The paragraph is a transcript of the opening remarks for the ConocoPhillips fourth quarter 2024 earnings conference call. Liz, the operator, introduces the call, which is hosted by Phil Gresh, Vice President of Investor Relations. Several members of the ConocoPhillips leadership team are present, including CEO Ryan Lance and CFO Bill Bullock. The introduction also welcomes Guy Baber, who recently joined from Marathon Oil, to the investor relations team. Phil outlines the structure of the call, which includes opening remarks by Ryan and Bill, followed by a Q&A session. He also mentions the availability of supplemental financial materials and notes that forward-looking statements and non-GAAP financial measures will be discussed.

In 2024, ConocoPhillips experienced strong operational performance, achieving 4% production growth and a 123% organic reserve replacement ratio. The company saw growth in various regions, including a 5% increase in production in the lower 48 states and 3% growth in Alaska and international markets. They completed the acquisition of Marathon, enhancing their portfolio, and anticipate over $1 billion in synergies by the end of 2025. ConocoPhillips also made strategic moves in Alaska and progressed its global LNG strategy. Asset sales agreements are underway, targeting $2 billion in sales, with $600 million from non-core lower 40 assets set for sale by mid-2025. The company generated a 14% return on capital employed and returned $9.1 billion to shareholders. Looking ahead to 2025, they remain confident in their strategic plan.

The company plans to achieve low single-digit production growth in the lower 48 states with a $12.9 billion capital expenditure, reducing spending by over 15% from the previous year. This growth is supported by synergies from the Marathon acquisition and significant drilling and completion. They also aim to increase production in Alaska and Canada while investing in high-return, long-term projects, expecting peak spending in 2025 and project startups from 2026 to 2029. The company estimates $3.5 billion in additional CFO from projects like NFV Port Arthur and Willow, with incremental annual sustaining free cash flow reaching about $6 billion by 2025. They plan to return $10 billion to shareholders through dividends and buybacks, intending to retire shares issued for the Marathon acquisition, even with potentially lower WTI prices. The paragraph concludes with Bill Bullock discussing the company's fourth-quarter performance and 2025 guidance, noting $1.98 per share in adjusted earnings despite several special items.

The paragraph discusses financial and operational impacts of a recent Marathon acquisition. The company recorded over $400 million in transaction and integration-related expenses, largely offset by tax benefits from foreign tax credits. These items were mostly non-cash, with expected cash benefits in the future. The company anticipates recognizing net operating losses related to Marathon over the coming years. In the fourth quarter, they produced 2,183,000 barrels of oil equivalent per day, including one month of Marathon's production. Excluding Marathon, there was an 8% year-over-year production growth. The Lower 48 region produced over 1.3 million barrels per day, with significant output from the Permian, Eagle Ford, and Bobcat basins. Cash flow from operations was over $5.4 billion, factoring in LNG distributions, while working capital faced a $1 billion headwind. Capital expenditures were $3.3 billion, including $400 million for acquisitions. The company returned over $2.8 billion to shareholders through buybacks and dividends, and executed strategic debt transactions post-acquisition.

The article discusses the company's financial and operational outlook. It highlights that recent transactions have improved their capital structure and extended the maturity of their portfolio while lowering interest costs. They ended the year with $6.4 billion in cash and short-term investments and $1.1 billion in long-term investments. For 2025, they project production to be 2.34 to 2.38 million barrels of oil equivalent per day, factoring in planned turnarounds, particularly in Norway, Australia, and Alaska. The first quarter is forecasted to have minimal turnaround impact, similarly to the fourth quarter. Capital spending for the year is projected at $12.9 billion, with planned decreases and increases in spending across different regions. They anticipate full-year operating costs between $10.9 and $11.1 billion, exploration expenses of $300 million, and depreciation, depletion, and amortization expenses around $11.3 billion.

