Q1 2025 ConocoPhillips Earnings Call

Operator: Operator for today's call. At this time, all participants are on a listen-only. Later we will conduct a question and answer session. During the question and answer session, if you have a question, please press star 1 1 on your touch tone.

Time, all participants are in a listen only mode.

Later, we will conduct a question and answer session.

During the question and answer session. If you have a question. Please press star one one on your Touchtone phone.

Phil Gresh: I will now turn the call over to Phil Gresh, Vice President, Investor Relations. Thank you, Liz, and welcome, everyone, to our first quarter 2025 earnings conference call. On the call today are several members of the ConocoPhillips leadership team, including Ryan Lance, Chairman and CEO, Bill Bullock, Executive Vice President and Chief Financial Officer, Andy O'Brien, Senior Vice President of Strategy, Commercial Sustainability and Technology, Nick Olds, Executive Vice President, Lower 48, and Kirk Johnson, Senior Vice President of Global Outreach.

Speaker Change: I will now turn the call over to Phil Gresh, Vice President Investor Relations, Sir you may begin.

Speaker Change: Thank you Liz and welcome everyone to our first quarter 2025 earnings conference call on the call. Today are several members of the Conoco Phillips leadership team, including Brian <unk>, Chairman and CEO, Bill Bullock Executive Vice President and Chief Financial Officer.

Andy O'brien: Andy O'brien senior Vice President of strategy commercial sustainability and technology.

Nick: Nick <unk> Executive Vice President lower 48, and Kirk Johnson Senior Vice President of global operations.

Nick: Brian and Bill will kick off the call with opening remarks, after which the team will be available for your questions.

Phil Gresh: Ryan and Bill will kick off the call with opening remarks after which the team will be available for your questions. For the Q&A, we'll be taking one question per caller.

Nick: For the Q&A, we will be taking one question per caller.

Phil Gresh: A few quick reminders. First, along with today's release, we have published supplemental financial materials and a slide presentation, which you can find on the Investor Relations Second, during this call, we will make forward-looking statements based on current expectations. Actual results may differ due to factors noted in today's release and in our periodic SEC filing. And we'll make reference to some non-GAAP financial measures. Reconciliations to our nearest corresponding GAAP measure can be found in today's release or on our website.

Nick: A few quick reminders first along with today's release published supplemental financial materials, and a slide presentation, which you can find on the Investor Relations website.

Nick: Second during this call we will make forward looking statements based on current expectations.

Nick: Actual results may differ due to factors noted in today's release and in our periodic SEC filings.

Nick: And we will make.

Nick: Reference to some non-GAAP financial measures rec.

Nick: Reconciliations to our nearest corresponding GAAP measure can be found in today's release or on our website.

Ryan Lance: With that, I will turn the call over to.

Ryan: That I will turn the call over to Ryan.

Ryan: Thanks, Phil and thank you to everyone for joining our first quarter 2025 earnings conference call.

Ryan Lance: Thanks, Phil.

Ryan Lance: And thank you to everyone for joining our first quarter 2025 earnings conference call. Before we cover the details of our first quarter results, some comments on the macro. Clearly the current environment is marked by both uncertainty and volatility. Outlooks for global economic growth and oil demand have been revised lower. And on the supply side, OPEC Plus is unwinding voluntary cuts quicker than expected. And as a result, oil prices have softened relative to the first quarter. However, the ultimate depth and duration of this current price environment remains unclear. And as I've said in the past, ConocoPhillips is built for this with clear competitive advantage.

Ryan: Before we cover the details of our first quarter results and comments on the macro.

Ryan: Clearly the current environment is marked by both uncertainty and volatility.

Ryan: It looks for global economic growth in oil demand had been revised lower.

Ryan: And on the supply side OPEC, plus is unwinding voluntary cuts quicker than expected.

And as a result oil prices have softened relative to the first quarter. However.

Ryan: However, the ultimate depth and duration of this current price environment remains unclear.

Ryan: And as I have said in the past Conoco Phillips is built for this with clear competitive advantages.

Ryan Lance: We have a deep, durable, and diverse portfolio. We have decades of inventory below our $40 per barrel WTI cost of supply threshold, both in the US and internationally. and our advantaged U.S. inventory position in particular should become increasingly evident as the market sorts through the inventory haves and have-nots in the current environment. We believe we are the clear leader of the half. And we have a disciplined capital allocation framework that has battle tested through the cycle. In addition, our company is executing well. Our integration of Marathon Oil is progressing ahead of schedule. And we are finding additional opportunities to enhance capital efficiency and reduce costs across the entire organization, as reflected in our updated guidance, which includes about a half a billion dollar reduction to our capital spending and a 200 million reduction in operating while keeping our production guidance unchanged.

Ryan: We have a deep durable and diverse portfolio.

Ryan: We have decades of inventory below our $40 per barrel W. T I cost of supply threshold, both in the U S and internationally.

Ryan: And our advantaged U S inventory position in particular should become increasingly evident as the market sorts through the inventory haves and have nots in the current environment.

Ryan: We believe we are the clear leader of the house.

Ryan: And we have a disciplined capital allocation framework that is battle tested through the cycles.

Ryan: In addition, our company is executing well.

Ryan: Our integration of marathon oil is progressing ahead of schedule.

Ryan: And we are finding additional opportunities to enhance capital efficiency and reduce cross costs across the entire organization as reflected in our updated guidance, which includes about a half a billion dollars reduction to our capital spending and a 200 million reduction in operating costs, while keeping our production guidance unchanged.

Ryan: <unk>.

Ryan: So we are delivering the same volume for less.

Ryan Lance: So we are delivering the same volume for less, less capital and reduced operating costs. And we will keep working to further advance this plan as the year progresses. We'll also continue monitoring the macroenvironment. We have flexibility in our capital program we could exercise should conditions warrant. We've been here before, and we know how to manage through a more challenging environment.

Ryan: Capital and reduced operating costs and.

Ryan: And we will keep working to further advance this plan as the year progresses.

Ryan: We'll also continue monitoring the macro environment.

Ryan: We have flexibility in our capital program, we could exercise should conditions warrant.

Ryan: We've been here before and we know how to manage through a more challenging environment.

Ryan: With respect to return of capital we.

Ryan Lance: With respect to return of capital. We distributed $2.5 billion to shareholders in the first quarter. We believe our shares represent a very attractive investment at these prices and we will continue returning a significant portion of our cash flow to our shareholders, consistent with our long-term track record of distributing 45% of our annual CFO.

Ryan: We distributed $2 5 billion to shareholders in the first quarter.

Ryan: We believe our shares represent a very attractive investment at these prices and we will continue returning a significant portion of our cash flow to our shareholders.

Ryan: System with our long term track record of distributing 45% of our annual CFO.

Ryan: To close out my commentary, while I recognize the current focus is on the near term macro uncertainties. We are playing the long game.

Ryan Lance: To close out my commentary, while I recognize the current focus is on the near-term macro uncertainties, we are playing the long game. I'll remind everyone that our fundamental long-term value proposition is truly differentiated. We have a deep, durable, and diverse portfolio with decades of high-quality, low-cost supply inventory to develop. And we are on the cusp of a compelling multi-year free cash flow growth trajectory, led by our high-quality, longer-cycle investments in Alaska and LNG. This underlying improvement in our free cash flow will structurally lower our break-even and increase our capacity to return capital to shareholders.

Ryan: To remind everyone that our fundamental long term value proposition is truly differentiated.

Ryan: We have a deep durable and diverse portfolio with decades of high quality low cost of supply inventory to develop.

Ryan: And we are on the cusp of a compelling multi year free cash flow growth trajectory.

Ryan: Led by our high quality longer cycle investments in Alaska and LNG.

Ryan: Underlying improvement in our free cash flow will structurally lower our breakeven and increase our capacity to return capital to shareholders.

Ryan Lance: And finally, you'll also see in our announcement this morning that Bill Bullock has decided to retire after 39 years of service to the company.

Ryan: Finally, you'll also see in our announcement. This morning that Bill Bullock has decided to retire after 39 years of service to the company.

Ryan Lance: and that Andy O'Brien will take over as CFO. Bill has been an outstanding colleague and an integral part of our executive leadership. I know you will all join me in congratulating Bill on an exemplary career and wishing him well in retirement.

And then Andy O'brien will take over as CFO.

Ryan: Bill has been an outstanding colleague and an integral part of our executive leadership team.

Ryan: I know you will all join me in congratulating Bill on an exemplary career and wishing him well in retirement.

Bill Bullock: Now I'll hand it over to Bill for the last time to cover our first quarter performance and 2025 guidance in more detail. Thanks, Ryan. Shifting to our first quarter performance. As Ryan mentioned, we started 2025 with another quarter of strong execution across the portfolio. We produce 2,389,000 barrels of oil equipment per day, exceeding the high end of our production guidance for the quarter. And in lower 48, production averaged 1,462,000 barrels of oil equivalent per day, with 816,000 in the Permian, 379,000 in the Eagleford, and 212,000 in the Box. Internationally, production continued to ramp up at Sarmat Pad 267 in Canada and Nuna in Alaska.

Ryan: Now I'll hand, it over to bill for the lifetime to cover our first quarter performance and 2025 guidance in more detail.

Bill Bullock: Well thanks Ryan.

Ryan: Shifting to our first quarter performance.

Speaker Change: As Ryan mentioned, we started 2025 with another quarter of strong execution across the portfolio.

Ryan: We produced 2.389 million barrels of oil equivalent per day exceeding the high end of our production guidance for the quarter.

