ConocoPhillips NYSE: COP reported second-quarter 2026 production above the high end of its guidance range, supported by record Permian Basin output, while also announcing that Chairman and Chief Executive Officer Ryan Lance will retire from the CEO role effective Sept. 1.
Andy O'Brien, currently chief financial officer and executive vice president of strategy and commercial, will become president and CEO. Lance will remain with the company as executive chairman during the transition. O'Brien said Konnie Haynes-Welsh will join the executive leadership team as chief financial officer.
Lance, who has spent more than 40 years at ConocoPhillips and served as CEO for 14 years, said the company was positioned for a leadership transition because of its portfolio strength, project execution and financial outlook. He said O'Brien had played a key role in shaping the company’s strategy and execution over nearly three decades with the business.
Second-quarter production and cash flow
ConocoPhillips produced 2.248 million barrels of oil equivalent per day during the second quarter, exceeding its guidance range. The company’s Permian production exceeded 900,000 barrels per day, reaching a record 920,000 barrels per day during the quarter, according to management.
O'Brien said adjusted earnings were $3.24 per share. Cash flow from operations totaled $7.2 billion, while capital expenditures of $3 billion resulted in $4.2 billion of free cash flow.
- Shareholder distributions totaled $3 billion, including $2 billion of share repurchases and $1 billion in ordinary dividends.
- Share repurchases doubled from the prior quarter.
- The company ended the quarter with $8.1 billion in cash and short-term investments, plus $1.2 billion of liquid long-term investments.
For the third quarter, ConocoPhillips forecast production of 2.290 million to 2.320 million barrels of oil equivalent per day. O'Brien said the anticipated sequential increase reflects a production ramp in Qatar and continued Lower 48 growth, more than offsetting the July sale of non-core assets producing about 15,000 barrels per day.
The company maintained its full-year guidance. O'Brien said ConocoPhillips averaged a roughly 40% payout rate in the first half and expects to increase distributions during the second half in order to meet its 45% full-year target.
Portfolio moves and international expansion
ConocoPhillips completed its previously announced $5 billion disposition target ahead of schedule, including $1.7 billion of non-core Lower 48 asset sales completed in July. O'Brien said the company would continue to evaluate its asset base, describing portfolio high-grading as an ongoing process rather than a one-time program.
The company also signed two liquefied natural gas offtake agreements, each for 1 million metric tons per year. One agreement is in Indonesia and the other is on the U.S. Gulf Coast. The additions bring ConocoPhillips’ total LNG offtake portfolio to 12 million metric tons per year.
O'Brien said the Indonesia volumes will supplement a portfolio primarily supplied from the Gulf Coast and provide geographic flexibility for commercial optimization, including substitution and diversion opportunities. He said ConocoPhillips expects LNG demand and pricing to remain constructive over the long term, while acknowledging potential volatility.
In the Middle East, the company signed strategic agreements involving low-cost supply growth opportunities in Iraq and Syria. O'Brien said the Iraq transaction related to the Kirkuk field is expected to close around year-end, with acquisition capital estimated at $300 million to $500 million, including historical costs and expected spending through closing.
He said the structure provides ConocoPhillips with a share of incremental production and reserves while allowing cost recovery. The company estimates cost of supply for the Kirkuk opportunity at about $30 per barrel and expects the joint venture to largely fund redevelopment from its own cash flow. O'Brien said the Iraq and Syria opportunities are not expected to affect the company’s planned 2029 free-cash-flow inflection and instead represent potential upside beyond that outlook.
Capital outlook and major projects
Management reiterated its expectation of a $7 billion free-cash-flow inflection by 2029. O'Brien said peak capital spending for the Willow project is already behind the company and that total capital expenditures are expected to decline as Willow begins production in early 2029.
He said the company’s free-cash-flow breakeven is expected to fall from the mid-$40s per barrel of West Texas Intermediate crude currently to the low $30s by 2029. ConocoPhillips plans to continue investing in its Lower 48 and Alaska operations, though O'Brien said this would occur at a structurally lower reinvestment rate.
In Alaska, Executive Vice President of Global Operations and Technical Functions Kirk Johnson said ConocoPhillips’ four-well exploration program in the National Petroleum Reserve-Alaska produced encouraging enough results for the company to anticipate adding resources to the Willow development area. He said additional appraisal work will be required before development plans are finalized.
Johnson said the company has begun preparations for its 2027 winter exploration season, including field surveying and federal permit applications. He added that future satellite developments could use Willow infrastructure for decades, with additional volumes potentially filling capacity later in the 2030s.
Regarding Qatar, Johnson said Ras Laffan production was largely shut in during the second quarter amid conflict-related disruptions, though limited volumes continued to support local demand. The company completed a planned turnaround during the downtime and expects a production ramp through the third quarter. He said the timing remains uncertain, but the company’s guidance incorporates that uncertainty.
Johnson said the North Field East and North Field South LNG projects continued to progress during the conflict. Any delay to first gas or first cargo is expected to be measured in months rather than a full year, he said, and is not expected to materially affect ConocoPhillips’ free-cash-flow outlook.
Lower 48 technology efforts
Executive Vice President of Lower 48 and Global HSE Nick Olds said ConocoPhillips is testing technologies intended to improve recovery and capital efficiency in its shale operations. These include real-time fracture diagnostics, far-field diverters and surfactants.
Olds said real-time fracture optimization has enabled the company to adjust completion-stage volumes by as much as 30%, while up to 60% of fracture stages on some wells have been modified from the original design. In the Permian, early surfactant tests have shown up to a 20% improvement in oil productivity for treated wells compared with untreated wells, though he said longer-term performance must still be evaluated.
The company is also increasing lateral lengths, with average laterals expected to rise 15% in 2026 from 2025 levels. Olds said all Permian wells brought online this year are longer than two miles, with several three- and four-mile laterals being drilled.
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.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
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