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ConocoPhillips produced solid first-quarter results.
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The oil company is reducing its 2025 spending plan while maintaining its production growth outlook.
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It expects to deliver peer-leading free cash flow growth through 2029.
ConocoPhillips (NYSE: COP) has spent several years building a low-cost oil company. It has sold off higher-cost assets and recycled the capital to expand its lower-cost resources. The result is an oil company that can produce a lot of cash at lower oil prices.
That was on full display during the first quarter. Meanwhile, with further improvements in its cash flow ahead, the oil stock will become an even more efficient cash-producing machine.
ConocoPhillips produced an average of nearly 2.4 million barrels of oil equivalent (BOE) per day during the first quarter. That was an increase of 487,000 BOE per day from the prior-year period, fueled largely by its acquisition of Marathon Oil. However, even after adjusting for the impact of acquisitions and asset sales, its production was up 5% from the year-ago period due to its investments to grow its output in low-cost regions.
That higher production enabled ConocoPhillips to generate $5.5 billion of cash from operations during the period. It used that money to help fund $3.4 billion of capital expenditures and investments to maintain and grow its production. The oil company used its free cash flow and strong balance sheet to repurchase $1.5 billion of its shares and pay $1 billion in dividends. The company also retired $500 million of debt at maturity.
The oil giant ended the period with $7.5 billion in cash and short-term investments on its balance sheet and another $1 billion in long-term investments. It enhanced its balance sheet by repaying debt and selling $1.3 billion of noncore assets to maintain a strong cash position.
“Amid a volatile macro environment, we remain confident in the competitive advantages provided by our differentiated portfolio, strong balance sheet, and disciplined capital allocation framework that prioritizes returns on and of capital to shareholders,” stated CEO Ryan Lance in the first-quarter earnings press release. The company’s strong competitive position enables it to operate even more efficiently this year. ConocoPhillips is reducing its full-year capital and operating cost guidance while maintaining its production outlook.
ConocoPhillips now expects its capital spending to be in the range of $12.3 billion-$12.6 billion, down from $12.9 billion. It’s also lowering its adjusted operating cost guidance range from $10.9 billion-$11.1 billion to $10.7 billion-$10.9 billion. Despite reducing spending, the company still expects to produce between 2.3 million and 2.4 million BOE per day this year. That puts the company in a position to produce more free cash flow at the current oil price point than it would have had in its prior outlook.
