ConocoPhillips' Strategies in Response to Volatile Oil Prices

Cost management and operational efficiency strategies

ConocoPhillips and its peers emphasize cost management and operational efficiency through strategies like electrification, energy efficiency, and innovative completion techniques. These approaches aim to reduce costs, enhance productivity, and create value amid volatile oil prices, ensuring resilience in fluctuating market conditions.

"Expanding electrification is integral to Oxy's strategy because it increases operational efficiency, generates cost savings, improves safety and helps reduce our emissions." --- (OXY, earning call, 2024/Q1)

"Development activity continues to get more efficient. We’re one of the first operators to deploy triple-frac, delivering cost reductions of more than 10% and shortening completion times by 25% where applied." --- (CVX, earning call, 2024/Q2)

"Our strategy is to create value through price cycles by delivering on the financial, operational and ESG priorities that underpin our value proposition." --- (COP, sec filing, 2024/Q2)

"2nd is the importance of energy efficiency. Energy efficiency is often overlooked in policy discussions and debates." --- (BP, event transcript, 2024/07/10)

"achieved through lower nonproductive time, increased frac utilization, operational efficiency gains and facilities optimization as part of our focused program to lower wells cost, decrease time to market and increase free cash flow." --- (OXY, earning call, 2024/Q2)

Investment in technology for innovation and sustainability

ConocoPhillips and industry peers emphasize strategic investments in innovative technologies, including low-carbon solutions, hydrogen, and advanced monitoring systems. These initiatives aim to enhance operational efficiency and support the transition to sustainable energy, reflecting a commitment to innovation amidst volatile oil prices.

"Technology includes our investments in low-carbon and other new technologies or businesses and licensing revenues." --- (COP, sec filing, 2024/Q1)

"And in our Secure Lift, nearly 90% of all wells will require 1 or several forms of lift solution during their life. With this acquisition, we established a broad lift portfolio that will unlock future growth opportunities delivered through our shared innovation capability, complementary customer footprint and a distinctive promise to deliver fulfilled, digitally enabled production optimization solution to our customers." --- (SLB, event transcript, 2024/04/02)

"A key part of how we do this is our strategic investment in technology. One technology I'm excited about is the latest addition to Octiv, a key component of the ZEUS platform." --- (HAL, earning call, 2024/Q2)

"Over time, as it becomes more and more obvious that heavy industry and commercial transportation will not be meaningfully powered by renewables, the world will come to rely more on technologies where we have an advantage, including hydrogen, biofuels, and carbon capture and storage. A serious approach to the transition should focus on moving the world from high carbon to low carbon energy, not simply from oil and gas to wind and solar." --- (XOM, earning call, 2024/Q2)

"This project marks a significant step in leveraging advanced UAS remote sensing technology to enhance operational efficiency and safety in the oil and gas sector. The integrated solution will feature the Draganfly APEX, an" --- (COP, press release, 2024/09/17)

Diversification efforts beyond oil and gas

ConocoPhillips is actively diversifying beyond oil and gas by pivoting to gas opportunities when demand supports it. The company is also exploring renewable fuels and hydrogen, influenced by government policies, to capitalize on growing natural gas and renewable power demand.

"And the really nice thing about these gas opportunities is if the demand is there and the support is there, we can pivot very quickly to the gas in our portfolio if it makes sense, and it’s competing on a cost of supply basis." --- (COP, earning call, 2024/Q2)

"And so we're pleased with both of these. There are markets, maybe to your point about economics that are in some ways heavily influenced by government policy, be it the renewable fuel standard and the Low Carbon Fuel Standard, which affect renewable fuels or some of the things in the investment or the inflation reduction act that affect hydrogen." --- (CVX, earning call, 2024/Q1)

"It's still in the early innings for us, fully realizing the advantage of our vast position, but we're seeing growing opportunities across our footprint due to increasing natural gas and renewable power demand and their interconnectivity." --- (ENB, earning call, 2024/Q2)

Long-term sustainability initiatives

ConocoPhillips is committed to long-term sustainability through strategic initiatives that enhance competitiveness and operational safety. The company emphasizes the importance of diversifying energy sources and maintaining focus on renewable opportunities, ensuring alignment with their vision amid volatile oil prices.

"We're getting into these projects because they're competitive in the portfolio, and they're filling a strategic long-term vision that we have for the company." --- (COP, earning call, 2024/Q1)

"instead stresses the benefits of increasing reliance on domestically produced energy or at the very least on obtaining energy from resilient, trusted, diversified resources.I know the concept of the energy trilemma, the importance of energy systems providing energy which is secure and affordable as well as sustainable may feel a little stale, a little out of date." --- (BP, event transcript, 2024/07/10)

"All other full year guidance items are unchanged. So we continue to deliver on our strategic initiatives." --- (COP, earning call, 2024/Q1)

"In biofuels, focusing down the number of plants we're pursuing and there is tremendous countercyclical pricing opportunity with Bunge to create real long-term flows like we have in Arkea, that's the benefit of these renewable oilfield or gas fields." --- (BP, earning call, 2024/Q2)

"Operationally, we remain focused on safely executing the business while also progressing key strategic initiatives." --- (COP, sec filing, 2024/Q2)

Market outlook and future strategies

ConocoPhillips is strategically positioning itself to navigate current market challenges, anticipating a recovery in demand driven by regions like India. The company is focused on growth, leveraging its market knowledge and technology, while also preparing for improved pricing in the Permian Basin as conditions evolve.

"And so we'll continue to see some pricing challenges in that market. But ultimately, getting beyond this year and the next 18 months, I do believe that driven by India and other places that we'll see growth in demand again and that we'll start seeing prices going back up. So we're feeling like we're probably at a bottom right now." --- (OXY, earning call, 2024/Q1)

"So I think we feel good about where we're at in a very difficult market. Our view is that those market conditions are going to be with us for a little while here going forward, but we also feel like we're well positioned to be successful there." --- (XOM, earning call, 2024/Q1)

"All statements other than statements of historical fact included or incorporated by reference in this communication, including, among other things, statements regarding the proposed business combination transaction between ConocoPhillips and Marathon Oil, future events, plans and anticipated results of operations, business strategies, the anticipated benefits of the proposed transaction, the anticipated closing date for the proposed transaction and other aspects of Marathon Oil's or ConocoPhillips' operations or operating results are forward-looking statements." --- (COP, press release, 2024/08/29)

"We know the markets. We have our own technology. We know the business quite well and we do have a strategic intent to continue to try to grow that." --- (COP, earning call, 2024/Q1)

"We think that’s going to be really helpful for Permian Basin pricing as we look towards the end of the third quarter and into the fourth quarter and should improve overall Lower 48 capture rates as we go forward. The other thing I’d just note, as you look at the second quarter, you think about the remainder of the year is that in the second quarter, not only was Permian Basin pricing low, but a lot of the premium markets were impacted." --- (COP, earning call, 2024/Q2)

Impact of geopolitical factors on pricing strategies

Geopolitical factors significantly influence oil pricing strategies, as seen in the slight increase in crude prices amid OPEC+ production cuts and geopolitical volatility. Additionally, dynamics in specific regions, like Waha prices, highlight the importance of managing gas evacuation to avoid flaring, reflecting broader market pressures.

"Crude prices increased slightly during the second quarter despite volatility driven by geopolitical events and extension of voluntary OPEC+ production cuts." --- (CVX, sec filing, 2024/Q2)

"So there's a dynamic happening in the basin that is impacting Waha prices. So again as Bill said getting evacuating your gas is pretty important, so you don't go flare because we're not going to routinely flare gas we've made that commitment." --- (COP, earning call, 2024/Q1)

"These contrasting outlooks reflects the impact of 2 competing forces. The dominant factor in current trajectory is increasing use of gas in emerging economies as they grow and industrialize." --- (BP, event transcript, 2024/07/10)

Historical performance during past price fluctuations

ConocoPhillips has navigated historical oil price fluctuations by increasing production while managing costs. In Q2 2024, realized bitumen prices rose significantly, reflecting resilience despite volatility. The company anticipates ongoing price reductions, indicating a proactive approach to market changes.

"So we’re seeing some price reduction in there. We think that will continue into the second half." --- (COP, earning call, 2024/Q2)

"Production increases were partly offset by normal field decline. Exploration Activity In the first quarter of 2024, we charged $18 million before-tax as dry hole expense for the Busta suspended discovery well on license PL782S that was drilled in 2019." --- (COP, sec filing, 2024/Q1)

"Our realized bitumen price averaged $54.59 per barrel in the second quarter of 2024, an increase of 33 percent compared with $41.01 per barrel in the second quarter of 2023." --- (COP, sec filing, 2024/Q2)

"Oil prices have been volatile, gas prices have been weak, but certainly, you have a terrific balance sheet and have the capacity to raise that number. So I'd love your perspective on that." --- (COP, earning call, 2024/Q1)

"ConocoPhillips expects to achieve at least $500 million of run rate cost and capital savings within the first full year following the closing of the transaction." --- (COP, press release, 2024/05/29)