 dispositions.

Q: Leo Mariani asked about $500 million budget cut.

A: Ryan Lance said spread across global portfolio, no specific production impact this year or next.

Q: David Deckelbaum asked about non-core asset sales cadence.

A: Ryan Lance said constantly optimizing portfolio, scrubbing assets, and doing cleanup asset sales annually