ConocoPhillips aims to cut costs by $1 billion in 2026. Profits miss on lower oil prices
ConocoPhillips announced on Thursday that it plans to reduce capital and operating costs by $1 billion by 2026. This comes after the U.S. energy producer missed Wall Street's?estimates? for its fourth-quarter profits due to lower crude prices.
Falling oil prices have put pressure on the industry to reduce spending, drill less and cut staff.
ConocoPhillips' average price was $42.46 for a barrel of oil-equivalent (boe), which is 19% less than the previous year, since it does not typically hedge its production.
As it only operates in the upstream sector, Exxon Mobil is more vulnerable to fluctuations in oil prices than Chevron and Exxon Mobil. Both companies beat their profit expectations last week due to higher margins from their refining businesses. The CEO Ryan Lance stated that the cost-reduction drive builds on the more than $1 billion run-rate synergies achieved in 2025 following the $22.5 million acquisition of Marathon Oil.
Lance stated that "we're focused to drive a $1 billion decrease in our capital costs and expenses in 2026 while returning 45% our cash from operations back to our shareholders."
As it streamlines its operations, the largest independent U.S. producer of oil and gas said that it had closed $3.2 billion worth of?asset sales by 2025. It is also on track to reach its $5 billion disposal target by 2026. ConocoPhillips announced last year that it would reduce its workforce from 20% to 25% in a wider restructuring.
Scott Hanold, analyst at RBC Capital Markets, said that investors are still concerned about the timing of the significant inflection of free cash flow and the use of the balance of cash for shareholder returns.
In afternoon trading, shares of the company fell 2.5%.
VENEZUELA LAWSUIT
Lance also said, on a call with investors to discuss earnings, that the company is still focused on recovering money due under legal judgments already in place in Venezuela. The company is also working with the U.S. Government on policy developments for the South American nation in the short, mid-term and long-term. Exxon Mobil ConocoPhillips, and Chevron used to be?leading partners for Venezuela's PDVSA state oil company before it was nationalized in 2004-2007 under the late president Hugo Chavez.
ConocoPhillips, Exxon and Chevron both left the country and sought arbitration.
OIL PRICES SQUEEZED by Oversupply
Benchmark Brent Crude Prices Benchmark Brent crude prices averaged $63.13 per barrel between October and December, an 11.3% decrease from a year ago, as geopolitical risk was outweighed by concerns over supply.
The quarterly production increased 6.3% to 2.320 million barrels equivalent per day (boepd). The company expects to produce between 2.33 and 2.36 millions boepd in 2026.
ConocoPhillips reported an adjusted profit per share of $1.02 for the quarter that ended December 31. This compares to analysts' estimates of $1.11 according to data compiled LSEG. Reporting by Pooja menon in Bengaluru, and Arathy somasekhar, in Houston. Editing by Shilpa Majumdar and Sriraj Kalluvila; Will Dunham, Leroy Leo and Shilpa Majumdar.
(source: Reuters)