The paragraph discusses ConocoPhillips' financial expectations and performance for 2024, including a projected full-year adjusted corporate segment net loss of about $1.1 billion and an effective corporate tax rate in the 36-37% range. The company anticipates $1 billion in full-year APLNG distributions, with $200 million expected in the first quarter. It highlights a successful operational year and ongoing strategic initiatives across its portfolio, emphasizing competitiveness in shareholder distributions. The Q&A session begins with a question from Arun Jayaram of JPMorgan regarding the company's decision to increase cash returns by 10% to $10 billion for 2025, considering price volatility and the merger with Marathon. Ryan Lance emphasizes the importance of returning cash to shareholders as part of the company's strategy set in 2016.

The paragraph discusses a company's financial strategy and outlook for 2025, highlighting confidence in achieving a $10 billion target despite recent declines in WTI prices. It mentions the company's sensitivity to commodity price changes, with significant cash flow implications for every dollar movement. The company has a strong balance sheet, ending the year with over $7.5 billion in cash and investments, and plans to sell $2 billion in non-core assets for added flexibility. The paragraph also introduces a transition in the conversation, with Steve Richardson from Evercore ISI asking about long-cycle CapEx and its outlook.

The paragraph provides an update from Andy O'Brien on several major projects, including Port Arthur Phase Two and long-cycle capital investments. Port Arthur Phase Two is highlighted as a promising project with involvement from key companies like Aramco and aims to build significant offtake and regas capacity. The discussion also touches on the company's capital expenditure, noting a peak spend in 2025 due to extensive winter construction activities in Willow. Post-2025, there will be a gradual reduction in major project expenditures as projects begin to come online, leading to anticipated improvements in cash flow by 2026 with the NFV project.

The article discusses the progress and financial outlook of various projects, emphasizing that this year marks the peak in spending for these initiatives. Ryan Lance highlights an expected steady stream of project startups leading to significant cash flows, projecting over $6 billion in free cash flow by 2025. These projects are described as low-cost, competitive, and crucial for the company's long-term growth. Doug Leggett from Wolfe Research comments on the company's remarkable performance in production, surpassing growth expectations. He questions whether the company will continue its current trajectory or adjust its activity and capital spending in response to the exceptional efficiencies achieved. Ryan Lance credits Nick and his team for delivering these impressive results through advanced horizontal drilling and fracking techniques.

The paragraph discusses a company’s strategic approach to managing production growth and efficiency, emphasizing their acquisition of Marathon assets, which added significant resources at a low cost. The focus is on integrating these assets into plans, primarily in the Bakken and Eagle Ford areas, and maintaining operational efficiency without overexpanding or underutilizing resources. The company aims to avoid unnecessary drilling or idling of equipment, opting instead for a balanced, efficient approach. Despite not adding new rig lines as initially anticipated, they have achieved significant growth through improved efficiency, leading to questions about whether the level of growth is sustainable in a slowly growing macro environment.

The paragraph discusses the company's approach to capital efficiency and sustaining capital needs. It highlights that the company aims to optimize returns on capital without disrupting its efficient operations. During the discussion, Lloyd Byrne from Jefferies poses a question about future capital expenditure and production growth, suggesting consensus estimates predict flat capital spending with no growth. Andy O'Brien responds by explaining their philosophical approach to sustaining capital, referencing their 2025 capital plans which include $12.9 billion, with $3 billion allocated for preproductive capital. This suggests a normalized sustaining capital need of about $9 billion in the current commodity price environment. He also mentions that back in 2022, sustaining capital was estimated at $6 billion in a $40 price environment, and notes that the company's financial structure has changed significantly due to acquisitions and organic growth.

The paragraph discusses financial projections and capital expenditure (CapEx) related to Marathon's acquisition and operations. The speaker suggests that if the Marathon and Sirmat acquisitions, along with organic growth, were added to current figures, the company's value could approach $7.5 billion. Betty Jiang from Barclays inquires about the reduction in pro forma CapEx by $1.4 billion, with $500 million resulting from Marathon Synergy, seeking details on the remaining drivers like efficiency gains and development optimization. Nick Olds responds, attributing the reduction to operational improvements, synergies, and modest deflation, praising the team's efficiency over the past two and a half years.