In our lower 48 production averaged 1.462 million barrels of oil equivalent per day with 816000 in the Permian 379000 in the Eagle Ford and 212000 in the Bakken.

Ryan: Internationally production continued to ramp up at surmount pad 267 in Canada and newness in Alaska.

Bill Bullock: And we completed the largest winter construction season at Willow, achieving critical milestones. Regarding first quarter financials, we generated $2.09 per share in adjusted earnings. First Quarter CFO was $5.5 billion, inclusive of $200 million of APLNG distribution. Operating working capital was a $650 million tailwind in the quarter, benefiting from the previously guided one-time cash tax benefit associated with the marathon acquisition. as well as changes in accounts receivable and accounts payable. Capital expenditures were $3.4 billion. And on return of capital, we returned $2.5 billion to shareholders, including $1.5 billion in buybacks and $1 billion in ordinary dividends.

Ryan: And we completed the largest winter construction season at Willow achieving critical milestones.

Ryan: Regarding first quarter financials, we generated $2 nine per share and adjusted earnings.

Ryan: First quarter, CFO was $5 $5 billion inclusive of $200 million of AP LNG distributions.

Ryan: Operating working capital was a $650 million tailwind in the quarter benefiting from the previously guided one time cash tax benefit associated with the marathon acquisition as well as changes in accounts receivable and accounts payable.

Ryan: Capital expenditures were $3 4 billion.

Ryan: And on return of capital, we returned $2 $5 billion to shareholders, including $1 5 billion in buybacks and $1 billion in ordinary dividends.

Bill Bullock: That represents 45% of CFO returned in the quarter, consistent with our long-term track record. And we ended the quarter with cash and short-term investments of $7.5 billion, plus a billion in long-term liquid investments.

Ryan: That represents 45% of CFO returned in the quarter consistent with our long term track record.

Ryan: And we ended the quarter with cash and short term investments of $7 $5 billion plus a billion in long term liquid investments.

Ryan: Now turning to our outlook for the year full year production guidance remains unchanged, we still expect to deliver low single digit production growth at this lower level of capital spending.

Bill Bullock: Now turning to our outlook for the year, full year production guidance remains unchanged. We still expect to deliver low single-digit production growth at this lower level of capital spending. For the second quarter, we expect production to be in a range of 2.34 to 2.38 million barrels of oil equivalent per day, including approximately 40,000 barrels per day of planned turnaround. We expect the second quarter to be our peak turnaround activity for the year, with the triennial turnaround at Eka Thysken Norway and a turnaround at Qatar. Then third quarter turnarounds should be around 25,000 barrels per day, primarily in Alaska.

Ryan: For the second quarter, we expect production to be in a range of $2 three four to $2 three 8 million barrels of oil equivalent per day, including approximately 40000 barrels per day of planned turnarounds.

Ryan: We expect the second quarter to be our peak turnaround activity for the year with the triennial turnaround at ekofisk in Norway, and a turnaround at Qatar.

Ryan: Then third quarter turnarounds should be around 25000 barrels per day, primarily in Alaska.

Ryan: Yeah.

Bill Bullock: For capital, we now expect to spend between $12.3 and $12.6 billion for the full year, or about a half billion lower than our prior guidance of approximately $12.9 billion. This is a result of continued capital efficiency improvements and plan optimization. second quarter capital should be similar to the first quarter and then decline materially over the back half of the year.

Ryan: For capital, we now expect to spend between $12 three and $12 6 billion for the full year or about a half billion lower than our prior guidance of approximately $12 9 billion.

Ryan: This is a result of continued capital efficiency improvements and plan optimization.

Ryan: Now second quarter capital should be similar to the first quarter, and then decline materially over the back half of the year.

Ryan: Unadjusted operating costs, we have lowered our guidance range by $200 million to $10 seven to $10 9 billion, primarily due to ongoing cost optimization efforts.

Bill Bullock: Unadjusted operating costs. We have lowered our guidance range by $200 million to $10.7 to $10.9 billion, primarily due to ongoing cost optimization. We expect our full-year effective corporate tax rate to be a bit higher than prior guidance of 36 to 37 percent range, excluding one-time items, and this is due to geographic We expect an effective cash tax rate to be roughly in line with book tax, which is a function of discrete items in the first quarter.

Ryan: We expect our full year effective corporate tax rate to be a bit higher than prior guidance of 36% to 37% range, excluding onetime items and this is due to geographic mix.

Ryan: We expect an effective cash tax rate to be roughly in line with book tax, which is a function of discrete items in the first quarter.

Ryan: Now moving to cash flows full year AP LNG distributions are now expected to be $800 million.

Bill Bullock: Now moving to cash flows. Full year APLNG distributions are now expected to be $800 million, primarily due to lower price From a timing perspective, we expect the remaining $600 million of distributions for this year to be in the third quarter, with no APLNG distributions in the second or fourth quarter. In terms of working capital, we expect a modest use of cash on a full year basis. This includes an operating working capital outflow of $800 million in the second quarter related to normal timing of tax. as well as the unwinding of the $800 million investing working capital tailwind from the first quarter over the remainder of the year.

Ryan: Primarily due to lower pricing.

Ryan: From a timing perspective, we expect the remaining $600 million of distributions for this year to be in the third quarter with no AP LNG distributions in the second or fourth quarter.

Ryan: In terms of working capital, we expect a modest use of cash on a full year basis.

Ryan: This increase in operating working capital outflow of $800 million in the second quarter related to normal timing of tax payments as well as the unwinding of the $800 million investing working capital tailwind from the first quarter over the remainder of the year.

Ryan: So to wrap up Conocophillips had a strong start to 2025 the teams executed well operationally.

Bill Bullock: So to wrap up, ConocoPhillips had a strong start to 2025. The team's executed well operationally. We continue to improve our plan and deliver on our strategic initiatives across our deep, durable, and diverse portfolio. And amid a more volatile macro environment, we remain focused on delivering competitive returns on and of capital to our shareholders, while maintaining our A-rated balance sheet. And our long-term value proposition remains compelling, with a differentiated free cash flow growth trajectory and the strongest lower 48 inventory position of any operator.

Ryan: We continue to improve our plan and deliver on our strategic initiatives across our deep durable and diverse portfolio.

Ryan: And amid a more volatile macro environment, we remain focused on delivering competitive returns on and of capital to our shareholders, while maintaining our a rated balance sheet.

Ryan: And our long term value proposition remains compelling with a differentiated free cash flow growth trajectory and the strongest lower 48, and then torry position of any operator.

Bill Bullock: That concludes our prepared remarks.

Ryan: That concludes our prepared remarks, I'll now turn it over to the operator to start the Q&A.

Operator: I'll now turn it over to the operator to start the Q&A. Thank you. We'll now begin the question and answer session.

Ryan: Thank you we will now begin the question and answer session and.

Operator: In the interest of time, we ask that you limit yourself to one question. If you have a question, please press star 1-1 on your touch tone. If you wish to be removed from the queue, please press star 1 1 again. If you're using a speakerphone, you may need to pick up the handset first before pressing the number.

Ryan: In the interest of time, we ask that you limit yourself to one question.

Ryan: If you have a question. Please press star one one on your Touchtone phone.

Ryan: If you wish to be removed from the queue. Please press star one again.

Ryan: If youre using a speakerphone you may need to pick up the handset first before pressing the numbers.

Neil Mehta: Once again, if you have a question, please press star 1 1 on your touch Our first question comes from Neal Mehta with Goldman Sachs. Hey, good morning, Ryan and team. And Bill, thanks for everything. Congratulations to you. 39 years. Incredible.

Ryan: Once again, if you have a question. Please press star one one on your Touchtone phone.

Neil Mehta: Our first question comes from Neil Mehta.

Speaker Change: Goldman Sachs.

Neil Mehta: Hey, good morning, Ryan and team and Bill Thanks for everything Congratulations to you 39 years of incredible and Andy Congratulations to you as well.

Ryan Lance: And Andy, well.

Speaker Change: And in.

Speaker Change: And your honor Bill, let's ask a return of capital question and the cash flow question, which is you guys had.

Ryan Lance: In your honor, Bill, let's ask a return of capital question and a cash flow question, which is, you guys had $2.5 billion of capital return in the first quarter. You're very much tracking towards the $10 billion number. We're obviously in a softer commodity macro than we were Thanks For Watching! .

Speaker Change: $2 $5 billion of capital return in the first quarter very much tracking towards the $10 billion number. We're obviously in a softer commodity macro than we were.

Speaker Change: In the first quarter, but do you still view the $10 billion is an attainable number in <unk>.

Speaker Change: And given.

Speaker Change: Given the fact that.

Speaker Change: Now as the stock is undervalued would you be willing to take take on debt in order to support the shrinking the share count.

Speaker Change: Yes, let me.

Ryan Lance: Yeah, let me take that with Neil. And thanks for the shout out for Bill. He's been an integral part of our team and with me for a long period. So I thank him a lot for all his support.

Speaker Change: I'll take that one Neil and thanks for the shot up for Bill has been an integral part of our our team and with me for a long period. So think of a lot for all his support.

Ryan Lance: Yeah, the, you know, step back for a minute, Neil, just a little bit, our, you know, our CEO, our CFO based distribution framework has been unchanged for a number of years. And you you correctly pointed out in the first quarter and for the last number of year multi year history, we've been in the mid 40%, or as I said, in my commentary, the 45% return of capital back to our shareholders. And we've been able to sustain that because of really the quality, the depth, the duration of the portfolio, the low cost supply nature of that, the depth of that inventory and the duration that we have as well as a lot of sustain that.

Speaker Change: Yes.

Speaker Change: You know, it's a setback for a minute Neil just a little bit are you know are our.

Speaker Change: Our CFO based distribution framework has been unchanged for a number of years and you correctly pointed out in the first quarter and for the last number of year multiyear history, we've been in the mid 40% or as I said in my commentary about 45% return of capital back to our.

Speaker Change: And we've been able to sustain that because of really the quality the depth and the duration of the portfolio of low cost supply nature of that.

Speaker Change: The depth of that inventory and the duration that we have as well.

Speaker Change: It was allowed us to sustain that.

Ryan Lance: And all the while, we've been investing for future growth of our CFO and our free cash flow, as we've talked about with the projects that are coming on. And I think, or we think, that's unmatched by any other E&P in this business. So the future looks very, very bright for the company, too. Now, as we assess our CFO, which then leads to distributions each quarter for the year, I think a great place to start is assuming that 45% or mid-40% distribution against that CFO. And that's what we've been counting on. And as you've indicated, we have cash on the balance sheet.

Speaker Change: And all the while we've been investing for future growth of our CFO and our free cash flow.

Speaker Change: As we've talked about with the projects that are coming on and I think a we think that's unmatched by any other E&P in this business. So the future looks very very bright for the company to reassess our CFO, which then leads to distributions each quarter for the year I think a great place to start is assuming that for.

Speaker Change: <unk> five or mid 40% disc.

Speaker Change: Distribution against that CFO, and that's what we've been counting on and as you've indicated we have cash on the balance sheet. So we're willing to use some of that if we need to as we go through the course of the year now what does this mean for the second quarter.

Ryan Lance: So we're willing to use some of that if we need to, as we go through the course of the year.

Ryan Lance: Now, what does this mean for the second quarter? We still think we ought to be buying our shares, and we're doing that. But as we kind of go into the second quarter, reflective of where the macro is at, too, it probably represents a couple hundred million reduction in the second quarter relative to the first quarter. And we're still looking to see where commodity prices are going and what it means for the third and fourth quarter, and we'll deal with those as we see the course of the year play out.

Speaker Change: We still think we ought to be buying our shares and we're doing that but as we kind of go into the second quarter reflective of where the macros out to it probably represents a couple hundred million dollars reduction in the second quarter relative to the first quarter and we're still looking to see where.

Speaker Change: The prices are going and what it means for the third and fourth quarter and we will we'll deal with those as we as we see the course of the year play out.

Speaker Change: Our next question comes from Devin Mcdermott with Morgan Stanley.

Devin Mcdermott: Our next question comes from Devin McDermott with Morgan. Hey, good morning. Thanks for taking my question and echo the congrats bill to you and Andy, to you as well.

Devin Mcdermott: Hey, good morning, Thanks for taking my question and Echo the congrats Bill to you and Andy to you as well.

Devin Mcdermott: I wanted to ask on the capital side. So it looks like the reduction in this year's budget is largely efficiency, driven but love to get a little bit more detail on the drivers and then kind of stepping back I think over the years, you've been very consistent about the strategy of investing through the cycle to maximize returns Ryan.

Andy O'brien: I wanted to ask on the capital side. So it looks like the reduction in this year's budget is largely efficiency driven. We'll have to get a little bit more detail on the drivers.

Andy O'brien: And then kind of stepping back, I think over the years, you've been very consistent about the strategy of investing through the cycle to maximize returns. Ryan, in your remarks, you mentioned flexibility in the program if needed. So I'd love to hear you just elaborate on how you're thinking about that flexibility and at what price levels or macro conditions you might utilize.

Devin Mcdermott: In your remarks, you mentioned flexibility in the program if needed. So I'd love to hear just elaborate on how youre thinking about that flexibility and at what price levels or macro conditions you might utilize it.

Andy O'brien: Hi, Devin this is Andy I can start with that one as you pointed out we have we have reduced the capital this year to a range of $12 three to $12 6 billion. So that's about a half a billion dollar reduction.

Andy O'brien: Hi, Devin, this is Andy. I can start with that one. As you pointed out, we have reduced the capital this year to a range of $12.3 to $12.6 billion. That's about a half a billion dollar reduction. And it really is a combination of capital efficiency improvements across the portfolio and then plan optimization. The capital reduction, it does not include any material changes to the scope in the lower 48 versus our prior guidance. And as you saw, it didn't have any real impact on our production guidance for the full year. It's also probably also worth pointing out that already within our guidance, sort of from the last quarter and again now, we've been factoring in a drop in activity in the lower 48 as we get marathon onto a steady state program.

Andy O'brien: And it really is a combination of capital efficiency improvements across the portfolio and then pan optimization.

Andy O'brien: The capital reduction it does not include any material changes to the scope and the lower 48 that is our prior guidance and as you saw it it didn't have any real impact on our production guidance for the full year.

Andy O'brien: It's also probably also worth pointing out that they are already within our within our guidance sort of put them in the last quarter and again now we've been factoring in a drop in activity in the lower 48, as they get Madison onto a steady state program and I know that that remains unchanged.

Andy O'brien: And that remains unchanged. So the way we think about it is, you know, we've got a global portfolio, and, you know, the first thing we obviously do is we look everywhere to see where we can defer some discretionary capital that doesn't impact production, and that's effectively what we've done here. You know, I think as we're doing this, we also shouldn't lose sight of the trend we're on. You know, we're finding ways to deliver the same level of production for less capital and less operating costs. So, you know, we kind of think we're taking a pretty measured approach here.

Andy O'brien: So right now the way the way, we think about it we've got a global portfolio and you know the first thing. We do is we look everywhere to see where we can defer some discretionary capital that doesn't impact production that that's effectively what we've done here.

Andy O'brien: No I think that's been doing this we also shouldnt lose sight of the trend. We're on we're finding ways to deliver the same level of production for less capital and less operating costs.

Andy O'brien: We kind of think we're taking a pretty measured approach here and we want to take our time to better understand any.

Andy O'brien: We want to take our time to better understand when any potential debt for duration of any ongoing commodity price weakness before we determine if we really need to make any any changes to our program. I would say we we haven't really changed any scope of note. You know, and for us, you know, we're really going to continue to focus on maximizing our returns on capital through the cycle.

Andy O'brien: Any potential debt for duration of any ongoing commodity price weakness.

Andy O'brien: Before we determine where do you need to make any any changes to our program.

Andy O'brien: We haven't really changed any scope of note.

Andy O'brien: And for US we're really can just continue to focus on maximizing our returns on capital through the cycle.

Andy O'brien: But we need to leave it that and with instead of I'd say at this point for US it's kind of a just a measured approach to see what to see where things go.

Andy O'brien: Leave it down.

Andy O'brien: It's sort of like I say, at this point for us, it's kind of just, you know, a measured approach to see where things are going.

Andy O'brien: Our next question comes from Stephen Richardson with Evercore ISI.

Stephen Richardson: Our next question comes from Stephen Richardson with Evercore ISD.

Stephen Richardson: Hi, good morning.

Ryan Lance: Hi, good morning. Ryan, I was wondering if you could talk a little bit about your current views on cost structure and opportunity for further employment improvement. started the year well with the $200 million reduction. Well, one of the themes this quarter in the industry has been kind of resource maturity and appreciate your comments about the depth of your inventory, particularly in the lower 48. But I'm wondering if you could talk about kind of as the industry matures, as Conoco's business kind of matures, how are you thinking about the overall cost structure and where to go from here considering all the macro considerations you talked about?

Speaker Change: Ron I'm wondering if you could talk a little bit about your current views on cost structure and opportunity for further employment improvement.

Speaker Change: Started the year well with the $200 million reduction one of the themes. This quarter. The industry has been kind of resource maturity and appreciate your comments about the depth of your inventory, particularly in the lower 48, but I'm wondering if you could talk about kind of as the industry matures as conoco's business kind of matures. How are you thinking about the overall cost structure and where to go from here considering all the macro.

Speaker Change: Iterations you talked about.

Speaker Change: Yeah. Thanks, Steve you know I think it's a part of our DNA. We're constantly looking at the cost when we benchmark both are our operations and our G&A across the whole world World pretty pretty constantly were looking at.

Ryan Lance: Yeah, thanks, Steve. You know, I think it's a part of our DNA. We're constantly looking at the cost. And we we benchmark both our, our operations and our DNA across the whole world. We're all pretty, pretty constantly we're looking at, you know, across the fence line to our fence line neighbors, making sure that we're not disadvantaged in any any way, shape or form. So I think it's just something that's built into us. We've, you know, we've had the opportunity now with the marathon transaction to step back and take a look at the company, what we're doing in the center, what we're doing in the business units, and we're just trying to drive that efficiency across the whole organization just to maintain our competitive edge and maintain the competitive nature.

Speaker Change: Cross the finish line to our friends and neighbors, making sure that we're not disadvantaged in any any way shape or form. So I think this is something that's built into US. We've you know we've had the opportunity to help with the marathon transaction to step back and take a look at the company what we're doing in the center of what we're doing in the business units and we're just trying to drive that <unk>.

Speaker Change: <unk> across the whole organization just to maintain our competitive edge and maintain the competitive nature. So you know just watch US every quarter. You know we just we're focused on continuing to get better and then they use guidance of environments.

Ryan Lance: So, you know, just watch us every quarter. You know, we just were focused on continuing to get better and, and these kinds of environments just make that all the all the more important, but it needs to be a constant thing that you do as part of your just just running a company like this in a in a Volvo macro.

Speaker Change: They've got all of them all the more important that it needs to be a constant thing that you do as part of your.

Speaker Change: Just wondering in a company like this in a in a volatile macro.

Arun Jairam: Our next question comes from Arun Jairam.

Arun Jayaram: Our next question comes from Arun Jayaram with J-P-A-R-I-N-T.

Speaker Change: With J P. Morgan.

Speaker Change: Yeah, Good morning, Ryan and team, Brian we've seen a modest activity reduction from several of your E&P peers, but yet you know conoco looks to be staying put in terms of your 2025 plans.

Ryan Lance: Good morning, Ryan and team. Ryan, we've seen a modest activity reduction from several of your E&P peers. Yet, you know, Conoco looks to be staying put in terms of your 2025 plans. I guess my question is, you've built Conoco with a low cost of supply in your core basins. And how do you think about kind of balancing this low cost of supply with the macro as well as, you know, perhaps preserving, you know, precious inventory particularly in the lower 48.

Speaker Change: I guess my question is you've built conoco.

Speaker Change: With a low cost of supply in your core basins and how do you think about kind of balancing this low cost of supply.

Speaker Change: With the macro as well as you know perhaps preserving.

Speaker Change: Precious inventory, particularly in the lower 48.

Speaker Change: Yeah.

Andy O'brien: Yeah, I can let Andy jump into Arun a little bit here. But yeah, I think it's right. We, you know, low cost supply wins in this business. So we're trying to drive that as much as we can in our entire inventory. And I think we've gotten ourselves to a pretty great, great place with the depth of the inventory, and the duration.

Speaker Change: Yeah, I can let Andy.

Speaker Change: Jumping to earn a little bit here, but.

Speaker Change: Yeah, I think it's right. We you know low cost supply wins in this business. So we're trying to drive that as much as we can in our entire inventory and I think we've gotten ourselves to a pretty great great place with the depth of the inventory and the duration and now. It's just you know how do you how do you effect that program and and drive the best returns on the capital.

Andy O'brien: And now it's just, you know, how do you how do you I can, I can let Andy sort of provide a little bit more, more about how we think about that as we execute our programs. Yeah, thanks, Ryan. And Arun, as Ryan said, you know, it's, we've got that decades of low cost supply inventory. And it's actually times like this, where, you know, it's been our relentless focus on low cost supply. We've been talking about this for years now, sometimes in sort of a higher price environment, it doesn't get quite the same focus externally, but we've remained, you know, laser focused on it.

Speaker Change: Will that you're investing in the business and.

Speaker Change: I can let.

Speaker Change: Andy you sort of provide a little bit of more and more about how we think about that as we execute our programs. Yeah. Thanks, Ryan Arena as Brian said, it's Oh, we've got that decades of low cost supply of inventory and in fact, the times like this where it is.

Speaker Change: Been a relentless focus on low cost supply we've been talking about this but yes, now sometimes instead of a higher price environment. It doesn't get quite the same focus externally, but we remain laser focused on it and we.

Andy O'brien: And, you know, we invest in projects that generate 10% returns in a $40 world. And it's one of the central tenets to our resiliency. No, I'd say, you know, we're not looking to try and time the market with our capital investments. And the way we're sitting right now with all prices, they're actually not that far from a mid cycle price. You know, what history has taught us is that we really value our steady state program. And when we look back on times like this, these are the times where you get a great opportunity to capture lower capital costs and operating costs.

Speaker Change: We invest in projects that generate 10% returns on a $40 world and it's one of the central tenets to our resiliency.

I'd say no we're not looking to try and time the market with our capital investments in the now where we're sitting right now with oil prices actually not far from a mid cycle price.

Speaker Change: What history has taught us is that we really value our steady state program and when we look back on times like this these are the times, where you've got a great opportunity to capture lower capital costs and operating costs.

Ryan Lance: So, you know, that's the way we think about it, but we're also fully aware that the market's not calling us to grow anything like 4 to 5 percent, you know, like we did last year. Remember, we've adjusted our plan. Our plan this year is for low single digit production growth, significantly lower than last year. And the way I would sort of sum it up is that, you know, we just remain very focused on delivering the returns on free cash flow and production just remains an output of our plan. And I would finish that, Arun, with, you know, look, the people that can do this are the ones that have the kind of inventory that we do.

Speaker Change: So you know that's the way we think about it but we're also we're also fully aware that into the market is not holding us to grow anything like 4% to 5% like we did last year and I know remember we have adjusted our plan when it where our plan. This shows the low single digit production growth and with significantly lower than last year and the way the way I would now.

Speaker Change: So to sum it up we just remain very focused on delivering the returns and free cash flow and production just remains an output of our planet.

Speaker Change: And I would.

Speaker Change: <unk> finished yet Arun with.

Speaker Change: Look the people that can do this are the ones that have the kind of inventory that we do we mentioned to have and the have nots in our opening comments.

Ryan Lance: We, you know, mentioned the have and the have nots in our opening comments. And companies like ours, with the kind of inventory we have, have this optionality in terms of how we how we execute our programs. And as long as we're driving returns on and of capital, that's that's our North Star. That's what's what's driving it is, as Andy said, the production growth. It is really an output. The real driver is cash flow and pre-cash flow.

Speaker Change: Companies like ours with the kind of inventory we have have this optionality in terms of how we how we execute our programs and as long as we're driving returns on and of capital. That's that's our norstar that splits.

Speaker Change: It's driving it as Andy said the production growth is really an output the real driver is cash flow and free cash flow growth.

Speaker Change: Yeah.

Doug Leggate: Our next question comes from Doug Leggett with Wolf. Good morning, everyone. Thank you for having me on.

Speaker Change: Our next question comes from Doug Leggate with Wolfe Research.

Speaker Change: Hi, Good morning, everyone. Thank you for having me on Anvil, it's been a lot of fun.

Bill Bullock: And Bill, it's been a lot of fun and Andy, it wouldn't be an inaugural call as the pending CFO if I didn't ask you about breakevens. So I'm going to try that, if I may. It's really a clarification question on the $450 million reduction. Is this coming out of growth capital in terms of doing things more efficiently, or is it coming out of, I guess, what you would call base capital for maintaining the business? In other words, has the sustaining capital also being reset by almost half a billion dollars? And if so, what does that do to your breakeven?

Speaker Change: Andy.

Speaker Change: It wouldn't be.

Speaker Change: Yeah, you know an old girl call as the pending CFO. If I didn't ask you about breakeven so I'm going to I'm going to try that if I may is really a clarification question on the 450.

Speaker Change: Million dollar reduction is this coming out of growth capital in terms of doing things more efficiently or is it coming out of I guess, what you would call base capital for maintaining the business in other words is the sustaining capital also being reset by almost half a billion dollars and if so what does that do to your break.

Bill Bullock: And I will leave it there. Thank you. Thanks, Doug.

Speaker Change: And I believe there thank you.

Speaker Change: Yep. Thanks, Dogger couple of threats that sort of a week together. So I think as I said earlier that you know.

Bill Bullock: A couple of threads there to sort of weave together. So I think, as I said earlier, that the capital reduction of half a billion dollars is really coming out of a combination of things in terms of where we can simply defer things that are not adding production this year, with basically a very negligible impact next year. There's obviously, when we go through a, you know, the price is coming down, we're starting to see some capture of deflation. So we always say, when we talk about breakevens, it does, it does become a bit of a, you know, a hypothetical conversation, because as price goes down, you know, we would expect some deflation.

Speaker Change: The capital reduction of half a billion dollars is really coming out of a combination of things in terms of where we can know we can simply to four things.

Speaker Change: Thanks.

Speaker Change: Now, adding production you know this yet.

Speaker Change: By magical impact next year.

Speaker Change: There's obviously sort of when we go through sort of a.

Speaker Change: The prices coming down we're starting to see some capture of deflation. So we always say when we talk about break evens. It does it doesn't even have a bit of a.

Speaker Change: A hypothetical conversation because its price goes down we would expect some deflation. So I'd say, it's a mix of things that we're seeing.

Bill Bullock: So, you know, I'd say it's a, you know, it's a mix of things that where we're seeing, you know, where we can do things cheaper. And, you know, we're basically making sure that we're, you know, where we can push scope out, where it doesn't have any impact on our production. We're not really playing with rigs and fractures. We're going to do that. So, you know, yes, over time, you know, it reduces our breakeven, but, you know, to put it, you know, quite clearly where we are with our, with our breakeven, you know, you know, this year, our free cash flow breakevens, you know, in the mid 40s, and the dividend would add about $10 to that.

Speaker Change: Where we can do things cheaper and now we're basically making sure that we're in a way where we can push scope out where it doesn't it doesn't have any impact on our production went up when you're playing with rigs and frac crews, we're going to do that.

Speaker Change: So yes over time it reduces our breakeven.

Speaker Change: To put it in a quiet period, where we are with our without breakeven.

Speaker Change: This year, our free cash flow breakeven in the mid Forty's on.

Speaker Change: On the dividend without about $10 to that and really importantly that includes all of the pre productive capex that we've got going on on our major projects, which is about seven bucks. So as you look sort of through this year and going forward.

Bill Bullock: And, you know, really importantly, that includes all of the pre-productive CapEx that we've got going on, on our major projects, which is about $7. So, as you look sort of, you know, through this year and going forward, you know, we talk about our free cash flow inflection, this is exactly where you'll start to see it with our breakeven coming down into the low 30s as we start to basically reduce the capital and we see the projects coming on.

Speaker Change: We talked about our free cash flow inflection. This is exactly what you'll start to see it with a breakeven coming down into the low 30, so is that okay.

Speaker Change: Out to basically reduce the <unk>.

