ConocoPhillips Delivers Solid Financial Performance Amid Volatile Market

ConocoPhillips, one of the world’s leading exploration and production (E&P) companies, has reported its financial results for 2024, showcasing resilience in the face of a challenging and volatile market environment.

Overview of Financial Performance

In 2024, ConocoPhillips generated $54.7 billion in sales and other operating revenues, a slight decrease from the previous year due to lower realized natural gas and crude oil prices. However, the company’s total production increased by 9% to 1,987 MBOED, driven by new wells coming online across its global portfolio, including the acquisition of Marathon Oil. This increase in production, coupled with the company’s disciplined cost management, resulted in $20.1 billion in cash provided by operating activities.

Navigating Volatile Commodity Prices

ConocoPhillips’ earnings and cash flows are closely tied to crude oil and natural gas commodity prices, which have historically been subject to significant volatility. In 2024, Brent crude oil prices decreased 2% to $80.76 per barrel, while WTI crude oil prices decreased 2% to $75.72 per barrel. U.S. Henry Hub natural gas prices also declined 17% to $2.27 per MMBTU. Despite these price fluctuations, the company’s diverse, low-cost portfolio and focus on capital discipline allowed it to maintain strong financial performance.

Executing on Strategic Priorities

ConocoPhillips’ management team has outlined a clear set of strategic priorities to guide the company through the volatile market environment. These priorities include:

1. Maintaining Balance Sheet Strength: The company ended 2024 with $5.9 billion in cash and cash equivalents, $0.5 billion in short-term investments, and $1.1 billion in long-term investments, demonstrating its commitment to a strong financial position.

2. Providing Peer-Leading Distributions: In 2024, ConocoPhillips returned $9.1 billion to shareholders through its ordinary dividend, variable return of capital (VROC), and share repurchases, representing 45% of its net cash provided by operating activities. The company has announced a planned 2025 return of capital to shareholders of $10 billion.

3. Making Disciplined Investments: The company’s capital expenditures and investments totaled $12.1 billion in 2024, with a focus on short-cycle projects in the Lower 48 and longer-cycle projects such as Willow in Alaska and LNG projects in Qatar and Port Arthur. This balanced approach aims to maximize free cash flow through price cycles.

4. Demonstrating Responsible and Reliable ESG Performance: ConocoPhillips has set targets to reduce its Scope 1 and Scope 2 emissions intensity by 50-60% by 2030 from a 2016 baseline. The company has also achieved the Gold Standard Reporting for emissions reporting in the Oil and Gas Methane Partnership 2.0 Initiative.

Acquisition of Marathon Oil

A key highlight of 2024 was the completion of ConocoPhillips’ acquisition of Marathon Oil, an independent oil and gas exploration and production company. This $16.5 billion transaction added high-quality, low-cost-of-supply development opportunities to the company’s existing Lower 48 portfolio and additional LNG capacity through Equatorial Guinea. ConocoPhillips expects to capture approximately $1 billion in synergies on a run-rate basis within the first full year following the close of the transaction.

Segment Performance

ConocoPhillips’ operations are organized into six segments: Alaska, Lower 48, Canada, Europe, Middle East and North Africa, Asia Pacific, and Other International. The Lower 48 segment, which contributed 63% of the company’s consolidated liquids production and 74% of its consolidated natural gas production, reported earnings of $5.175 billion in 2024, down from $6.461 billion in 2023 due to lower commodity prices and higher costs. The Alaska segment, which contributed 14% of the company’s consolidated liquids production and 2% of its consolidated natural gas production, reported earnings of $1.326 billion, down from $1.778 billion in the previous year, primarily due to lower revenues and higher depreciation, depletion, and amortization (DD&A) expenses.

Outlook and Guidance

Looking ahead, ConocoPhillips has provided the following guidance for 2025:

• Production: 2.34 to 2.38 MMBOED, including impacts from planned turnarounds
• DD&A: $11.3 to $11.5 billion
• Capital Expenditures: Approximately $12.9 billion

The company’s focus on capital discipline, cost control, and portfolio optimization positions it well to navigate the volatile market environment and deliver competitive returns to shareholders.

Strengths and Weaknesses

Strengths:

• Diverse, low-cost-of-supply global portfolio
• Disciplined capital allocation and cost management
• Commitment to shareholder returns through dividends and share repurchases
• Progress on Scope 1 and Scope 2 emissions reduction targets

Weaknesses:

• Exposure to volatile commodity prices, which can impact earnings and cash flows
• Potential challenges in executing on the acquisition of Marathon Oil and integrating the new assets
• Reliance on regulatory approvals and permits for certain development projects

Outlook and Conclusion

ConocoPhillips has demonstrated its ability to navigate the challenges of the current market environment through its strategic focus on balance sheet strength, shareholder returns, disciplined investments, and responsible environmental, social, and governance (ESG) performance. The acquisition of Marathon Oil has further strengthened the company’s position in the U.S. unconventional space and expanded its global LNG portfolio.

Looking ahead, ConocoPhillips’ diverse portfolio, commitment to capital discipline, and progress on emissions reduction targets position it well to continue delivering value to shareholders, even in the face of ongoing market volatility. However, the company remains exposed to the inherent risks of the oil and gas industry, including fluctuations in commodity prices, regulatory uncertainties, and the challenges of executing on large-scale acquisitions and development projects.

Overall, ConocoPhillips’ 2024 financial results demonstrate the company’s resilience and its ability to adapt to a dynamic market environment, while maintaining a focus on its strategic priorities and long-term sustainability.