The paragraph discusses the operational efficiencies and synergy capture achieved by the company in 2024, resulting in a significant increase in production despite similar rig and frac activity levels. These efficiencies include improved well and mud programs, common contracts, and steady-state development strategies, particularly for the Marathon assets. The company is also optimizing its legacy positions in Eagle Ford and Bakken, contributing to activity optimization and anticipated modest deflation in 2025, amounting to around $200 million. Overall, these efforts are expected to contribute to a total benefit of $1.4 billion. The paragraph concludes by highlighting the continued growth in the lower forty-eight business, driven by consistent operating efficiencies, despite flat activity levels. The discussion then shifts to a question from Devin McDermott regarding capital spending in Alaska, particularly the Willow project.

Kirk Johnson provides an update on the progress of the Willow project in Alaska, highlighting that they are on track and have achieved key milestones since taking the final investment decision in late 2023. He mentions successful mobilization for the current winter construction season, noting that ice road construction is slightly ahead of schedule, allowing them to maximize the season despite potential weather challenges. This year marks a peak in ice road construction efforts, building on accomplishments from the previous year.

The paragraph discusses the progress and plans for a development project involving the construction of infrastructure such as gravel roads, bridge construction, and pipeline crossings. The company has been advancing operations, including moving modules into the Willow development area. Engineering and contracts are on schedule, setting up for full fabrication throughout the year. 2025 is anticipated to be a peak year for project spending, about $500 million more than in 2024. A significant portion of the annual spend for 2025 is expected in the first quarter, with expenditures decreasing over the subsequent quarters, and minimal spending by 2029 when first oil is expected. The paragraph concludes with a mention of media attention about NPRA.

The paragraph discusses the ongoing activities and exploration in Alaska, particularly in areas such as Caparra, Western Roselope, and Willow. It notes that a previous ruling by the prior administration did not affect these activities, but there was some disagreement with the ruling. The administration under President Trump issued an executive order to reverse the ruling, allowing continued exploration, particularly west of Willow. The speaker expresses optimism about collaborating with the Department of Interior and the state of Alaska to advance energy exploration, which they believe benefits both energy development and the state. Additionally, the conversation shifts to a question from Neil Mehta of Goldman Sachs about reserve replacement, highlighting the company's strong performance in this area in recent years and emphasizing the importance of this metric. Andy O'Brien acknowledges the significance of reserve replacement as a measure for oil and gas companies.

The company is reporting a strong organic reserve replacement ratio of 123% this year, despite challenges from falling prices that led to some downward revisions. They are particularly pleased with the results, especially in the lower 48 region, and have made notable bookings from projects like the NFS and Sirmont. Including acquisitions like Marathon, the total reserve replacement ratio reaches 244%, bringing reserves up to 7.8 billion boe for 2024, a billion increase from the previous year, with an improved reserve replacement period of 10.7 years. The impact of the late-year Marathon acquisition is primarily seen in approved developed reserves, with integrated five-year plans currently underway.

The paragraph discusses the company's divestiture strategy and ongoing asset sales. They've announced $600 million in asset sales, aiming for a total of $2 billion, with most expected by 2025. Non-core Permian assets worth $600 million have been signed with Purchase and Sale Agreements, reflecting progress toward their goal. There are ongoing discussions about the Port Arthur equity sell-down. The company initially took equity in Port Arthur phase one to kickstart the project, but now it is under execution, and they don't need to retain ownership indefinitely. The project is currently being funded through project financing.

The paragraph discusses a company's strategy for managing natural gas resources, contrasting their global LNG approach with opportunities in the US power market. While they are primarily focused on LNG due to favorable market conditions and higher value markets, they are also exploring opportunities in domestic power supply, given their extensive natural gas production and land holdings in the US. The company sees potential in supplying gas to data centers with increasing power demands and is considering ways to monetize their gas resources despite lower wellhead prices.

The paragraph discusses a company's evaluation of growth opportunities in the Permian Basin within the context of their financial framework and competitiveness for capital. It also addresses questions from Scott Hanold of RBC Capital Markets regarding the impact of recent White House initiatives, particularly tariffs, on their business and the industry. Ryan Lance acknowledges that these initiatives disrupt the market but suggests that the market will eventually stabilize. He notes potential negotiations between the administration and neighboring countries, which could impact the market and the company's portfolio. Andy O'Brien further emphasizes that the company is closely monitoring these developments.