Speaker Change: Capital and we see the projects coming on.

Speaker Change: Our next question comes from <unk> Kumar with Mizuho.

Nitin Kumar: Our next question comes from Nitin Kumar with Missou Hi, good afternoon, guys.

Speaker Change: Hi, Good afternoon, guys and bill congratulations on the retirement.

Kirk Johnson: And Bill, congratulations on the retirement. Maybe I'll take it away from the macro for a minute and talk about your long cycle projects. You mentioned that you hit some critical milestones at Willow. I'd love to hear a little bit more about that. And then I think the spending in Alaska was just north of a billion dollars this year or this quarter. How can we look for it to trend over the next few quarters as you as you get into the later phases of that project?

Speaker Change: Maybe ill take it away from the macro for a minute and talk about your long cycle projects. You mentioned that you hit some critical milestones tied to below.

Speaker Change: I'd love to hear a little bit more about that and then I think the spending in Alaska was up just north of $1 billion. This year or this quarter. How can we look for it to trend over the next few quarters as you as you get into the theater pieces of that project.

Speaker Change: Yeah, Hi, Matt This is Kurt I can take that one certainly as you're as you're pointing to with your question execution here in first quarter on our Willow project was very important and the project team deliver the key milestones that were required to ensure that this project remains on track.

Kirk Johnson: Hi, this is Kirk. I can take that one. Certainly, as you're as you're pointing to with with your question, execution here in first quarter on our Willow project was very important. And the project team delivered the key milestones that were required to ensure that this project remains on track, fully in support of our first oil in 2029. You know, we saw really good progress up there. We ramped to to roughly 2,400 people on the North Slope, which again reaffirms that this was our peak winter construction season. And and again, a little bit of kudos to the folks up there.

Speaker Change: Fully in support.

Speaker Change: First oil in 2029.

Speaker Change: We saw really good progress up there we ramped to two.

Roughly 2400 people on the north slope, which again reaffirms that this was our peak winter construction season.

Speaker Change: And again, a little bit of kudos to the folks up there really strong safety performance. We saw some really strong efficiencies are.

Kirk Johnson: Really strong safety performance. We saw some really strong efficiencies in a broad span of work across that across those activities. So on that winter construction, we're now roughly 50%, if not slightly better on completion of all of our civil scopes. So when you hear that, think roads, pads, bridges. And we've got about 80 miles of pipeline installed. And very importantly, we executed a horizontal directional drill underneath one of the key waterways. And that allows us to connect east-west pipelines. Again, continued build out of that infrastructure. And as you've heard from me before, really critical this year as well with that operation center pad.

Speaker Change: And in a broad span of work across that Oh.

Speaker Change: Across those activities.

Speaker Change: So on that winter construction, we're now roughly 50% if not slightly better on completion of all of our civil scope. So when you hear that think roads pad bridges.

Speaker Change: When we got about 80 miles of pipeline installed and very importantly, we executed a horizontal directional drill underneath one of the key waterways and that allows us to connect east-west pipeline again continued built out a build out of that infrastructure and as you've heard from me before are really critical this year as well with that operation.

Speaker Change: <unk> centre paths.

Kirk Johnson: So those modules that we see lifted up there here last year, those are now set on the pad. We opened our Willow construction camp. And that becomes important because it allows us to begin construction work on the North Slope a bit more throughout the year, as opposed to being completely confined to the winter season. And then outside of Alaska, engineering, fabrication on our processing modules, that continues to go well. And then, of course, key for us here this year, being our second major season on this project, is procurement activities and sourcing activities. And so we do expect to source and receive a bulk of the engineered equipment that's required to procure, again, for those process modules, as well as all this forward-looking work that we have on the slope.

Speaker Change: Modules that we see lift it up there here last year. Those are now set on the pad, we opened our willa construction camp and that becomes important because it allows us.

Speaker Change: To begin construction work on the north slope are a bit more throughout the year as opposed to being completely confined.

Speaker Change: To the winter season.

Speaker Change: And then outside of Alaska, Our engineering fabrication on our processing modules that continues.

Speaker Change: To go well and then of course key for US here this year being our second major season on this project is procurement activities and sourcing activities and so we do expect to source and receive a bulk of the engineered equipment that's required to procure again for those process.

Speaker Change: Modules as well as all the forward looking work that we have on the slope and so here by year end, we'll have 90% to 95% of that work.

Kirk Johnson: And so here, by year-end, we'll have 90 to 95 percent of that work sourced. And that brings even more certainty, just understanding how this will continue to play out for us in a positive way. So again, peak capital, we guided you a bit to about a third of total spend here this year. We'll be in the first three to four months of this year. We're seeing that actualized for us. And so we expect capital to continue to taper down through the remainder of the year.

Speaker Change: Sourced and that brings even more certainty.

Speaker Change: Just understanding how this will continue to play out for us in a positive way. So so again.

Speaker Change: Peak capital, we guided you a bit to about a third of our.

Speaker Change: Total spend here this year will be in the first three to four months of this year, we're seeing that our actual.

Speaker Change: Actual wise for us and until we expect capital to continue to taper down through the remainder of the year.

Speaker Change: Okay.

Lloyd Byrne: Our next question comes from Lloyd Byrne with Jeff.

Our next question comes from <unk> with Jefferies.

Speaker Change: Please go ahead.

Ryan Lance: Good afternoon, everybody. And Bill, congratulations, and thank you for all your help over the years. Ryan, you talked a lot about what separates Conoco and the advantages you have going forward, including all the free cash you have coming. So would you use your balance sheet and your asset sales and lean in a little bit on going above that 45% return to shareholders going forward? Thanks. Well, I think, Lloyd, I tried to guide to sort of the 45% feels about right for where we are in the in the cycle. Obviously, these kind of commodity prices, if you think about it, it may require a little bit of use of cash on the balance sheet.

Speaker Change: Good afternoon everybody.

Speaker Change:

Speaker Change: Well congratulations and thank you for all your help over the years.

Speaker Change:

Speaker Change: Brian you talked a lot about what separates conoco.

Speaker Change: And the advantages you have going forward, including all the free cash you have coming.

Speaker Change: So would you use your balance sheet and your asset sales and lean in a little bit.

Speaker Change: On going above that 45% return to shareholders going forward.

Speaker Change: Yes.

Speaker Change: But I think.

Stephen Richardson: Lloyd I was trying to guide to sort of a 45% feels about right for where we are in the in the cycle.

Bill Bullock: Obviously, if these kind of in commodity prices. If you can think about it it may require a little bit of use of cash on the balance sheet, but as bill described in his opening remarks, you know we stand and are in a pretty good shape.

Ryan Lance: But as Bill described in his opening remarks, you know, we stand in a in a pretty good shape. We think buying our shares makes sense right now, we're not going to drop off that at all. and in a small factoid in In the last four to five months, we've bought nearly 20% of the marathon shares back in. So, you know, we think that's important. And we know that returns of capital are important, but I would probably anchor on the mid 45% of our CFO. And, you know, that may have some impact on net debt, but we're not intending to borrow gross debt to do that.

Bill Bullock: We think buying our shares makes sense right now, we're not going to drop off that at all.

Bill Bullock: And.

<unk> factored in.

Bill Bullock: And the last four to five months, we bought nearly 20% of the marathon shares back in.

Bill Bullock: So we think that's important and we know that returns of capital are important, but I would probably anchor on the mid 45% of our CFO and you know that.

Bill Bullock: They have some impact on net net debt, but we're not intending to borrow a gross debt to do this.

Scott Hanold: Our next question comes from Scott Hanold with RBC capital markets.

Scott Hanold: Our next question comes from Scott Hanold with RBC Capital Markets. Yeah, thanks. You know, congrats, you know, Bill and Andy, and Bill, you know, wish you well in your future endeavors.

Scott Hanold: Yes. Thanks.

Speaker Change: Congrats Bill and Andy and Bill.

Scott Hanold: Wish you on your future endeavors.

Ryan Lance: You know, my question, and, you know, look, I don't want to belabor this sort of macro kind of question and what does Conoco do, but I'm going to try a bit of a different angle at it. And Ryan, you talked about the haves and have nots, where Conoco is advantaged. But, you know, if we do have a weaker macro environment, you know, what do you think should happen in the industry? Should it be companies with higher cost of supply should be the first to cut and companies like Conoco, you know, show a little bit more resilience?

Speaker Change: My question and you know look I don't want to belabor this sort of macro kind of question and what this contract would do but I'm gonna try a bit of a different angle edits and Brian you talked about the haves and have nots.

Speaker Change: We're conoco's advantage, but you know if we do have a weaker macro environment.

Speaker Change: Where do you think should happen in the industry should be companies with higher cost of supply should be the first to cut in companies like Conoco, you show, a little bit more resilience or or do larger companies like conoco needed to take a leadership role in making some of the first cuts.

Ryan Lance: Or do larger companies like Conoco need to take a leadership role in making some of the first cuts?

Speaker Change: Well I think it's a.

Ryan Lance: Well, I think it's a great question, Scott. Obviously, the folks that don't have the kind of Cost of Supply is sitting in their portfolio, or we're going to find themselves cash strapped and in return straps. So there, you know, obviously the balance sheets are pretty good shape across the industry better than we were in the last downturn. But you'll, you'll see a lot of activity cut back in and presumably what you're talking about is a price outlook that is well below 60. So into the 50s or the low 50s, and I think you'll see. Yeah.

Speaker Change: Yeah, that's a great question, Scott, obviously, the folks that don't have the kind of.

