ConocoPhillips Financial Model

For ConocoPhillips, revenue is driven by production volumes and realised commodity prices across its five geographic segments.

• Lower 48
• *Revenue driver formula:* Lower 48 Production (MBOED) x 365 x Lower 48 Realised Price ($/BOE)
• *Historical growth rate:* 5-10% CAGR (heavily boosted by the 2021 Concho and 2024 Marathon Oil acquisitions).
• *Key growth levers and headwinds:* Rig count, completion efficiency, and well productivity in the Permian Basin; headwinds include natural decline rates and supply chain inflation.
• *Pricing dynamics:* Tracks WTI and Henry Hub, subject to local basin differentials (e.g., Midland vs. Cushing).
• Alaska
• *Revenue driver formula:* Alaska Production (MBOED) x 365 x Alaska Realised Price ($/BOE)
• *Historical growth rate:* Flat to slightly declining historically, but poised for growth.
• *Key growth levers and headwinds:* The $8 billion Willow project (first oil expected 2029) is the primary growth lever.
• *Pricing dynamics:* Tracks Alaska North Slope (ANS) crude pricing, which often trades at a premium to WTI.
• Canada
• *Revenue driver formula:* Canada Production (MBOED) x 365 x Canada Realised Price ($/BOE)
• *Historical growth rate:* 2-4% CAGR (boosted by the 2023 Surmont acquisition).
• *Key growth levers and headwinds:* Surmont pad development and Montney drilling; headwinds include wide Western Canadian Select (WCS) differentials.
• *Pricing dynamics:* Heavily influenced by WCS pricing for bitumen.
• Europe, Middle East and North Africa (EMENA)
• *Revenue driver formula:* EMENA Production (MBOED) x 365 x EMENA Realised Price ($/BOE)
• *Historical growth rate:* Flat.
• *Key growth levers and headwinds:* North Field East (NFE) and North Field South (NFS) LNG expansions in Qatar (startup expected 2H26).
• *Pricing dynamics:* Brent crude and TTF natural gas pricing.
• Asia Pacific
• *Revenue driver formula:* Asia Pacific Production (MBOED) x 365 x Asia Pacific Realised Price ($/BOE)
• *Historical growth rate:* Flat to slight decline.
• *Key growth levers and headwinds:* Backfill projects for Darwin LNG.
• *Pricing dynamics:* Brent-linked LNG contracts and spot Asian LNG prices (JKM).

*Revenue recognition notes:* Revenues are recognised when control of the product transfers to the customer at delivery points. *Seasonality:* Q1 and Q4 can experience weather-related downtime (e.g., winter storms in the Lower 48 or extreme cold in Alaska).

• *Total assets:* Approximately $124 billion (as of Q1 2025).
• *Key asset categories:* Property, Plant and Equipment (PP&E) makes up the vast majority of assets (proved and unproved oil and gas properties).
• *Goodwill & intangibles:* Increased significantly following the Marathon Oil and Concho acquisitions.
• *Working capital profile:*
• *Days Sales Outstanding (DSO):* 30-45 days.
• *Days Payable Outstanding (DPO):* 40-60 days.
• *Net working capital:* Typically negative or neutral. The company does not rely on working capital to fund growth.
• *PP&E:* Depleted using the unit-of-production method based on proved reserves.
• *Right-of-use assets:* Operating leases for drilling rigs, office space, and transport vessels are material but small relative to PP&E.

• *Capex as % of revenue:* Typically 15-25%, but better evaluated as absolute spend.
• *Absolute Capex:* $12.6 billion in 2025; guided to approximately $12.0 billion for 2026.
• *Maintenance vs. growth capex:* Approximately 60% maintenance (to hold production flat) and 40% growth.
• *Major capex programmes:* The Willow project in Alaska ($8 billion total, 50% complete by winter 2025/2026) and Qatar LNG expansions.
• *M&A pattern:* Transformational acquirer. Acquired Concho Resources (2021), Surmont remaining stake (2023), and Marathon Oil (2024 for $22.5 billion).

• *Total debt:* Approximately $23 billion long-term debt.
• *Net debt:* Reduced by nearly $2 billion in 2025.
• *Credit rating:* Investment grade (A- / A3).
• *Key debt instruments:* Unsecured senior notes. ConocoPhillips assumed and exchanged Marathon Oil's legacy notes in late 2024.
• *Interest rate profile:* Predominantly fixed-rate bonds.
• *Share repurchase programme:* Highly active. $5.0 billion repurchased in 2025.
• *Dividend policy:* $4.0 billion paid in 2025. The company targets returning 45% of Cash from Operations (CFO) to shareholders through a combination of ordinary dividends and share buybacks. First-quarter 2026 ordinary dividend declared at $0.84 per share.

• *Operating cash flow (CFO):* $19.9 billion in 2025.
• *Free cash flow (FCF):* $7.3 billion in 2025.
• *Major non-cash items:* DD&A is the largest bridge between net income and OCF (running at nearly $12 billion annually).
• *Working capital cash flow impact:* Minor fluctuations based on commodity price timing at quarter-end.
• *Capex intensity:* High. Requires $10-12 billion annually just to maintain and slightly grow the production base.
• *Cash tax rate:* Varies by jurisdiction. Norway and Alaska have high statutory tax rates, while the Lower 48 benefits from intangible drilling cost (IDC) deductions.