The paragraph discusses the impact and potential consequences of recently announced tariffs on the company's business, particularly regarding sales of "somewhat liquids" to the U.S. It highlights that about half of these liquids are exported to the U.S., while the rest are sold locally in Canada. The company mentions its natural gas sales from the Motney region do not go to the U.S., providing a natural hedge. They anticipate that tariffs could affect price differentials for various oil types and influence foreign exchange rates. The company emphasizes its focus on controlling what it can, such as producing low-cost supply volumes and optimizing commercial value. They are preparing for the possibility of tariffs but hope the situation does not arise.

In the paragraph, Ryan Lance discusses the state of mergers and acquisitions (M&A) in the industry, particularly in relation to cloud opportunities and the strategic decisions of other companies like Marathon. He notes that while the landscape is changing and consolidation is expected to continue, there are fewer high-quality opportunities available compared to previous years. Lance emphasizes the importance of any potential acquisition aligning with their financial framework, improving their assets, and enhancing their ten-year plan. He mentions that the landscape of high-quality opportunities is shrinking, although they remain attentive to possible strategic changes in other companies. Following this discussion, the dialogue shifts to Leo Mariani, who inquires about recent divestitures totaling $600 million.

The paragraph involves a discussion about the sale and production of non-core Permian assets, which are estimated to produce around 15,000 barrels per day, with a typical Southern Delaware mix. Paul Cheng from Scotiabank inquires about the potential development opportunities with the recently acquired Marathon assets, asking particularly about tier-one inventory and strategies for regions like Eagle Ford and Bakken. Ryan Lance responds about the Equatorial Guinea operations, noting satisfaction with existing contracts and plans, and mentions upcoming infill wells, indicating continuity of Marathon's original plans.

In the paragraph, the company discusses its short and medium-term plans, indicating there are no significant changes to Marathon's operations in the EG area. The focus is on understanding the long-term potential for LNG growth in the region, aligning with the company's broader strategic goals. Nick Olds responds to an inventory quality question, noting the inventory remains competitive with 2,000 well locations at a $40 per barrel supply cost, mainly in Eagle Ford, Bakken, and Delaware. Eagle Ford shows strong performance, meeting expected metrics. Additionally, the company is exploring synergies in the Bakken for longer lateral wells to optimize inventory. The response ends as the operator directs the next question to Charles Meade from Johnson Rice.

The paragraph discusses Conoco's Nuna project in Alaska, highlighting its significance for the company's production growth. The project, which started in December, involves building a new pad for the first time in a decade and drilling new wells. Kirk Johnson emphasizes the investment opportunities in Alaska, stating that production from Nuna will help offset declines and sustain modest growth. The project showcases the company's strategy of exploring new targets while utilizing existing infrastructure. Plans include drilling eight more wells in 2025 to support production goals.

The paragraph discusses various targets and projects in the energy sector, highlighting developments in Caparic and WNS, particularly focusing on the Coyote project, which parallels the Willow project. The speaker mentions the advancement of technology and capital efficiency through these projects, which are expected to be beneficial by 2027. A question from Josh Silverstein of UBS addresses the LNG contracting environment, asking about any changes in the demand for LNG in Europe due to geopolitical events like the Russia-Ukraine conflict. Andy O'Brien responds by stating that there is a continued strong demand for LNG in Europe, especially due to reduced pipeline gas supply from Russia and the impact of a cold winter on energy inventories, indicating that the need for LNG remains unchanged.

The paragraph discusses the company's strategy of increasing their regasification capacity in Europe and expanding sales into Asia, indicating that they are on track with their plans. It also touches on the potential influence of the U.S. President's push for higher domestic production, but the company remains focused on driving efficiencies and addressing permitting reforms to facilitate infrastructure development. This includes improving the speed of drilling approvals and other permits, which had slowed under the previous administration, in order to enhance operational efficiency and business normalcy.

The paragraph discusses the expectation of sustained or growing production levels of liquids and increasing gas volumes in the lower forty-eight states, suggesting this will foster a more favorable investment environment and enhance operational efficiency. The conference call is then concluded by the operator.

This summary was generated with AI and may contain some inaccuracies.