Speaker Change: Our cost of supply sitting in their portfolio, we're going to find themselves cash strapped in and returns traps. So there you know obviously the balance sheets are pretty good shape across the industry better than we were in the last downturn, but you'll see a lot of activity cut back and presumably what you're talking about is.

Speaker Change: A price outlook that is well below 60, so into the fifties or the the low fifty's.

Speaker Change: And I think you'll see.

Ryan Lance: Even even some of the larger companies, I think, if we found ourselves thinking that the remainder of the year was going to be in the low 50s, you know, we would we would be looking probably at additional scope, kinds of opportunities within within our company, too. But again, we have to assess whether we think that's going to be here for a quarter or a month or two months. Or is that kind of the new normal and lower for longer kind of view this.

Speaker Change: Even even some of the larger companies I think if if we found ourselves thinking that the remainder of the year was going to be in the low fifties.

Speaker Change: We would be looking probably at additional scope kinds of opportunities.

Speaker Change: Opportunities within within our company too, but again, we have to assess whether we think that's going to be here for a quarter or a month or two months or is that kind of a new normal and lower for longer kind of our view of this so.

Ryan Lance: So I go back to kind of our prevailing view of the macro. And that is, while demand is come off a little bit from our current think of a million barrels a day, it's still are viewed in 25 is probably 8 million barrels or 0.8 million barrels of additional demand growth in 2025. And that's not stopping. And yeah, OPEC is doing their thing to put some softness in the in the market. But might remind people $60 is pretty close to our mid cycle planning price. So you shouldn't expect a lot of things to change out of our company at these kinds of prices, because we're built for it.

Speaker Change: I go back to kind of our prevailing view of the macro and that is while demand has come off a little bit from our current thinking of a million barrels a day. It's still are viewed in 'twenty five is probably 8 million barrels.

Speaker Change: Or is there a point 8 million barrels of additional demand growth in 2025, and that's about stop it.

Speaker Change: And Yahoo, OPEC is doing their thing to put some softness in the market.

Speaker Change: I remind people $60 is pretty close to our mid cycle planning price.

Speaker Change: So you shouldn't expect a lot of things to change out of our company at these kinds of prices because we'll go for it he can handle the volatility has got a great balance sheet.

Ryan Lance: We can handle the volatility, got a great balance sheet. We know we're executing low cost supply, we're delivering the efficiencies that Andy and Nick are driving and what Kirk talked about in the operating side of the business. And so we're really focused on doing that. Would we have to look at potentially doing something different at 50? Sure, we would. But that's not our that's not our view today. And doesn't doesn't represent where we think the market is going to be for the next few years. All things to change. But that's kind of why for us, it's, you know, don't whipsaw this thing too hard right now.

Speaker Change: We know we're executing low cost supply, we're delivering the efficiencies that <unk>.

Speaker Change: Andy and Nick are driving and what Kirk talked about in the operating side of the business and so we're really focused on doing that would we have to look at potentially doing something different at 50 sure we would but that's not our that's not our view today and doesn't doesn't represent where we think the market is going to be.

Speaker Change: For the next few years, all things could change, but that's kind of why for us it's.

Speaker Change: Don't Whipsaw this thing too hard right now and.

Ryan Lance: And use some of the strengths that we have as a company, because because we can't, because of the portfolio that we're investing in and the opportunity set that's in front of us. So don't overreact. But don't put your head in the sand either.

Speaker Change: Use some of the strengths that we have as a company because because we can't because of the portfolio that we're investing in in the the opportunity set that's in front of us So don't overreact, but don't put your head in the sand either.

Speaker Change: Our next question comes from Ryan Todd with Piper Sandler.

Ryan Todd: Our next question comes from Ryan Todd with Piper Sands. Thanks. Maybe one on a follow up on on the marathon integration.

Speaker Change: Yeah.

Speaker Change: Okay. Thanks.

Speaker Change: Maybe one on a follow up on on the marathon integration.

Andy O'brien: I think it would appear that It's going well, given your guidance on capital and operational cost reduction, so maybe can you talk about how that integration is going, what you're seeing on the operational front. You've called out Eagleford Performance, so maybe any update would be great.

Speaker Change: It would appear that.

Speaker Change: Yeah.

Speaker Change: It's going well given your guidance on capital and operational cost reduction. So maybe can you talk about.

Speaker Change: How that integration is going and what you're seeing and I'm.

Speaker Change: On the operational front, you've called out Eagle Ford performance So maybe.

Speaker Change: Maybe any update would be great.

Speaker Change: Yeah.

Andy O'brien: Hey, Hey, Ryan Andy here, I can start that one and Beth.

Andy O'brien: Hey, Ryan, Andy here. I can start that one. And maybe Nick might have a couple of comments to add, too. So to say, it really feels pretty good to have the first full quarter of Marathon, you know, behind us. And things are going really well. The integration is tracking ahead of schedule, you know, we're making great progress on $1 billion of synergy captures. And so we continue to find more opportunities as a combined company. You know, it is actually one of the drivers to, you know, why we're able to lower our capital operating guidance and the improvements we've announced today.

Speaker Change: Maybe Nick might have a couple of comments to that too. So I'd say, it's really feels pretty good to have the first full quarter of math and you're now behind us and things are going really well.

Speaker Change: The integration is tracking ahead of schedule and we're making great progress on our $1 billion of synergy captures and debt. So we continue to find more opportunities as a combined company. It is actually one of the drivers do you know why we were able to lower our capital operating guidance and the improvements have been asked today.

Andy O'brien: You know, what I'd say on the capital side is, you know, we're already delivering capital synergies of over $500 million. So that started day one. And what's particularly pleasing is we're continuing to see efficiency improvements come forward. You know, an example I can give you and maybe Nick can add to it is that, you know, this quarter, our teams achieved, you know, record drilling performance in Eagleford. And what was particularly pleasing about that is they were leveraging combined best practices from both companies. So there are kinds of things that we're, you know, we're still continuing to get.

Speaker Change: And what I'd say on the capital side as you know, we're already delivering capital synergies of over $500 million. So that started day one.

Speaker Change: And what's particularly pleasing as we're continuing to see efficiency improvements come forward. You know an example, I can give you and maybe Nick can answer is this.

Speaker Change: This quarter our teams achieved.

Speaker Change: A record drilling performance in Eagle Ford and what was particularly pleasing about that they were leveraging combined best practices from both companies is that the kinds of things that we're continuing to get that.

Andy O'brien: Then on the cost side of it, you know, we're also ahead of schedule. You know, we're seeing opportunities for additional synergies in areas that we really couldn't evaluate pre-close, particularly on the commercial side of the business. Again, examples there would be, you know, we've got opportunities in areas like crude lending and midstream contracts. You know, we didn't have factored in that we can now see. And of course, you know, we're actually realizing synergies in the first quarter from things like the debt transaction we did that lowered our interest costs and the day one employee exit.

Speaker Change: And then on the cost side of it. We're also ahead of schedule no were seeing opportunities for additional synergies in areas that we really couldn't evaluate pre close particularly on the commercial side of the business again examples that would be and we've got opportunities in areas like food blending of midstream contracts no. We didnt have factored in that we cannot see.

Speaker Change: And of course, we're actually realizing synergies in the first quarter from things like the the debt transaction that we did that lowered our interest costs and that was.

Speaker Change: The day, one employee exit so that's right on track.

Andy O'brien: So, you know, that's right on track. As was previously guided, we would expect to see the synergy pace accelerate during the second half of the year as we ramp up merging all the systems. You know, we remain very confident that we're going to exit, you know, achieving the cost and S&J synergies for that run rate of $500 million.

Speaker Change: <unk>.

Speaker Change: And I'd say as it appears the guidance, we'd expect to see the synergy pace accelerate during the second half of the year as being as we ramp up merging all of the systems.

Speaker Change: So we remain we remain very confident awaken exit the other achieving the cost and S J synergies.

Speaker Change: That run rate $500 million.

Andy O'brien: Maybe one just final comment I'll make is, you know, we don't consider this a synergy because we think of it as a one-time, but, you know, we got tax benefits from this transaction too. You know, between the foreign tax credit utilization and the NOLs associated with Marathon, that's about a billion dollars of incremental value that we're getting from the transaction above and beyond the synergy. So, you know, I would just say that, you know, we're really pleased with how things are going and it's sort of, you know, we're getting it integrated into our company, I think, pretty seamlessly.

Speaker Change: One just final comment I'll make is you know we don't consider this a synergy because it's we think of it as a one time, but you.

Speaker Change: You know, we we we got tax benefits from this transaction too.

Speaker Change: Between the foreign tax credit utilization in the Nols. It says that a milestone that's about $1 billion of incremental value that we're getting from the transaction above and beyond the synergies so.

Speaker Change: I would just say that we're.

Speaker Change: We're really pleased with how things are going in.

Speaker Change: So we're getting it integrated into our company I think pretty seamlessly.

Speaker Change: Yeah.

Speaker Change: Our next question comes from Betty Jiang with Barclays.

Betty Jung: Our next question comes from Betty Jung with Barclays.

Ryan Lance: Good afternoon. Thank you for taking my question. Ryan, I really appreciate all the color on. If I'm hearing Cash return is closer to the mid-40s of cash flow from Ops going forward. If I could ask on the flip side. Is it fair to say will be more willing. a bit higher given where you are. on the bass.

Betty Jiang: Good afternoon. Thank you for taking my question.

Speaker Change: Brian.

Speaker Change: I appreciate all the color on.

Speaker Change: Cash return framework.

Speaker Change: If I'm hearing it yes, the cash return is closer to that 40.

