An array of pumpjacks operate Thursday, July 7, 2022, in Odessa. (Odessa American File Photo)Boosted by its $22.5-billion acquisition of Marathon Oil and continued strong Permian Basin production, ConocoPhillips ended 2024 well positioned to pursue a slate of major projects including its initiatives in Alaska this year.
That’s according to Chairman-CEO Ryan M. Lance, who said during his fourth quarter earnings call from Houston that his company had delivered 5% growth in the Lower 48 States and 3% growth in Alaska.
“We closed the acquisition of Marathon in late November, which added high quality, low cost of supply inventory to our portfolio,” Lance said. “In Alaska we opportunistically exercised our preferential rights to acquire additional working interest at attractive valuations in Kuparuk River and Prudhoe Bay.
“We progressed our global LNG strategy through additional regasification and sales agreements into Europe and Asia.”
Executive Vice President-Chief Financial Officer William L. Bullock Jr. reported that ConocoPhillips produced 2,183,000 barrels of oil equivalent per day with 833,000 in the Permian Basin, 296,000 in Eagle Ford and 151,000 in the Bakken.
“This included one month of production from the acquired Marathon assets, which added 126,000 barrels per day to the quarter,” Bullock said. “Now inclusive of one month of Marathon the Lower 48 produced 1,308,000 barrels of oil equivalent per day.”
Lance said the company is making solid progress on its planned $2 billion of asset sales.
“We have agreements in place to sell noncore Lower 48 assets for approximately $600 million before customary adjustments in the first half of 2025,” he said. “We generated a trailing 12-month return on capital employed of 14% or 15% on a cash adjusted basis and returned $9.1 billion of capital to our shareholders.
“Now looking ahead to 2025 we remain confident in the plan that we outlined in our third-quarter call to deliver low single-digit production growth for $12.9 billion of capital expenditures. In the Lower 48 on a pro forma basis we plan to reduce capital spending by over 15% year over year while still delivering low single-digit production growth.”
Lance said that is primarily due to the expected material synergy capture associated with the acquisition of Marathon and significant drilling and completion efficiency gains.
“We also expect to grow production in Alaska and Canada and we are doing all of this while continuing to invest in differentiated high-return, longer-cycle projects,” he said. “We expect 2025 to be the peak year of our long-cycle spending at around $3 billion followed by a steady stream of project start-ups from 2026 to 2029.
“Once these projects are all online we expect $3.5 billion of incremental cash flow from the North Field East, Port Arthur, the North Field South and Willow, all combined at $70 WTI and $4 Henry Hub. And that leads to roughly $6 billion of incremental annual sustaining free cash flow relative to 2025.”
Lance announced a target to return $10 billion to shareholders this year assuming current commodity prices.
“This consists of $4 billion of ordinary dividends and $6 billion in buybacks, positioning us to execute on our objective to retire the equivalent of the shares issued for the Marathon transaction within two to three years even with lower WTI prices than at the time of the announcement,” he said.
“Our portfolio is well positioned to generate competitive returns and cash flow for decades to come.”
Bullock said ConocoPhillips generated $1.98 per share in adjusted earnings during the fourth quarter, recording over $400 million of transaction- and integration-related expenses.
“Now this was mostly offset by over $400 million of tax benefits resulting from the utilization of certain foreign tax credits associated with the Marathon acquisition,” he said. “Both these items were largely non-cash in the quarter and the one-time cash benefit will show up as a working capital tailwind in the first quarter of this year.”
Bullock said fourth quarter cash flow was over $5.4 billion including over $250 million of Australia Pacific LNG distributions.
“Operating working capital was a $1-billion headwind in the quarter primarily due to normal changes in accounts receivable and accounts payable,” he said. “Capital expenditures were $3.3 billion, which included approximately $400 million for spending related to acquisitions that was not premised in guidance.”
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