ConocoPhillips (NYSE: COP) has transformed its business into a cash-gushing machine. The oil company has invested heavily in developing and expanding its low-cost oil and gas resources, which is allowing it to produce prodigious cash flow and return a lot of money to shareholders.
The oil company sent investors $9.1 billion last year via dividends and share repurchases. Based on current commodity prices, it’s aiming to return $10 billion in 2025. Here’s a look at what’s fueling its ability to return so much money to investors.
ConocoPhillips recently reported its fourth-quarter and full-year results for 2024. The oil giant generated $20.3 billion in cash from operations last year. It used some of that money to fund $12.1 billion in capital expenditures and investments to maintain and grow its low-cost oil and gas resources, which included investing $400 million in bolt-on acquisitions in Alaska during the fourth quarter.
It returned all of its excess free cash flow to shareholders ($9.1 billion). The company repurchased $5.5 billion of its shares and paid $3.6 billion in dividends (including variable return of cash payments). Even with those lavish cash returns, ConocoPhillips ended the year with a strong balance sheet, including $6.4 billion of cash and short-term investments and another $1.1 billion of long-term investments.
ConocoPhillips produced strong cash flow despite lower commodity prices last year. It realized an average of $54.83 per barrel of oil equivalent (BOE), a 6% decline from 2023’s average. It was able to partially offset some of that headwind by growing its high-margin production. The company produced an average of nearly 2 million BOE per day last year, a 3% increase from 2023’s level after adjusting for the impact of acquisitions and asset sales.
ConocoPhillips has significantly enhanced its ability to produce cash by closing its needle-moving acquisition of Marathon Oil in late November. The deal added more than 2 billion barrels of resources, with an average cost of supply below $30 a barrel. That immediately accretive deal will enhance the company’s ability to return money to shareholders in 2025 and beyond.
The oil producer expects to achieve more than $1 billion in integration-related synergies this year. That drives its view that it will only need to spend about $12.9 billion in capital this year to maintain and grow its production. That capital spending level positions the company to produce more than 2.3 million BOE per day in 2025.