Speaker Change: Cash flow from ops going forward, if I can ask on the flip side of that is that fair.

Speaker Change: She will be more willing to Blackberry, that's my right.

Speaker Change: Is it higher.

Speaker Change: Where you are.

Speaker Change: Cycle on the capital.

Speaker Change: Projects I guess, what I'm trying to get to is there a level of outspend that can sell less comparable for the next couple of years.

Ryan Lance: I guess what I'm trying to get to is, is there a level of outspan that you'll feel less Well, I think we've kind of factored that into the plans that we've talked about, Betty, we're not, you know, the The absolute worst thing to do right now is to try to whipsaw these long cycle investments. So we're not trying to slow Willow down, or we're not trying to create inefficiencies in that. And we're not equally equally important, not trying to do that on the LNG side. So depending on where the price goes, and what our CFO is, obviously, our reinvestment rate will be a little bit higher as you kind of factor that in.

Speaker Change: Well I think we've got a factor that into the plans that we've talked about Betty were not.

Speaker Change: No.

Speaker Change: The absolute worst thing to do right now is to try to whipsaw. These long cycle investments. So we're not trying to slow roll down or we're not trying to create inefficiencies in that and we're not equally equally important not trying to do that on the LNG side, so depending on where the price goes in.

Speaker Change: What our CFO is obviously, our reinvestment rate will be a little bit higher as you kind of factor that in but I'll remind you back you know when we.

Ryan Lance: But I'll remind you back, you know, when we, when we showed a 10 year plan, what we've done with a company, you know, over time, as our cash flow goes and free cash flows, these projects come on, you know, the reinvestment rate falls, the break even falls, the reinvestment rate falls. And, and that's really the reason why we're doing these projects to begin with. We can't always anticipate what the commodity price cycle is going to look like through that. But we know, these projects are sub $40 cost of supply, they can compete, and they deliver a good, good rate of return based on, you know, our view of the mid cycle price call, because they're low cost of supply.

Speaker Change: When we showed a 10 year plan, what we've done with the company you know over time as our casually goes in free cash flow as these projects come on.

Speaker Change: Reinvestment rate falls, the breakeven falls, a reinvestment rate falls in and that's really the reason why we're doing these projects to begin with we can always anticipate what the commodity price cycle is going to look like through that but we know these projects are sub $40 cost of supply there and compete.

Speaker Change: And they deliver a good good rate of return based on you know.

Speaker Change: Our view of the mid cycle price call because of their low cost of supply. So there's things shareholders should be wanting us to invest in for the future growth and development of the company, but yeah there'll be some natural ups and downs in our reinvestment rate as we go through that and.

Ryan Lance: So there's things shareholders should be wanting us to invest in for the future growth and development of a company. But yeah, there'll be some natural ups and downs in our reinvestment rate as we go through that. And the shorter cycle stuff is where we have the flexibility and Today we're choosing not to exercise that because we have a longer term view, but we always have that flexibility as we go forward.

Speaker Change: The shorter cycle stuff is where we have the flexibility in.

Speaker Change: Today, we're choosing not to exercise that because we have a longer term view, but we always have that flexibility as we go forward.

Paul Cheng: Our next question comes from Paul Cheng with Scotiabank.

Paul Cheng: Our next question comes from Paul Cheng with Scotiabank. Hi, good morning. I just want to say thank you with all the insight and help over the number of years. And Andy, welcome to that congratulation on the new role.

Paul Cheng: Hi, good morning.

Speaker Change: Good morning.

Speaker Change: Wanted to say, thank you that with all of the insight and households at a number of years and Andy welcome to Ah that congratulation on the NIM as well.

Ryan Lance: Ryan, I don't know whether this is a fair question. If we look at your inventory in the lower 48 is probably one of the best in the industry. But we have heard from a lot of your competitors talking about how we are in the late innings. in the shell oil anyway, and inventory will become far more difficult. So with that in mind, do you think that Conoco needs to start more maybe aggressively diversify away from the lower 48 into your other area of operation? If you think that is a reasonable approach with the potential downturn, typically opportunity horizon, which you have captured the opportunity in the past.

Speaker Change: Brian I don't know with us right.

Speaker Change: If we look at your inventory in the lower 48 is probably one of the best in the industry.

Speaker Change: But we have heard from a lot of your competitors talking about how we are amazing.

Speaker Change: In the show Oi anyway.

Speaker Change: Inventory, we've become far more difficult so with that in mind do you think that Oh Nicole.

Speaker Change: I need to start more maybe aggressively.

Speaker Change: As defined away from the lower 48.

Speaker Change: Get into your other areas of operation.

Speaker Change: I think that is.

Speaker Change: A reasonable approach.

Speaker Change: The potential downturn typically opportunity arise in which you have captured the opportunity in the past so with that Andrew yes or asset type.

Ryan Lance: So with that, is there any areas or asset type you would like to expand into or that substantially increase your existing position?

You would like to expand into or that substantially increase your existing position. Thank you.

Ryan Lance: Thank you. Yeah, long, long detailed question, Paul, I think, look, cost of supplies, our North Star, we're a bit indifferent is to gas, oil, US, lower 48, international. We like the diversity in the portfolio. All things being equal, there are areas we'd like, you would like to grow to kind of offset the profile, maybe the conventional, but look, it's all about the cost of supply, first and foremost. And, you know, we like adding more resource that is low cost of supply into our portfolio and into our company. But, you know, inorganically, doing that, at this point, it's a pretty high bar in the company, because we obviously have a differentiated, we believe a differentiated portfolio, both in terms of the cost of supply and its So having that diversity is important.

Speaker Change: Yeah along.

Speaker Change: Long detailed question, Paul I think look cost to supply as our north star for a bit indifferent as to gas oil.

Speaker Change: U S lower 48 international we like the diversity in the portfolio.

Speaker Change: All things being equal there are areas, we'd like you would like to grow to kind of offset the the profile maybe the unconventional but look it's all about the the cost to supply first and foremost and.

Speaker Change: We we like adding more resource that is low cost of supply into our portfolio and into our company, but inorganically doing that at this point its a pretty high bar in the company because we obviously have a differentiated we believe a differentiated.

Speaker Change: Portfolio, both in terms of the cost of supply and its depth and duration as well. So we're not we don't need to do anything, but we will watch the market. We monitor it we know what we like and you know what.

Speaker Change: Well, we don't like so we pay close attention to it but we're first and foremost focused on delivering our plans and delivering what we've got in the portfolio and executing whether it's in Norway, Alaska, Canada, and lower 48, the middle east or the far east so.

Speaker Change: That diversity is important to really like it but we're not trying to go after it if that ends up being a higher cost of supply that just doesn't fit our model.

Ryan Lance: We like it. But we're not trying to go after it. If that ends up being a higher cost of supply that just doesn't fit our model.

Josh Silverstein: Our next question comes from Josh Silverstein with UBS.

Joshua Silverstein: Our next question comes from Josh Silverstein with UBS. Hey, guys, my question was going to be on the percent of capital allocation to the long cycle projects going forward. Ryan, you mentioned the free cash flow is starting to increase going forward because the spending from these four big projects is starting to roll off. I think it's around 25 percent of the budget this year on those projects. Can you just talk about the capital allocation going forward? Does that 25 percent trend over the next few years towards towards 15 percent? Or do you start backfilling some of these projects as they come online?

Josh Silverstein: Yeah, Hey, guys. My question was going to be on a percent of capital allocation to the long cycle projects going forward.

Speaker Change: Ryan you mentioned the free cash flow is starting to increase going forward because the spending from these four big projects are starting to roll off I think it's around 25% of the budget. This year on the on those projects.

Speaker Change: Can you just talk about the capital allocation going forward does that 25% trend over the next few years towards towards 15% or do you start back filling some of these projects as they come online.

Speaker Change: Yeah Josh.

Ryan Lance: Yeah, Josh, you look the you know, and we tried to signal what the cash flow and pre cash flow inflection is coming as these projects come online. I mean, we don't have another willow and another big batch of LNG things sitting in in the on the cupboard waiting to get fall into the execution plan. So no, at this point, you ought to see the capital start ramping down commensurate with the completion of those projects. And the CFO going up as those projects come online, and the free cash flow going up at an even faster pace, because not only is the CFO coming up, we see a drop off in the capital that's being invested.

Speaker Change: The.

Speaker Change: And we just tried to signal what the cash flow and free cash flow inflection is coming as these projects come online I mean, we don't have another willow and another big batch of LNG payments sitting in.

Speaker Change: On the covered waiting to get following the execution plan. So no. It at this point you ought to see the capital start ramping down commensurate with the completion of those projects.

Speaker Change: And the the CFO going up as those projects come online and the free cash flow going up at an even faster pace because not only is the CFO coming up we see a drop off in the the capital that's being invested.

Speaker Change: That doesn't mean that we're starving, Alaska, Norway, and Canada, you know with with investment we're still investing in those base businesses just like we're doing today and that continues and then we're obviously investing in the lower 48 and over over time would expect to see some.

Ryan Lance: That doesn't mean that we're starving Alaska and Norway and Canada, you know, with, with investment, we're still investing in those base businesses, just like we're doing today. And that continues. And then we're obviously investing in the lower 48. And over over time, what expect to see some ramping activity there as well over time. But that's all part of our base plan.

Speaker Change: Ramping ramping activity there as well over time, but that's all part of our base plan.

Speaker Change: Yeah.

Kevin Mccarthy: Our next question comes from Kevin Mccarthy with Pickering Energy partners.

Kevin MacCurdy: Our next question comes from Kevin MacCurdy with Pickering Energy. Hey, good morning, and thanks for taking my question. Just on the quarter, I mean, it looks like you got a really good operational quarter. But cash flows kind of missed the mark a little bit. And to tell us that looks to be driven by cash taxes.

Kevin Mccarthy: Hey, good morning, and thanks for taking my question.

Kevin Mccarthy: Just on the quarter I mean, it looks like you got a really good operational quarter, but cash flow, there's kind of missed the mark a little bit and to tell us that looks to be driven by cash taxes.

Bill Bullock: Can you talk a little bit about why the cash taxes were higher in the first quarter and what your outlook is for the remainder of the year? Well, thanks, Kevin. We wanted to get Bill in on this call. So that seems like an appropriate thing for Bill to talk about. Yeah, I think I've got that one, Kevin. So first, let me just say, thank you to everybody. It's been an absolute privilege for 39 years for the company. I've enjoyed working with our investors in the analyst community over the last five years. And you're in great hands, you know, Andy really, really well.

Kevin Mccarthy: Can you talk a little bit about why the cash taxes were higher in the first quarter and what your outlook is for the remainder of the year. Thank you.

Speaker Change: Well, thanks, Kevin we wanted to get build out on these calls that seems like an appropriate thing for bill to talk about yes, I think I've got that one Kevin. So first let me just say thank you to everybody. It's been an absolute privilege for 39 years with the company I've enjoyed working with our investors and the analyst community over the last five.

Speaker Change: Five years and you are in great hands, you know, Andy really really well so one last time talking about taxes.

Bill Bullock: So one last time talking about taxes. And so, sure, we had some deferred tax movement in the quarter, so let me just put this in total context. You know, when we started the year, we gave guidance to an effective tax rate of 36 to 37 percent, and an effective cash tax rate of 35 to 36 percent. Based on our updated forecast, our full-year effective tax rate is in the high 30s. It's probably closer to right at 40 percent. That's due to a shift in the mix of income. We're seeing an increased percentage of our income in higher tax jurisdictions such as Norway and Libya, and so it's pretty normal when that happens for your effective tax rate to go up a bit.

Speaker Change: <unk>.

Speaker Change: So sure we we had.

Speaker Change: Some deferred tax movement in the quarter and so let me just put this in total context, you know when we started the year, we gave a guidance and effective tax rate of 36% to 37% and an effective cash tax rate of 35% to 36%.

Speaker Change: Based on our updated forecast our full year effective tax rate is in the high Thirty's is probably closer to right at 40% that's due to a shift in the mix of income we're seeing an increased percentage of our income in higher tax jurisdictions, such as Norway, and Libya, and so it's pretty normal when that happens for Ya.

Speaker Change: <unk> tax rate to go up a bit.

Bill Bullock: And then for the full year, as you spotted, our cash tax rate is expected to be a bit higher. We're expecting it to be the same as our effective tax rate. That's due largely to some discrete deferred tax items related to the lower 48 dispositions, which showed up in this quarter. As you know, discrete items are really difficult to forecast. You can see them in our deferred tax headwind in our cash flow statements for this quarter. So we had a headwind rather than our normal tailwind for deferred taxes. Now, on an underlying basis, if you exclude those discrete items for the lower 48 dispositions, we're continuing to realize underlying deferred tax benefits from IDCs as normal, and the MRO-NLOs that we've talked about, those are rolling through the system.

Speaker Change: And then for the full year she spot our cash tax rate is expected to be a bit higher we're expecting that would be the same as our effective tax rate.

Speaker Change: That's due largely to some discrete deferred tax items related to the lower 48 dispositions.

Speaker Change: Which showed up in this quarter as you know as discrete items are really difficult to forecast you can see them in a deferred tax headwind in our cash flow statements for this quarter. So we had a headwind rather than our normal tailwind for deferred taxes.

Speaker Change: Now on an underlying basis, if you exclude those discrete items for the lower 48 dispositions. We're continuing this realized underlying deferred tax benefits from itc's as normal and the MRO Nols that we've talked about those are rolling through the system, but what you're really seeing here is a one time discrete issue associated.

Bill Bullock: But what you're really seeing here is a one-time discrete issue associated with dispositions in lower 48.

Speaker Change: Made with dispositions and lower 48.

Leo Mariani: Our next question comes from Leo Mariani with Roth.

Leo Mariani: Our next question comes from Leo Mariani with Ross. All right, why don't you just see if you guys could provide a little bit more color on the $500 million that was cut from the budget. Certainly understand that these areas were things that don't necessarily impact near-term production here in 2025. But perhaps you could talk a little bit about more, you know, kind of what these things were, you know, what countries they were located in. It sounds like there could be a little bit of kind of medium-term, you know, production impact, but presumably you can go and, you know, spend more money if prices recover on some of that eventually.

Leo Mariani: Alright, so just see if you guys could provide a little bit more color on the 500 million that was cut from the budget certainly understand that.

Leo Mariani: These are areas, where things that don't necessarily impact our you know.

Leo Mariani: Near term production here.

Leo Mariani: In 2025, but.

Speaker Change: Perhaps you could talk about more you know kind of what what these things where you know what countries. They were located in it sounds like there could be a little bit of kind of medium term.

Speaker Change: Reduction impact, but presumably you can go and spend more money if prices recover on some of that eventually.

Speaker Change: Sure I can take that one.

Andy O'brien: Sure, I can take that one. You know, it's, you know, it's, it's, I think I kind of really gave the answer earlier. It's, for lack of a better term, it's nits and nats, basically, sort of all over the, all over our global portfolio, that, you know, there's, and some, a little bit of deflation and optimization. You know, there's nothing here specifically that's having any, any production impact this year. And I'd also add that it has a negligible impact on production next year. So not really any one specific things that I would call out, you know, it's an inventory list of the first things we do when we, we look to sort of, you know, where do we, where can we tighten the belt and reduce some capital, but nothing really of note I'd want to call out, really spread across the entire company.

Speaker Change: So I think I read kind of really gave the answer earlier is a for lack of a better soon as nits and nats basically sort of all over the all overall global portfolio that you know there's.

Speaker Change: Some are a little bit of deflation and optimization.

Speaker Change: No theres nothing here, specifically this having any any production impact of the show and I I'd also add that it has a negligible impact on production next year as well.

Speaker Change: Are there any one specific things I would call out I know, it's an inventory list of the first things. We do when we are we look just sort of where do we where can we tightened the belt one road use some capital, but nothing really of note I'd want to call out.

Speaker Change: Really spread across the entire company.

Leo Mariani: Yeah, that's what I would say Leo.

Andy O'brien: Yeah, that's what I would say, Leo. It's a bit in Kirk's area and in Nick's area. So it's not any one particular area or any one particular category.

Leo Mariani: And Kirk's area and in mix area. So it's not any one particular area or any one particular category.

Leo Mariani: Yeah.

Speaker Change: Our next question comes from David <unk> with TD Cowen.

Andy O'brien: Our next question comes from David Dekelbaum with TD Cowan. Thank you all for taking my question today. I just wanted to follow up in the context of talking about lower cost of supply over time. You guys more or less completed your asset sale target post-marathon. with the most recent divestiture. How do you guys think about the cadence of any of non-core asset sales over the next few years? Or do you feel like you've sort of optimized the portfolio? Yeah, David, I think we're, we're always optimizing the portfolio. And I think as we kind of scrub, scrub the assets and scrub the portfolio, there's hundreds of millions to half a billion of asset sales that we do each year.

David: Thank you all for taking my question today.

David: I just wanted to follow up in the context of talking about lower cost of supply over time.

David: You guys more or less completed your asset sale target.

David: Post the marathon deal.

With the most recent divestiture how do you guys think about.

David: Cadence with any of noncore asset sales.

David: Over the next few years.

David: Or do you feel like you've sort of optimize the portfolio at this point.

David: Yes, David.

David: I think we're we're always optimizing the portfolio and I think as we kind of scrub scrub the assets scrubbed the portfolio, there's hundreds of millions to half a billion of asset sales that we do each year coming out of the marathon.

Ryan Lance: Coming out of the marathon transaction, we identified a couple billion dollars of targeted asset sales. So that probably is a little bit at the high end, but we're constantly testing all of our assets, we don't get in love with anything. And if, if the cost of supply of future investments start rising in those assets, we tell our teams, you've got time to figure it out. Is there technology, more efficiencies that we can bring in to make sure that those investments are competitive in the portfolio? If not, then, then sometimes the asset will move into a different category in the company.

David: Transaction, we identified a couple of billion dollars of a targeted asset sales so that probably is a little bit.

David: At the high end, but we're constantly testing all of our assets. We don't good luck with anything and if.

David: If the cost of supply of future investments start rising in those assets we.

David: While our teams you've got time to figure it out because it was our technology more efficiencies that we can bring in to make sure that those investments are competitive in the portfolio. If not then when sometimes the asset will move into a different category in the company and we'll look to move it out of the out of the portfolio if it makes sense, but I.

Ryan Lance: And, and we'll look to move it out of the, out of the portfolio, if it makes sense. But I would say the big things, yes, have been done. It's just more of the little cleanup things that we do just really every year.

David: I'd say the big things, yes have been done is just more of the little cleanup things that we do just do really every year.

Speaker Change: That concludes today's question and answer session.

Operator: That concludes today's question and answer session. This will conclude today's conference. Thank you for participating. You may now disconnect.

Speaker Change: This will conclude today's conference call. Thank you for participating.

Speaker Change: Now disconnect.

Speaker Change: Okay.

Speaker Change: Hum.

Speaker Change: [music].