ConocoPhillips (NYSE:COP) executives used the company’s fourth-quarter 2025 earnings call to emphasize what they described as another year of strong operational execution, balance sheet improvement, and progress on a multi-year free cash flow growth plan that management said is now underway.
2025 results: production in line, capital and costs beat guidance
Chairman and CEO Ryan Lance said the company “outperformed all our major guidance drivers from the beginning of the year” including capital spending, operating costs, and production. On a pro forma basis, Lance said ConocoPhillips grew production by 2.5% in 2025 while also reducing capital and costs.
Shareholder returns and balance sheet
O’Brien said ConocoPhillips returned $2.1 billion to shareholders in the fourth quarter, including “just over $1 billion” in buybacks and $1 billion in ordinary dividends. Full-year returns totaled $9.0 billion, which management said equaled 45% of CFO and was in line with the company’s framework.
Management also highlighted balance sheet actions in 2025. O’Brien said the company paid down $900 million of debt, increased cash balances by $1 billion, and reduced net debt by nearly $2 billion. Cash and short-term investments ended the year at $7.4 billion, with an additional $1.1 billion in long-term liquid investments.
Asked about maintaining distributions during weaker price periods, O’Brien said the company views the balance sheet as a tool to support its framework. He stated that returning 45% of CFO “works across a range of prices,” and if a quarter or two required drawing on the balance sheet, “that’s what we would do.”
Marathon integration, divestitures, and cost initiative
Lance said the company’s integration of Marathon Oil exceeded its acquisition case on key metrics. He said ConocoPhillips “doubled our synergy capture,” realized an additional $1 billion of one-time benefits, and “completely eliminated the Marathon capital program while still delivering pro forma production growth.”
On portfolio moves, O’Brien said ConocoPhillips closed more than $3 billion of asset sales in 2025, including $1.6 billion of proceeds in the fourth quarter. The company said those sales represent progress toward an “upsized” $5 billion divestiture target.
Management also referenced a separate efficiency push. Lance said ConocoPhillips launched an “incremental $1 billion cost reduction and margin enhancement initiative” and said the company has already made progress on it.
2026 guidance: lower spending, modest production growth
For 2026, O’Brien guided to about $12 billion of capital spending, down roughly $600 million year over year, which he attributed to Lower 48 capital efficiency gains and lower major project spending. Operating costs are expected to be about $10.2 billion, down about $400 million versus 2025, driven by cost-reduction efforts and a full year of Marathon synergies.
Production guidance for 2026 is 2.23 million to 2.26 million barrels of oil equivalent per day, which management described as modest growth. First-quarter production is expected to be higher, at 2.30 million to 2.34 million barrels of oil equivalent per day, including the estimated impacts of weather-related downtime from Winter Storm Fern.
In the Lower 48, O’Brien said ConocoPhillips expects to deliver “more production for less capital,” citing improvements in drilling and completion efficiencies of more than 15% in 2025 and additional capital efficiency gains in 2026. During Q&A, executives also discussed longer laterals in the Permian, saying the share of future Permian well inventory that is two miles or greater increased from about 60% in 2023 to about 80% “today,” with 90% of 2026 wells expected to be two miles or greater.
Major projects, free cash flow inflection, and breakeven outlook
Management repeatedly pointed to what it framed as an accelerating free cash flow profile. Lance said four major projects plus the cost initiative are expected to drive a $7 billion free cash flow “inflection” by 2029 that would double 2025 free cash flow generation. He said the company anticipates approximately $1 billion of incremental free cash flow each year from 2026 through 2028, with another $4 billion tied to Willow coming online in 2029.
O’Brien said the company’s LNG portfolio has grown to about 10 million tons per annum of offtake. He added that the company’s LNG projects are more than 80% complete, with NFS expected to start up in the second half of 2026. Willow, meanwhile, is nearing 50% complete and remains on track for first oil in early 2029, executives said.
In response to a question on breakeven, O’Brien said ConocoPhillips’ current pre-dividend free cash flow breakeven is in the “mid-$40s” WTI range, with roughly $10 added for the dividend. He said management expects the pre-dividend breakeven to fall into the low $30s by the time Willow comes online, adding that buybacks also reduce the dividend burden over time.
Other topics addressed in Q&A included:
- M&A outlook: Lance said the company has done “heavy lifting” on M&A over the last four to five years and sees “no strategic gaps,” describing the company’s pivot as focused on organic opportunities.
- Venezuela and Citgo: Lance said the company’s priority remains recovery of what it is owed in Venezuela through “two judgments,” and he said ConocoPhillips sees “no change” to the Citgo sale process at this point, while noting appeals and an OFAC license remain part of the process.
- International and Libya: Lance said the company recently signed an agreement extending the Libya concession after years of working on improved fiscal terms, which he characterized as an organic improvement to an existing asset.
- Alaska exploration: Executives said ConocoPhillips has four fully permitted wells and began drilling the first of the four recently, targeting tieback opportunities near Willow and existing infrastructure, with a multi-year plan.
- Equatorial Guinea LNG backfill: Management said it is in discussions with other operators and the government to leverage existing infrastructure and extend the life of the LNG facility beyond a five-year outlook.
- Canada Surmont: Executives said the latest pad came online about a month early, but they do not expect a material change in capital or production profiles, describing development as disciplined and level-loaded.
Looking ahead, Lance said the company intends to maintain its framework of returning about 45% of CFO to shareholders while pursuing production growth “on an underlying basis” and delivering the targeted $1 billion combined reduction in capital spending and operating costs in 2026.
About ConocoPhillips (NYSE:COP)
ConocoPhillips (NYSE: COP) is a Houston-based international energy company focused on exploration and production of oil and natural gas. Formed in 2002 through the merger of Conoco Inc and Phillips Petroleum Company, the firm operates as an independent upstream company that explores for, develops and produces crude oil, natural gas and natural gas liquids across a portfolio of global assets.
The company’s activities span conventional and unconventional resources and include onshore and offshore operations in multiple regions around the world.