1. Assumptions: Macroeconomic drivers (WTI, Brent, Henry Hub, TTF prices), segment production growth rates, cost inflation factors, and capital return targets.
2. Production & Pricing: Row-level detail for production (MBOED) and realised pricing ($/BOE) for Lower 48, Alaska, Canada, EMENA, and Asia Pacific.
3. Revenue Build: Calculates segment-level revenue based on the outputs of the Production & Pricing sheet.
4. Income Statement: Consolidated view. Includes Sales and other operating revenues, Purchased commodities, Production and operating expenses, Production taxes, DD&A, Exploration expenses, and SG&A.
5. Balance Sheet: Mirrors the 10-K. Key lines include Cash and cash equivalents, Accounts receivable, PP&E (net), Goodwill, Accounts payable, and Long-term debt.
6. Cash Flow Statement: Net income, plus DD&A, deferred taxes, less working capital changes to get CFO. Less Capital expenditures to get FCF.
7. Debt & Shareholder Returns: Tracks debt maturities, interest expense, dividend payouts (based on the 45% CFO target), and share repurchases.
8. DCF Valuation: Unlevered free cash flow build, WACC calculation, and terminal value based on an EV/EBITDA exit multiple.

1. Total Production (MBOED) = Lower 48 + Alaska + Canada + EMENA + Asia Pacific Production
2. Segment Revenue = Segment Production (MBOED) x 365 x Segment Realised Price ($/BOE)
3. Total Sales and Other Operating Revenues = Sum of Segment Revenues + Marketing/Midstream Revenues
4. Production and Operating Expenses = Total Production (MMBOE) x Average LOE Rate ($/BOE)
5. Production Taxes = Total Revenue x Effective Severance Tax Rate (%)
6. DD&A Expense = Total Production (MMBOE) x DD&A Rate ($/BOE) (Guided at ~$11.8B for 2026)
7. Target Shareholder Returns = Cash from Operations (CFO) x 45%
8. Dividends Paid = Shares Outstanding x Annualised Dividend per Share ($3.36 for 2026 based on $0.84 quarterly)
9. Share Repurchases = Target Shareholder Returns - Dividends Paid
10. Ending Share Count = Beginning Share Count - (Share Repurchases / Average Share Price)
11. Free Cash Flow = Cash from Operations (CFO) - Capital Expenditures

• The Assumptions sheet feeds commodity prices and production growth rates into the Production & Pricing sheet.
• The Production & Pricing sheet feeds total volumes and realised prices into the Revenue Build and Income Statement.
• The Income Statement generates Net Income, which flows to the top of the Cash Flow Statement.
• The Cash Flow Statement calculates CFO, which feeds the Debt & Shareholder Returns sheet to determine the size of the buyback programme (45% of CFO rule).
• The Debt & Shareholder Returns sheet calculates the new share count, which feeds back into the Income Statement for EPS calculations.
• *Circularity flag:* Interest expense depends on average debt balances, which depend on cash flow shortfalls/surpluses, which in turn depend on interest expense. A circuit breaker toggle must be included.

• Revenues, production volumes, and realised prices are positive.
• All expenses on the Income Statement (COGS, LOE, DD&A, SG&A, Interest) are entered as negative numbers.
• Assets and Liabilities on the Balance Sheet are positive.
• On the Cash Flow Statement, cash inflows (Net Income, DD&A add-back) are positive, while cash outflows (Capex, Dividends, Share Repurchases) are negative.

• Failing to multiply daily production (MBOED) by 365 to get annual volumes for revenue and cost calculations.
• Applying benchmark WTI/Brent prices directly to production without accounting for historical basis differentials (realised prices are always lower/different than raw benchmarks).
• Ignoring the segment reporting change; the "Other International" segment was removed in Q4 2025, so historical data must be recast to match the new 5-segment structure.
• Overestimating near-term Alaska production; the Willow project will not contribute to volumes until early 2029.
• Miscalculating the shareholder return framework; the company strictly targets 45% of CFO, meaning buybacks must flex up or down dynamically based on operating cash flow.
• Failing to account for the step-up in DD&A and shares outstanding following the Marathon Oil acquisition (closed Nov 2024).
• Double-counting "Purchased commodities" revenue and expense; ConocoPhillips runs a marketing business that inflates top-line revenue and COGS equally but has minimal margin impact.
• Applying a generic tax rate; E&P tax rates are highly complex due to international jurisdictions (Norway/Qatar) and US tax shields.

• Total 2026 production must fall within the guidance range of 2.33 to 2.36 MMBOED.
• Total 2026 capital expenditures must equal approximately $12.0 billion.
• Total 2026 operating costs must equal approximately $10.2 billion.
• Total 2026 DD&A must fall between $11.7 billion and $11.9 billion.
• Total shareholder returns (Dividends + Buybacks) must equal exactly 45% of Cash from Operations.
• Balance sheet must balance: Total Assets = Total Liabilities + Equity in every forecasted period.
• Implied realised price per BOE should track roughly $25-$30 below the blended WTI/Brent benchmark due to NGL and natural gas weighting.

• *Filings:* SEC EDGAR (Form 10-K, 10-Q, 8-K) and the ConocoPhillips Investor Relations website (conocophillips.com/investors).
• *Key Peers:* EOG Resources (EOG), Occidental Petroleum (OXY), Devon Energy (DVN), and Diamondback Energy (FANG).
• *Industry Data:* US Energy Information Administration (EIA) for benchmark pricing and inventory data; Baker Hughes for US rig counts.
• *Consensus Estimates:* FactSet or Bloomberg for forward commodity curves and consensus EPS.

• ConocoPhillips Q4 2025 Earnings Release (Feb 5, 2026)
• ConocoPhillips 2025 Annual Report / Form 10-K
• ConocoPhillips Marathon Oil Acquisition Press Release (Nov 22, 2024)
• ConocoPhillips Q1 2025 Form 10-Q
• Offshore Technology: ConocoPhillips Q4 2025 net income drops
• The Motley Fool: ConocoPhillips Q4 2025 Earnings Transcript
• Quartr: ConocoPhillips Q4 2025 earnings summary