ConocoPhillips (NYSE:COP) discussed its financial performance, recent acquisitions, and forward-looking strategies during its Third Quarter 2023 Earnings Conference Call. The company reported record global and Lower 48 production, raised its full-year production guidance, and increased its quarterly dividend by 14%. The leadership also discussed the steady 7% growth in Lower 48 results and anticipated continued growth in international projects in 2024.

Key takeaways from the earnings call include:

ConocoPhillips acquired the remaining 50% of the Surmont asset, contributing to its 10-year plan.
The company reported progress in its global LNG strategy, securing regas capacity in the Netherlands.
Several international projects, including CPF2 in the Montney and three in Norway, have started up ahead of schedule.
The company distributed $8.5 billion in dividends and buybacks year-to-date.
The full-year capital spending guidance remains unchanged.
ConocoPhillips’ international projects have seen progress, with milestones in Alaska achieved ahead of schedule and budget. In Norway, three out of four subsea tiebacks have begun production ahead of schedule, and the fourth is expected to come online in Q2 2024. The company’s partner-operated Bohai Phase 4b in China also achieved first production ahead of schedule.

In response to questions about 2024 CapEx, ConocoPhillips stated that spending on the Willow project and the additional 50% of the term of the Surmont project would be mostly offset by lower spending on LNG projects and the roll-off of project capital in Norway. The company reiterated its commitment to returning at least 30% of cash flow back to shareholders and increasing shareholder returns when prices are above their mid-cycle price call.

The company also discussed its cash distribution strategy, stating that it has returned around 45% of its cash to shareholders in the form of dividends and share buybacks over the past 5 to 6 years. The company aims to provide an affordable, reliable dividend that grows competitively with the S&P 500 and plans to buy back shares during mid-cycle periods. It also plans to introduce a third leg, VROC, to provide additional returns to shareholders when prices are above mid-cycle levels.

ConocoPhillips also outlined its 10-year plan, which includes investments in short-, medium-, and longer-cycle opportunities. The company aims to achieve 20 billion barrels with a cost of supply under $40. They emphasized their focus on high grading their portfolio and being opportunistic with acquisitions that align with their financial framework and improve their 10-year plan.

In terms of operations, the company highlighted its efforts to improve recovery rates in the Permian Basin. It mentioned various strategies such as increasing lateral length, optimizing reservoirs, and exploring enhanced oil recovery techniques. The company also provided updates on its Alaska project, stating that it is awaiting court rulings on legal challenges and that proposed regulations may impact future developments. The project is progressing well, with module fabrication and preparations for construction underway. The company stated that it is pleased with its portfolio and has no significant assets that need to be divested at the moment. However, it remains open to opportunistic acquisitions that align with its financial framework and enhance its 10-year plan.

The company also discussed its program in the Permian Basin, stating that its durable program attracts service companies and eliminates exposure to the current consolidation trend in the region. When asked about adding activity in the Lower 48, the company stated that it is considering the potential for growth in 2024 but will start with a flat scope and make decisions based on commodity prices and service capabilities. In terms of Lower 48 service cost trends, the company noted some areas of deflation but expects overall capital inflation to average mid-single digits this year compared to last year. They are closely monitoring market trends and expect capital expectations for next year to align with previous guidance.

With a market capitalization of $146.33 billion, the company has demonstrated a strong financial position. The P/E ratio stands at 11.68, reflecting a fairly valued market price compared to earnings. Over the last twelve months up to Q2 2023, revenue reached $68.78 billion, indicating a solid performance, despite a slight slowdown in growth at 2.82%.

ConocoPhillips is a prominent player in the Oil, Gas & Consumable Fuels industry that yields a high return on invested capital. The company has raised its dividend for 6 consecutive years, a trend that was confirmed in the recent earnings call. Also, it’s worth noting that the company’s cash flows can sufficiently cover interest payments, affirming its financial stability.