CONOCOPHILLIPS Earningcall Transcript Of Q2 of 2024

chairman  and  CEO;  Bill  Bullock,  executive  vice  president  and  chief  financial  officer;  Andy  O'Brien,

senior  vice  president  of  strategy,  commercial  sustainability  and  technology;  Nick  Olds,  executive

vice president of Lower 48; and Kirk Johnson, senior vice president of global operations. Ryan and

Bill will kick it off with opening remarks, after which the team will be available for your questions. A

few quick reminders.

First,  along  with  today's  release,  we  published  a  supplemental  financial  materials  and  a  slide

presentation, which you can find on the investor relations website. Second, during this call, we will

make  forward-looking  statements  based  on  current  expectations.  Actual  results  may  differ  due  to

factors  noted  in  today's  release  and  in  our  periodic  SEC  filings.  We  will  make  reference  to  some

non-GAAP financial measures.

Reconciliations to the nearest corresponding measure can be found in today's release and on our

website. Third, before we move to Q&A, we will take one question per caller. With that, I will turn the

call over to Ryan. 

Ryan M. Lance -- Chairman and Chief Executive Officer

Thanks,  Phil,  and  thank  you  to  everyone  for  joining  our  second  quarter  2024  earnings  conference

call. It was another busy quarter for the company. We continue to execute on our returns-focused

value  proposition.  We  announced  a  34%  increase  in  our  ordinary  dividend  starting  in  the  fourth

quarter,  we  announced  the  planned  acquisition  of  Marathon  Oil,  and  we  further  progressed  our

global commercial LNG strategy.

Now,  starting  with  the  results.  We  delivered  record  production  in  the  second  quarter,  with  strong

contributions  from  the  entire  portfolio.  In  the  Lower  48,  we  still  expect  to  deliver  low  single-digit

production  growth  in  2024  at  a  lower  level  of  capital  spending  relative  to  2023.  Internationally,

production continued to ramp up at Surmont Pad 267 and the Montney in Canada, Bohai Phase 4B

in China and four subsea tiebacks in Norway.

And  we  continue  to  make  strong  progress  at  Willow  and  on  our  LNG  projects  at  Port  Arthur  and

Qatar. Now, shifting to commercial LNG we recently signed two additional long-term regasification

and sales agreements to deliver volumes into Europe and Asia, both of which will start in 2027. With

these agreements, we have now secured just under 6 million tons per annum of volume placement

for our offtake commitments, and we continue to work new offtake and placement opportunities as

we look to expand our commercial LNG portfolio up to 10 million to 15 million tons per annum in the

coming  years.  Now,  regarding  our  planned  acquisition  of  Marathon  Oil,  we  remain  very  excited

about  this  transaction  and  integration  planning  activities  are  underway  to  ensure  a  seamless

transition upon close.

The  Marathon  Oil  shareholder  vote  has  been  set  for  August  29,  and  we  are  working  through  the

FTC's second request that we received in mid-July. We still expect to close the transaction late in

the  fourth  quarter.  On  return  of  capital,  we  remain  committed  to  distributing  at  least  $9  billion  to

shareholders this year on a stand-alone basis. As we said back in May, we will be incorporating our

VROC  into  our  base  dividend  starting  in  the  fourth  quarter,  representing  a  34%  increase  in  the

ordinary dividend.

And consistent with our long-term track record, we are confident that we can grow this dividend at a

top  quartile  rate  relative  to  the  S&P  500.  Finally,  as  we  previously  announced  with  the  Marathon

acquisition, we will be increasing our annualized buyback run rate by $2 billion upon closing with a

plan  to  retire  the  equivalent  amount  of  newly  issued  equity  in  two  to  three  years.  So  to  wrap  up,

we're  pleased  with  our  operational  execution,  and  we  are  looking  forward  to  closing  the  Marathon

transaction  later  this  year.  Now,  let  me  turn  the  call  over  to  Bill  to  cover  our  second  quarter

performance and 2024 guidance in more detail.

William L. Bullock, Jr. -- Executive Vice President, Chief Financial Officer

Well, thanks, Ryan. In the second quarter, we generated $1.98 per share in adjusted earnings. We

produced 1,945,000 barrels of oil equivalent per day, representing 4% underlying growth year over

year. and this includes the impact of 18,000 barrels per day of turnarounds.

Lower  48  production  averaged  1,105,000  barrels  of  oil  equivalent  per  day,  with  748,000  in  the

Permian, 238,000 in the Eagle Ford and 105,000 in the Balkan. Alaska and international production

averaged 839,000 barrels of oil equivalent per day, also representing roughly 4% underlying growth

year  over  year,  excluding  the  Surmont  acquisition  effects.  Now,  this  highlights  the  benefits  of  our

diversified global portfolio. Moving to cash flows.

Second  quarter  CFO  was  $5.1  billion,  which  included  over  $300  million  of  APLNG  distributions.

Working capital was $100 million headwind, which was lower than our guidance of $600 million as

the expected timing of some of our tax payments shifted into the third quarter. Capital expenditures

were just under $3 billion. We returned $1.9 billion to shareholders in the quarter, including $1 billion

in buybacks and $900 million in ordinary dividends and VROC payments, and we ended the quarter

with cash and short-term investments of $6.3 billion and $1 billion in longer-term liquid investments.

Now, turning to guidance. For the third quarter, we expect production to be in a range of 1.87 million

to  1.91  million  barrels  of  oil  equivalent  per  day.  This  is  inclusive  of  the  90,000  barrels  per  day  of

turnaround  impacts  that  we  discussed  last  quarter.  The  primary  driver  of  that  is  our  once  every

five-year  turnaround  at  Surmont,  which  will  impact  production  by  about  50,000  barrels  per  day

during the quarter.

For  the  full  year,  we  have  raised  the  midpoint  of  our  production  outlook,  reflecting  strong  second

quarter results. Our new range is 1.93 million to 1.94 million barrels of oil equivalent per day, which

implies roughly 3% underlying growth year over year. Our full year turnaround forecast continues to

be about 30,000 barrels per day. On income statement guidance items, we have lowered our DD&A

guidance to a range of $9.3 billion to $9.4 billion and we have lowered our annual after-tax adjusted

corporate segment net loss to a range of $800 million to $900 million.

These decreases were partially offset by higher forecasted adjusted operating costs now anticipated

to  be  in  a  range  of  $9.2  billion  to  $9.3  billion,  primarily  due  to  increased  transportation  and

processing  costs  and  inflationary  pressures  in  the  Lower  48.  For  capex,  we  expect  to  spend

approximately $11.5 billion. Now, this reflects strong progress on our Willow scope for the year, as

well  as  some  additional  capital  allocated  to  Lower  48  partner  operating  activity  that  has  highly

competitive returns. On cash flow, we are increasing full year guidance for APLNG distributions by

$100 million to $1.4 billion, and we expect $400 million of these distributions in the third quarter.

Additionally,  we're  going  to  have  a  $100  million  pension  contribution  in  the  third  quarter.  Finally,

regarding  working  capital.  We  anticipate  a  $500  million  outflow  based  on  the  tax  payment  shift  I

mentioned from the second quarter to the third quarter. And as a reminder, guidance excludes the

impact of pending acquisitions.

So conclusion, we continue to deliver on our strategic initiatives. We remain focused on executing

our plan for 2024. We are committed to staying highly competitive on our shareholder distributions,

and  we're  progressing  toward  closing  the  Marathon  transaction.  That  concludes  our  prepared

remarks.

I'll now turn it back over to the operator to start the Q&A.

Operator

Questions & Answers: