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Date
Aug. 7, 2025 at 4 p.m. ET
Call participants
Chief Executive Officer — Ryan Lance
Chief Financial Officer — Andy O'Brien
Executive Vice President, Global Operations — Nick Olds
President, Alaska — Kirk Johnson
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Takeaways
Production-- 2,391,000 barrels of oil equivalent per day in the second quarter of 2025, exceeding the upper end of guidance. Lower 48 averaged 1,508,000 barrels of oil equivalent per day. Alaskan and international production averaged 883,000 barrels of oil equivalent per day following Norway and Qatar turnarounds.
Adjusted earnings-- Adjusted earnings were $1.42 per share. The quarter included a $1.5 billion working capital headwind.
Shareholder returns-- $2.2 billion returned, comprised of $1.2 billion in share repurchases and $1 billion in dividends, totaling $4.7 billion in the first half of 2025.
Capital expenditures-- Capital expenditures were $3.3 billion, slightly down quarter on quarter.
Cash and investments-- $5.7 billion in cash and short-term investments, plus $1.1 billion in long-term liquid investments.
Asset sales and disposition target-- Anadarko Basin divestiture agreement announced for $1.3 billion. The company raised its total asset sale target from $2 billion (now achieved ahead of schedule) to $5 billion by the end of next year.
Marathon Oil acquisition synergies-- Integration complete. Over $1 billion in run-rate cost and synergy realization expected by year-end 2025, exceeding the original $500 million estimate.
Additional cost reduction and margin enhancement-- Over $1 billion in additional cost reduction and margin enhancement opportunities identified, expected to be realized on a run-rate basis by 2026, with 80% from expense reduction (G&A, LOE, T&P) and 20% from margin expansion.
Production guidance-- Full-year 2025 production guidance midpoint reiterated and narrowed, factoring in the approximately 40,000 barrels of oil equivalent per day impact from the Anadarko sale, expected to close at the beginning of the fourth quarter of 2025.
Tax guidance-- Effective corporate tax rate projected in the mid- to high-30% range (excluding one-time items) for the full year 2025, lowered due to geographic income mix. A $500 million deferred tax benefit anticipated for the full year 2025, driven by the “One Big Beautiful Bill.”
Operational efficiency-- The company is delivering more combined production with 30% fewer rigs and frac crews compared to pre-Marathon Oil pro forma levels.
Resource upgrades-- Estimated low-cost supply resource increased 25% since the Marathon Oil transaction, with the Permian Basin low-cost supply resource estimate approximately doubled following the acquisition. Eagle Ford and Bakken performing at or above acquisition case expectations.
LNG portfolio advancement-- Additional 1.5 MTPA of regasification capacity secured at Dunkirk, France. All 5 MTPA from Port Arthur placed with buyers. Commercial activities ongoing in Europe and Asia.
Free cash flow trajectory-- The company targets a $7 billion free cash flow inflection by 2029 (at $70/bbl WTI, non-GAAP).
Summary
Management reiterated and narrowed full-year 2025 production guidance despite the pending Anadarko Basin divestiture and maintained capital and operating cost guidance unchanged from prior reductions.ConocoPhillips(COP -0.61%) expects notable free cash flow tailwinds in the second half of 2025, citing lower capital spending, increased APLNG distributions, and favorable cash tax changes. TheMarathon Oil(NYSE: MRO) integration drove realized synergies exceeding a $1 billion run-rate by the end of 2025 and identified incremental opportunities for more than $1 billion in additional cost reductions and margin enhancements—primarily targeting G&A, LOE, and transportation/processing, expected to be realized on a run-rate basis by 2026. The asset disposition target was more than doubled to $5 billion after surpassing $2 billion in sales within nine months of the Marathon Oil closing, with management underscoring ongoing high-grading of the portfolio. The low-cost supply resource estimate increased by 25% in the second quarter of 2025, led by a doubling in the Permian and strong performance in Eagle Ford and Bakken. LNG projects advanced, with the placement of all Port Arthur volumes, new regas capacity in France, and signed sales agreements in Asia, establishing multiyear cash flow growth visibility as discussed on the second quarter 2025 earnings call. Deferred tax benefits of $500 million for the full year 2025 and a revised corporate tax rate in the mid- to high-30% range—attributable to favorable jurisdictional mix and new legislation—were also detailed by management.
CEO Lance forecast that, “Assuming a $70 per barrel WTI price environment, we expect the major projects we're currently progressing, combined with the additional cost and margin enhancements we just announced, to drive a $7 billion free cash flow inflection by 2029. That would almost double the consensus free cash flow expectation for the entire company this year.”
Management confirmed the ability to maintain capital-efficient production growth in the Lower 48 without increasing rig count for three to four years, attributing this to integration efficiencies and technology as discussed on the second quarter 2025 earnings call.
Kirk Johnson stated Willow construction is on schedule, with year-round activity enabled and 90%-95% of major contracts expected to be secured by year-end.
LNG expansion was highlighted through both new regasification capacity in France and multi-year offtake sales in Europe and Asia, with ongoing commercial discussions for future volumes.
The company expects meaningful cash flow enhancement in the second half of 2025 from lower capital spending, higher APLNG distributions, and the full implementation of recent tax benefits.
Industry glossary
LOE (Lease Operating Expense): Direct production costs associated with operating oil and gas properties, excluding depreciation and capital expenditures.
T&P (Transportation and Processing): Costs related to transporting and processing crude oil, natural gas, and related products to market.
MTPA (Million Tonnes Per Annum): Measurement of annual liquefied natural gas (LNG) capacity or sales volume.
CFO (Cash From Operations): Net cash generated from a company’s operational activities, exclusive of investing or financing flows.
Full Conference Call Transcript
Ryan Lance: Thanks, Guy, and thank you to everyone for joining our second quarter 2025 earnings conference call. Starting with results and outlook, we delivered another strong execution quarter, once again exceeding the top end of our production guidance range. We reiterated the midpoint of our full-year production guidance even with the announced agreement to sell our Anadarko Basin asset for $1.3 billion. Our capital spending and operating cost guidance ranges, both of which we lowered last quarter, remain unchanged. On return of capital, we remain on track to distribute about 45% of our full-year CFO to shareholders this year. That's consistent with our prior guidance and our long-term track record.
The bottom line, we are operating well, delivering on our plan, and we are well-positioned for a strong second half of the year, with clear free cash flow tailwinds including lower capital spending. Turning to the Marathon Oil acquisition, I'm pleased to announce that the asset integration is now complete and that we've significantly outperformed our acquisition case. We added more high-quality, low-cost supply resource, achieving more synergies, delivering a more efficient Lower 48 development program, and we've already announced more asset sales than we guided at the time of the transaction announcement. While these are all significant achievements, we're not stopping there.
Given our integration success, which builds upon other successful transactions, as well as our recent implementation of a new company-wide enterprise resource system, we continue to drive for improvement across every level of the organization. As part of this effort, we've identified more than $1 billion of additional cost reduction and margin enhancement opportunities. Now to be clear, that's on top of the more than $1 billion of Marathon synergies we've already expected to realize. Additionally, now that we've exceeded our $2 billion asset sales objective ahead of schedule, we're raising our total disposition target to $5 billion.
Collectively, these initiatives will strengthen our ability to generate strong returns on and of capital through the cycles and enhance our long-term value proposition. And that's a value proposition that's already differentiated, not only relative to our sector but relative to the broader S&P 500 as well. We believe we have the highest quality asset base in our peer space. Our global portfolio is deep, durable, and diverse, and we're recognized as having the most advantaged US inventory position in the sector. We believe this advantage will become increasingly apparent as the US shale industry continues to mature and investors are forced to more clearly sort through what we call the inventory haves and have-nots.
We are a clear leader in the US inventory haves. Additionally, we're uniquely investing in our high-quality portfolio, specifically our longer cycle projects in LNG and Alaska, to deliver strong returns and a compelling multiyear free cash flow growth profile. Assuming a $70 per barrel WTI price environment, we expect the major projects we're currently progressing, in combination with the additional cost and margin enhancements we just announced, to drive a $7 billion free cash flow inflection by 2029. That would almost double the consensus free cash flow expectation for the entire company this year. Now with that, let me turn the call over to Andy to cover our second quarter performance, 2025 guidance, and strategic objectives in more detail.
Andy O'Brien: Thanks, Ryan. Starting with our second quarter performance, as Ryan mentioned, we had another quarter of strong execution across the portfolio. We produced 2,391,000 barrels of oil equivalent per day, once again exceeding the high end of our production guidance. In the Lower 48, production averaged 1,508,000 barrels of oil equivalent per day. Alaskan international production averaged 883,000 barrels of oil equivalent per day as we successfully completed turnarounds in Norway and Qatar. Regarding our second quarter financials, we generated $1.42 per share in adjusted earnings. We had a $1.5 billion working capital headwind, effectively offsetting the equivalent size tailwind we realized last quarter. Capital expenditures were $3.3 billion, slightly down quarter on quarter.
We returned $2.2 billion to our shareholders, including $1.2 billion in buybacks and $1 billion in ordinary dividends. Through the first half of this year, we've returned $4.7 billion to our shareholders, about 45% of our CFO, consistent with our full-year guidance and long-term track record. We ended the quarter with cash and short-term investments of $5.7 billion plus $1.1 billion in long-term liquid investments. Turning to our outlook, for full-year production guidance, we have narrowed the range and reiterated the guidance midpoint, even after adjusting for the Anadarko sale of approximately 40,000 barrels of oil equivalent per day. It is expected to close at the beginning of the fourth quarter.
Our capital spend and cost guidance ranges, both of which we reduced last quarter, are unchanged. We now expect our full-year effective corporate tax rate to be in the mid- to high 30% range, excluding one-time items, lower than we previously guided due to geographical mix. And we now expect a total full-year deferred tax benefit of about $500 million, primarily reflecting the positive impacts from the One Big Beautiful Bill. In the second half of the year, we expect free cash flow tailwinds in the form of higher APLNG distributions, cash tax benefits, and lower capital spending. Further guidance details can be found on our earnings slide deck.
Turning now to our strategic updates, as Ryan noted, we have completed the Marathon asset integration and are realizing comprehensive outperformance against our acquisition case. We're delivering everything we said and much more. First, we've upgraded our low-cost supply resource estimate by 25%. While we're most attracted to Marathon's significant Eagle Ford and Bakken positions, both of which are every bit as good as we expected and delivering excellent well results, the majority of the increase has been driven by the Permian, where our resource estimate has approximately doubled versus the initial estimate. Second point I would highlight is that we have significantly outperformed our initial synergy guidance.
At the time of the transaction announcement, we guided $500 million of annual synergies. With our steady-state capital development program achieved and critical system cutovers now in the rearview mirror, we are on a glide path to realize more than $1 billion of run-rate synergies by the end of the year. In addition, we've identified over $1 billion of one-time benefits, largely cash tax-related. While we don't count this as a synergy, it's real value and a material benefit to our company. The third point I'd highlight is that we've brought the power of our more efficient and steady-state development program to the combined portfolio.
At the time of the transaction announcement, we highlighted our ability to more efficiently develop Marathon's acreage given our size and scale advantage and ability to level load our program versus Marathon's practice of ramping activity up and down. We've now achieved an optimized level of steady-state activity and we're delivering more combined production with 30% fewer rigs and frac crews in comparison to the pre-transaction pro forma activity levels. And finally, with the announced Anadarko sale, we've now signed over $2.5 billion of dispositions within nine months of the transaction close, beating our $2 billion target well ahead of schedule.
Given our growth in recent years and implementation of our new company-wide ERP system, we are taking the opportunity for further cost and margin improvements across the entire company. We've identified more than $1 billion of opportunities we expect to realize on a run-rate basis by 2026. All of this is in addition to the $1 billion of Marathon synergies we previously discussed that we expect to realize on a run-rate basis by the end of this year. These additional improvements will be wide-ranging, encompassing cost reductions across our SG&A, operating costs, and transportation costs, as well as margin enhancement with commercial opportunities.
All in, including the Marathon synergies, we expect to drive over $2 billion of run-rate improvements by the end of next year. In addition to furthering our cost reduction initiatives, we are more than doubling our asset sales target to $5 billion, which we also expect to achieve by the end of next year. We see a clear opportunity to further high-grade our portfolio and accelerate value realization of assets that are not currently competing for capital. So to wrap up, we continue to execute well operationally, financially, and across our strategic initiatives.
We are well-positioned for the second half of the year, with clear free cash flow tailwinds, and we continue to find ways to enhance our differentiated long-term investment thesis. That concludes our prepared remarks. I'll now turn over to the operator to start the Q&A. Thank you.
Operator: We will now begin the question and answer session. In the interest of time, we ask that you limit yourself to one question. If you have a question, please press 11 on your touch-tone phone. If you wish to be removed from the queue, please press 11 again. If you're using a speakerphone, you may need to pick up the handset first before pressing the numbers. Our first question comes from Neil Mehta with Goldman Sachs.
Neil Mehta: Good morning, good afternoon, Ryan, Andy, team. Really appreciate the incremental disclosure and love the Slide seven. So Ryan, maybe we could start there, which is, you know, if you look at street numbers, at around $60 to $70 WTI, you're generating close to $8 billion of free cash flow this year. So if you add $6.06 to seven, you're you're kinda closer to 14, which implies by twenty nine, a 12% free cash flow yield. So first one to just check the math on and make sure that we're not missing any pieces around it.
And then to the extent that is the right framework, which is a great prize in a couple years, the pushback might be you gotta wait for it. So, Ryan, maybe your perspective on hey. As with every year you derisk towards that free cash flow number, as capital intensity improves. So you don't necessarily have to wait till 2029 would be a theory. But it would be just your perspective on all that.
Ryan Lance: Yeah. Thanks, Neil. Though, go to the head of the class here, math is pretty good. Look. Yeah. We're working pretty hard as you mentioned the numbers. Fit exactly where we're thinking about in that $60 to $70 range. We'll add about $7 billion of free cash flow between now and 2029. Mean, don't have to wait till 2029. Some of that's coming through the about a third or so is coming through the LNG channel, and there's gonna be consistent start ups starting next year with Cutter, one of the trains in Cutter, '27 with Port Arthur, 28 with another train in Cutter, and then 29 with Willow. So all of that's coming. Everything's on track. And you're right.
It nearly doubles our current consensus free cash flow that I said in my opening remarks. And I think this is trajectory and you know, things that are coming that are unique in the business. There's no other E and P that I think can match you know, what's coming for us, including the integrated majors. So I think we're unique in this space. We've been leaning in and making these investments that are very competitive in the portfolio, low cost of opportunities for the company that are going to contribute to our growth and development for decades to come.
And I would say too that it does not include you know, the inventory advantage we currently have in the lower 48, a very deep and you know, tier one inventory that we have and where we're constructive in the macro going long term. And if the call for a shale production starts to come up because know, where is the supply coming to meet the growing demand that we believe is gonna be there? This doesn't even include what we could do to lean into our lower 48 a little bit more. We haven't because the call hasn't been there. To date, so we're we're growing at a bit more modest rate, but we're taking advantage of the integration.
We're taking advantage of the synergies. You know, I remind people we haven't added a rig in three, four years. So we're just continuing to grow our lower 48 just through the efficiency in the channel. So none of that even includes what we could do pending what the call is for unconventional production going forward. So, no, your math's good, Neil. Excited about the opportunities for the company.
Operator: Our next question comes from Arun Jayaram with JPMorgan. Your line is now open.
Arun Jayaram: Yeah. Good morning. Good afternoon, team. Right I was wondering if you could unpack the $1 billion cost reduction in margin optimization plan which looks to be a new wrinkle in the update. You mentioned, the ERP system integration. I was wondering if you could talk about what are some of the drivers of the billion dollars? And are you doing anything at the organizational level to re reengineer kinda your operating structure?
Ryan Lance: Yeah. No, Arun. It's gonna touch you know, all pieces of the of the company. There's some you know, some workforce centralization, some things that we've learned over the last three to four years with all the transactions that we've done. That we're gonna be implementing kinda globally throughout the company. So there's a piece of G and A built into this. There's utilizing the scale and scope of the company to drive some lease operating expense improvements as well, things that we're doing contractually things that we've captured in the Lower 48 and understand from an efficiency perspective that we can drive throughout the whole company.
As we've grown our scale, we also see opportunities in transportation and processing, and that's gonna show up as expense reduction and margin expansion through realized price improvement commercially. I'd say about 80% of it sits within the g and a, LOE, T and P, just expense reductions, 20% of it sits in that kind of margin expansion bucket. And I would but I'll tell you, none of this includes capital sort of things. We don't count that in our synergy estimates. We're we're just talking about stuff that'll flow through the bottom line and changes that we need to make as a result of some of the technologies we're deploying.
And the size, scale and scope of the company through the inorganic expansions that we've had over the three to four years. And it's with that behind us now, time for us to get the get the whole company running, taking advantage of stuff that we've invested in over the last few years.
Operator: Our next question comes from Steve Richardson with Evercore ISI.
Steve Richardson: Thank you. Appreciate you're probably not gonna tell us what's for sale, Ryan, in terms of this meaningfully increased divestiture target. But, you know, perhaps you can give us some perspectives on, acquisition market from the sell side. And maybe just talk about the types of assets. And I'm sure you're intensely focused on cost of supply in terms of the high grading, but maybe you could talk just sort of asset types and that process and the confidence on that higher target.
Ryan Lance: Yeah. No. Thanks, Steve. I think we've described to you and others, you know, that are on the call and, you know, we go through a pretty rigorous exercise every year. We've kinda come out of the back end of our planning exercise that ramps up during the summer months and through that process, we look at every asset in the portfolio. And we look for the ones that are competing for capital and those that aren't competing for capital, and we tell our teams for the assets that are on the outside looking in a little bit, maybe there's different technologies we can deploy. Different ways to think about it, different learnings from across the company.
We give them some time to see if they can compete for capital long term. But if they don't, then they migrate to a different list. And look. We're we're resource rich in a resource scarce world today. So that's what I think we were pleasantly surprised with the Anadarko Basin. We There's an example that wasn't going to compete for capital in the portfolio. We're getting plenty of North American natural gas production from our assets in North America. Just wasn't gonna compete for capital as we integrated that asset into the company. And we were pretty pleased with the price that we got.
So as we scrubbed the portfolio and think about it, going forward with the remainder of this year and through 2026, we just felt like we see the assets that are out there and that aren't competing for capital, and we think it's gonna be a reasonable market to be selling into, which is what gave us confidence to increase the target to $5 billion And we've already surpassed our $2 billion target. As Andy described, in his remarks today, with about $2.5 billion sold through this point in time.
Operator: Our next question comes from Doug Leggate with Wolfe Research.
Doug Leggate: Thank you. Good morning, everyone. Ryan, amidst all these incredibly positive updates, I hate to ask such an asinine question as cash tax. But I'm going to make Andy Earnest crust today. Andy, you got a $500 million incremental deferred for twenty five. Obviously, there's a lot of moving parts. With the m and a, you know, marathon and obviously asset sales and so on. What is the sustainable deferred tax visibility that you have for the lower 48 at this point if you're able to offer any color beyond 2025?
Andy O'Brien: Hey, Doug. It's Andy. Yeah. You're gonna you're gonna make me on my stripes with the with the first for the first question. So there's there's quite a few moving parts to text is caused. Maybe I'll just try to cover them sort of step by step and sort of and get everything covered in tax in one question here. So just so we just to clear it because I think some of this gets conflated in terms of what's the one big beautiful bill impacting, what isn't impacting.
So just starting with the quarter, in terms of our 2Q effective tax rate, we were lower than we guided last quarter And we and we've actually reduced the, you know, the full year effective tax rate to the mid 30s for the rest of the year. So that was purely due to sort of a mix where we had domestic commodity prices relative to international markets were a bit higher than we forecast. That resulted in a higher mix of income from our lower tax jurisdictions like The US. So that's probably the first thing that jumps out to people is the effective tax rate.
The second thing going on to the deferred taxes you know, we saw a larger than expected deferred tax benefit during the second quarter That had nothing to do with the new tax bill That was largely due to one off discrete items that we that we really don't forecast. And then getting probably to the meat of your question in terms of first of all, the expected benefits. We covered this on our prepared remarks, but this year, we think the one big beautiful bill will have a going from 40% to a 100%. We'll continue to benefit from that bonus depreciation. But specifically to get into numbers at this point, it's a little bit too early.
I you helped answer the question for me in terms of why we've got to land exactly where the which assets are being disposed of. But what we do know is that it's going to be a tailwind for us the next year.
Operator: Our next question comes from Lloyd Byrne with Jefferies.
Lloyd Byrne: Ryan, Andy, are you guys? I think that 30% fewer rigs and frac crews actually equates to almost a 100% of what Marathon is running at the time of the deal is very impressive. But let me just I guess I'll ask that question about the LNG. And kind of the downstream strategy. And just kind of what you're expecting from regasification sales deals going forward and then how do we expect that to contribute over the next few years?
Ryan Lance: Yeah. I'll maybe start, let Andy jump in on the LNG side. But, yeah, you stuck in two for one there Good job, Doug. You're or Lloyd, you're a you're good there. Look. Yeah. I think we're pretty impressed with what Nick his team have done with the integration in Marathon. But you're right. We've effectively eliminated their 10 rig program and not only delivered the pro form a production between the two companies, but growing the production as well. So I think Nick's team is really hitting on all the cylinders, and we're we're really pleased with the success we've had in the aggressive way that they've tackled that program as well.
I can let Andy talk a little bit about the LNG side.
Andy O'Brien: Sure. I think on the LNG side, you're probably as specifically referring to some of the stuff that we've announced this quarter where we've added another 1.5 MTPA of regas capacity at Dunkirk in France. And we also executed an SPA with an Asian buyer And what I'm quickly pleased about is with those two announcements, now effectively placed the entire five ms TPA from Port Arthur. Going forward, you know, we're now we're now at a point where we're, you know, we're continuing to have conversations both on the offtake side of things and on the placement. But everything is tracking really well. We're, you know, we're placing placed everything we have today.
So now we're looking basically to the next steps. And what I can say in that space is that things certainly aren't slowing down, both in terms of opportunities for more offtake and conversations with customers in Europe and Asia. So probably a bit of a watch this space. Hopefully, we'll have more to talk about in coming quarters. And really pleased to have the commercial LNG part is starting to come together to really complement what we've already got with our resource LNG in Australia and Qatar.
Operator: Our next question comes from Betty Jiang with Barclays.
Betty Jiang: Team. Thank you for taking my question Maybe, Endeep, a follow-up to your comment earlier about trying to understand where the CapEx lands for next year. I was wondering if you guys can give an early read on how you're thinking about 2026 at the moment. With the additional cost savings you're envisioning commodity prices probably a bit more supportive, How do you see development evolving next year? Where do you expect the major capital spend to trend? Maybe just frame how much of that long term free cash flow inflection could get captured next year?
Andy O'Brien: Thanks, Betty. I can try and take that one and it is a little early to be talking about 2026. But I'm happy to share a few high level high level thoughts. So starting on the capital spending side of things, we've been saying this for a number of quarters now. We expect our capital next year to be lower than this year. As we beginning of the cash flow plea inflection. And then may maybe also just to touch on production. I think we've always been saying that for us, really it's just simply an output of our plan.
If you look at what we're doing this year, from our guidance, basically, it implies about 2% growth on an underlying basis this year. And in the macro environment, we see right now, think this would be a, you know, a pretty good place to start for modeling premises for next year. I think Ryan mentioned it on the rig side in previous question. We haven't added essentially a rig in the lower 48 on the you know, on the side, you know, over three years. And right now, probably don't really see, you know, a good reason in order to do that.
But, you know, the other thing I would I would add is that, you know, in terms of maybe just going to sort of one half this year to second half next year, we're already starting to see the cash flow inflection coming. You look at our CapEx guidance, we're guiding from one half this year to second half to the second half. Our CapEx is going be down $1 billion You can see from our CFO, from the first half to the second half that know, we're also going to have some tailwinds from higher APLNG distributions and the one big beautiful bill.
So look at that and that continues on into 2026, I'd actually say that the cash flow is effectively already starting.
Operator: Our next question comes from Nitin Kumar with Mizuho.
Nitin Kumar: Hi, good afternoon. Good morning, everyone. Ryan, one of your peers talked about industry consolidation you know, going forward. You mentioned in the last two to four years, you've been at the forefront of that. So just wanna get a take on, you know, where do you see the M and A landscape? Right now, in Lower 48?
Ryan Lance: Yeah. And then I think look. I think there's still gonna be consolidation in this business. I think a lot of the E and Ps in the unconventional space look out into their plans two to three years out and wonder what's gonna happen And I think and that hasn't changed as capital intensity. You know, people that don't have the inventory like we do face higher capital intensities and just what do they do about that. Now specific to us, you know, this is the strongest I think our portfolio has ever been.
And so it's a pretty high bar, and we're we're focused pretty heavily right now on the organic side of the business where the investments they're we're making to grow and develop the company both short, medium, and long term. So I think, you know, that's where that's where all of our focus is going. But look, we watch the market every day. We see what other people are doing, and I'm familiar with the comments that were made by one of our peers But, you know, we're we're just in a different position because of the effort and the what we've done over the last four years that you're that you pointed out.
And then the focus we're trying to drive internal to the company to chase another $1 billion of additional cash flow growth in the company. We see the inflection that Andy just talked about in our free cash flow coming as these projects start starting up over the course of the next three to four years. So we've got a pretty high bar and a pretty full plate today. Just to execute executing on our organic plans.
Operator: Our next question comes from Ryan Todd with Piper Sandler.
Ryan Todd: Great. Thanks. Maybe a question on the on the Marathon transaction. You increased your expectation for the incremental resource adds. From 2 billion to 2.5 billion barrels with doubling of resource estimated resource in the Permian. Can you talk about what's driving that? What's been better than expected, particularly in the Permian?
Nick Olds: Yeah, Ryan. Good morning. Yeah. As a reminder, for the folks on the call, the Marathon transaction we announced the 2 billion barrels of low-cost supply resource You know, now we've got eight months under the marathon hood to further assess the inventory. The development strategy across all the assets. As Andy mentioned, after completing the integration, we've got a 25% increase. So that's the 2.5 billion. Now we were clear at the time of the acquisition that the quality positions in the Eagle Ford and Bakken were the primary strategic rationale for the transaction.
And we're seeing on aggregate the performance in those two basins have been in line even better than we expected with very strong well productivity versus the acquisition case. Now the upside identified as Andy mentioned, is primarily in the Delaware Basin. Where we've approximately doubled our low-cost supply resource estimate with some additional resource, in the Bakken as well. Now in the Permian, this is largely driven by a greater contribution of both primary and secondary intervals across the play. For example, we got inventory across Wolfcamp A And C Bone Springs, and Woodford formations, which are very competitive cost supply. And Ryan, that's that's through really re the inventory and applying our development strategy including spacing and stacking.
In fact, we're drilling some Wolfcamp A And C wells as well as some Woodford wells right now and seeing really promising results in line or even better than the type curves. In addition to the inventory I just described, we're also seeing opportunities to trade acreage core up positions, adding more longer laterals, which improves the cost of supply. You go from a one to three mile lateral, we see that 30 to 40% improvement. So I just got the hats off to the team as we get under the hood. They're excited. There's more opportunities in there. So getting ready enthused to execute upon it.
Operator: Our next question comes from Scott Hanold with RBC Capital Markets.
Scott Hanold: Yes, thanks. Know, Ryan, it'd be good to hear your view of what you're seeing on the old macro front. Obviously, if we wind the clock back last quarter, there's a lot of uncertainty. You know, oil price obviously has firmed up. I know you all do a lot of work, but I'd be interested in your thoughts on what you're seeing right now and how that could shape your plans into 26.
Ryan Lance: Yeah. Thanks. Scott. I think I described it as choppy this morning on CNBC, I think. And that's kind of our I'd say, short near term view of the macro. Look. The OPEC plus groups added about they've unwound all the 2.2 million barrels a day of cuts, and then they added 300,000 more allocation to The UAE, bring that to 2.5. Internal view is about eight hundred eight hundred thousand of that is already in the market. So of that 2.5, you take 800,000 off five.
So there's about 1.7 million barrel a True incremental production But that hasn't shown up in exports either because of the power burn and all the summer burn in the in The Middle East that's going on right now. And the demand grew in the first half a little bit more than what we would predicted, a little bit over a million barrels a day. I think for the full year, we're still at about 800,000 barrels a day of demand increases come coming forward. So you can see it's a bit imbalanced, more supply than the demand in the short term.
But we got to remember that inventories that are five year low, certainly here in The US, we're seeing some early indication that floating inventories might be coming up a little bit. Certainly, is filling their SPR right now to feed their Tibet refineries. So there is a lot of moving pieces, as you say, So how do we think about that? We step back We see the choppiness, although prices are hanging in about at our mid cycle price. They've been relatively stable in the sixties.
So we see probably that continuing with probably a bit more pressure to the downside, which is why Andy talked about how we're executing our program and kinda how you should think about modeling our production as we go into 2026. And that's just you know, we probably see a little bit of choppiness and some you know, slight headwinds as we go. But we're very constructive when you start stepping back for a minute and thinking about the longer term. We see demand continuing to grow at a million barrel a day incremental clip or at all time highs in the demand side, and we don't think that's stopping.
So we do wonder where the supply is gonna come to fill that growing demand over the next two, three, four, five years and beyond. Which is was our view over the last few years which is why we're leaning into some of the longer cycle projects. That's the oil side. And then obviously on the gas side, we're pretty bullish there. We see the LNG market growing from 400 million tonne market to over 700 million tonne market within the next you know, five to ten years, which is why we wanted to lean into the LNG side of the business. And we see a lot of resource in The US to support that. And to underpin that strategy.
So maybe that's Reader's Digest abridged version of our view of the macro both on the oil and the gas side.
Operator: Our next question comes from Charles Meade with Johnson Rice.
Charles Meade: Good morning, Ryan. You and your team there. And I caught your CNBC appearance. I thought that was a fine job. I wanted to ask a question on, on Willow. If you could perhaps give us a bit of a preview for, for what when you do get back to work there, you know, on the ground in the winter season, what does this next winter season hold as far as, you know, key milestones and work streams and just an overview.
Ryan Lance: Yeah. I can let Kirk take that Charles. I would I would say we haven't quit working. We're pretty busy right now. We gotta was just up there last week. We got a full team on the slope and a working through the summer and a lot of work going on in the in the Corpus Christi, Keywit, Fabiard 2 Building. Building modules. But Kirk can jump in and give you a bit more specifics.
Kirk Johnson: Yeah. Morning, Charles. Yeah. Certainly, as Ryan is mentioning, our execution here this year just continues to be really quite strong. We did ramp that winter season up It was the largest that we had certainly in the last couple years and really the largest we have here planned for the project. We wrapped that up late April, early May, And so we've transitioned. As again, as Ryan witnessed, we're transitioning to year round construction up there on the slope. We actually have about 900 tradesmen and craftsmen up on the slope right now.
And that's down from, again, what we were seeing during this peak winter season, which was closer to 2,400, if not 2,500 people up there on the slope. So it's been a pretty big transition for us here this spring. But, of course, our teams are really focused now as you're alluding to, which is our the activities we have here this summer and fall. So with that transition, those 900 craftsmen on the slope are continuing to build out that operation center that we see lifted up here last year with those modules on location. And so there's a lot of work ongoing so that we can truly begin year round construction there in Alaska at the Willow location.
And then again, as Ryan mentioned, outside of Alaska, we're focused on completing engineering. In support of these process modules that we're building here on the Gulf Coast. And then, naturally, that's gonna continue through 2027. But certainly, I would say, as it relates to the activities here this year, there's a lot of work by the team focusing appropriately on con contracting, procurement, general supply chain activities.
Admittedly, tariffs have introduced some level of uncertainty and that's manifesting with internationally sourced equipment alongside a trend of inflation that's that's pretty similar to what we've seen in the international markets and that's that's stabilizing act as activities stabilize here, so it's a good time for us to put a wrapper on some of these on some of these contracts here this year. We'll have close to 90 or 95% of these contracts pretty well secured by year end, and a lot of work in that space. So again, Charles, would say strong execution.
We're hitting the really key milestones We have some more work, of course, in this next winter season as it relates to gravel on the North Slope continuing to build that out towards the next set of pads. And then kind of wrapping up the last pieces around pipelines and a bit of civil work. So certainly more to come, but the milestones we're achieving we're hitting those as we expect and so it just continues to give us a lot of confidence in execution. And strong expectations again around 2029 and first oil.
Operator: Our next question comes from Paul Cheng with Scotiabank.
Paul Cheng: Ryan, I want to ask about Eagle Ford. But before that, can I just sneak in and just clarify all that confirm? Willow, the capital is still at $7 billion. And in terms of Eagle Ford, with the Marathon deal they do have some really decent knowledge there. Can you give us a outlook to the way that you see Eagle Ford? On the longer term basis? I mean, I think in the past that you have a view where that Eagle Ford will get to maybe for you guys. They call you 300,000 barrels a day now with this. Better performance in the second quarter and also then much larger resource base how should we look at Eagle Ford?
For your portfolio? Thank you.
Ryan Lance: Yeah. Thanks, Paul. I can let Nick chime in on April part. I think we're we're seeing everything and then some based on the acquisition case we had for Marathon and some of the well results that I've seen over the last few months coming out of Eagle Ford on the Marathon acreage in particular. Let alone our acreage has given us a lot of a lot of comfort in the case. And we're seeing upside out of that as well. And I can let Nick talk a little bit about the longer term perspective we might see in the Eagle Ford.
Nick Olds: Yeah. Thanks, Paul. Maybe just talk about short term here on the Eagle Ford. Obviously, as you pointed out, we had a really strong quarter related to Eagle Ford production, had really strong base production as well as new wells coming online. We actually had a little bit of lumpiness, about 10% more wells online. In 2Q in Eagle Ford. So you saw that slight bump in production I will say, we're really starting to get our understanding around the Heritage Marathon component in Eagle Ford. And what we're seeing there, Paul, is the wells are performing at or above type curve. So that's really good.
I also say in Eagle Ford, it's we're we're sharing best practices across Heritage Marathon, Heritage COP, And you may have heard that we had our best year ever in drilling within that asset. We had a 13% improvement in fee per day by combining best practices in drilling. So just hats off to the team there. Couple other things on near term. One of the things related to the acquisition we're also sharing our facilities being able to combine those two where we can reroute production, we can shelter maintenance, and that's leading to that increased production as well. So in summary, really strong Q2.
Now if I look longer term as Ryan mentioned, when you take a look at the inventory combined for Eagle Ford, we have a an industry leading position. We're sitting on fifteen years of inventory that's at current rig activities levels. And now hold a significant share of the remaining tier one inventory in the play. No one else comes close to that. Yeah. Longer term, you know, we're we're continuing to assess the optimum plateau of that asset, and we'll give you an update. One of the things we'll we're looking at is the ongoing efficiencies that we continue to see outperform quarter to quarter. And so dialing into an exact plateau remains ongoing discussion.
But that said, you know, we'll land somewhere you know, modestly below two q production as we go forward here in the in the in the near term. So really strong performance across Eagle Ford, really strong we're seeing with the well results.
Operator: Our next question comes from Leo Mariani with Roth.
Leo Mariani: I just wanted to follow-up a little bit on the asset sales here. Can you maybe give us what the rough production split is on the 40,000 barrel a day you're selling there? In the Anadarko in terms of oil and gas. And then can you just talk a little bit about the timing on asset sales? Was there particular reason you decided to kind of increase it right now? Certainly, a lot of the conversation in the call is, you know, talking about of macro uncertainty out there. So maybe just kind of talk about the environment to sell stuff now.
Ryan Lance: Yeah. No. Thanks, Neil. I think we're yeah. We it's, again, I tried to describe. We just go through a standard process inside our company to identify potential assets that we think would be worth more to other people than they than they are to us. And that's certainly proven out in the Anadarko Basin asset sale too. I can have Guy come back to you with the I don't know the it was mostly gas, but I don't know what the liquids mix is on that 30,000 barrels a day. But Guy can come back and provide that to you.
And, look, you know, we don't you know, we'll we'll sell assets when we think we're getting good value for them. Look. We know what our hold value is. We know what they're worth to us. Inside the portfolio. We're not fire selling anything in the company. And there's assets that we've marketed that we haven't sold. And we haven't sold because either the macro current macro environment wasn't supportive of it. And, again, we know what our hold value is, and we know what the market is, and we'll we'll move them out.
We as we look across that portfolio of opportunities for the company, we felt comfortable with a $5 billion target by the by the end of next year. So feel comfortable we got those assets to kinda sell and we're we're hard at work trying to deliver that.
Operator: Our next question comes from Philip Youngworth with BMO.
Philip Youngworth: Thanks for taking the question. I wanted to ask about return on capital. Conoco has historically been a leader here. Among the independents and integrated. We have seen corporate returns come down across the sector, much of which is oil price, but also m and a. So when you look at the organic free 6 billion free cash inflection that you have from major project start ups, I was hoping you can talk to how this improves ROCE. By the end of the decade, or there'd be more improvement really from accelerating the lower 48 growth at the right commodity price?
Ryan Lance: Yeah. So look, all these projects that we're executing meet our cost supply hurdles. So it almost kinda doesn't matter where you allocate. You're gonna see the growth in the ROCE. That's what we're trying to drive inside the company. We're trying to be competitive with the and P five hundred, not just competitive with our peers in this industry, We want to outperform even the S and P five hundred, give investors a resource or an E and P choice that they can invest in that can deliver year in, year out through the cycles you know, competitive ROC.
And, obviously, when the price whistles down as much as it may have did in the COVID year and stuff and in 2022, it was pretty damn good. As prices was back. But we're we're trying to deliver through the cycle ROC improvements and invest to compete against the S and P 500. That's what we're about. That's what that's how our performance gets judged. And that's what we're trying to go do. And as you as you inflect your free cash flow, $67 billion over the course of next three to four years, obviously, the CFO is growing. And we have we do have a unique value proposition in this business.
Which is you get your CFO off the top from us. And we have a commitment of a minimum of 30% at a mid cycle price, and when prices have exceeded that, like they have for the last number of years, we've given a lot more of that CFO back about 45%. So that's what we're signaling again this year, and we don't see that changing. So as that free cash flow inflects and our CFO grows, distributions are gonna grow with that. The opportunity to invest in organic programs come with that, and strengthening the balance sheet comes with that as well. But, absolutely, as our cash flow grows and free cash flow grows, distributions grow as well.
And we're investing in the right things. We believe in what we're investing in. Our ROCE will grow a mid cycle case basis as well.
Operator: Our last question will come from Kalei Akamai with Bank of America.
Kalei Akamai: Hey, good morning, guys. Thank you very much for squeezing me in. Look. I appreciate the, the strong performance on Lower 48. Last time you gave an outlook on a multiyear basis was in 2023. And in it, you suggested that there will be a capital ramp through the early 2030s. But when you look at the business today and the efficiencies achieved, it appears that you're still on the same production track So kind of wondering if you can hit those production targets without adding significant activity or without any change in CapEx.
Ryan Lance: Yeah. I mean, that's the name of this game. Gotta be capital light, capital efficient, and that's how you grow your ROC and that's how you grow your distributions and your free cash flow. So you're right to observe the last time we updated the market, Since then, we've done the Marathon transaction. You know, as I think Andy alluded to in his in some of his questions and comments, we haven't added a rig line anyone of the last three to four years. We're still delivering the production growth at a lower 48. We're just being a lot more efficient lot less capital spend, that's the name of the game.
So we start every year thinking about, let's just keep the scope of what we're doing constant. And as Andy said in response to one of the questions, you know, the out the production or the growth that comes out of that is purely an output. But we always start in trying to keep our stable programs in place. We don't want to whipsaw them up. We don't like to whipsaw them down. Obviously, we can react to both sides of that environment, but we like the consistent, stable execution in programs.
And we haven't had a rig line or significantly increased the frac spreads, and we're operating within a pretty efficient frontier range where you know, one frac spread can handle three to four rig lines. And that's improving with the technology, and we wanna be improving with that as well. So I think we have a lot of flexibility. We have a lot of inventory, and deep diverse inventory. So we've got a lot of choices and options. As I said in one of my comments earlier that it's really the best place and the strongest portfolio we've ever had as a company.
Operator: We have no further questions at this time. Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.