# How ConocoPhillips makes money

CXProWealth Business Lens · ConocoPhillips (COP) · Q2 FY2026

Read from the 10-Q for the period 2026-04-01 to 2026-06-30, filed 2026-08-06 with the SEC (accession 0001163165-26-000032): https://www.sec.gov/Archives/edgar/data/1163165/000116316526000032/

Business Lens explains how a company earns, spends and keeps its money, from its own filings. It is insight and context, never a view on the shares, a target, or advice. Figures are raw units as filed; percentages are percentage points.

## Headline figures

- Revenue: $19.2B (+36.8% on the year)
- Operating income: — (operating margin —)
- Net income: $3.9B (net margin 20.5%)
- Gross margin: 65.0%
- Free cash flow: —
- Cash conversion (operating cash flow / net income): 1.89x
- Capital expenditure: — of revenue

## Where the money goes (Q2 FY2026)

- Alaska → Sales and other operating revenues: $1.9B
- L48 → Sales and other operating revenues: $13.0B
- Canada → Sales and other operating revenues: $1.3B
- Emena → Sales and other operating revenues: $2.3B
- AP → Sales and other operating revenues: $674.0M
- Corporate → Sales and other operating revenues: $6.0M
- Sales and other operating revenues → Total revenues and other income: $19.2B
- Equity in earnings of affiliates → Total revenues and other income: $239.0M
- Other income → Total revenues and other income: $108.0M
- Gain (loss) on dispositions → Total revenues and other income: $14.0M
- Total revenues and other income → Total costs and expenses: $13.4B
- Total costs and expenses → Depreciation, depletion and amortization: $3.0B
- Total costs and expenses → Impairments: $2.0M
- Total costs and expenses → Accretion on discounted liabilities: $99.0M
- Total costs and expenses → Exploration expenses: $75.0M
- Total costs and expenses → Selling, general and administrative expenses: $188.0M
- Total costs and expenses → Purchased commodities: $6.7B
- Total costs and expenses → Production and operating expenses: $2.4B
- Total costs and expenses → Interest and debt expense: $182.0M
- Total costs and expenses → Taxes other than income taxes: $793.0M
- Foreign currency transaction (gain) loss → Total costs and expenses: $25.0M
- Total revenues and other income → Income (loss) before income taxes: $6.1B
- Income (loss) before income taxes → Income tax provision (benefit): $2.2B
- Income (loss) before income taxes → Net income (loss): $3.9B

## Where the revenue comes from

### Segments (Segment Disclosures and Related Information - Summary of Segment Level Net Income (Loss) (Details))

| Member | Value | Share |
|---|---:|---:|
| L48 | $13.0B | 68.0% |
| Emena | $2.3B | 11.9% |
| Alaska | $1.9B | 9.8% |
| Canada | $1.3B | 6.8% |
| AP | $674.0M | 3.5% |
| Corporate | $6.0M | 0.0% |

The members sum to total revenue.

### ConsolidationItems (Segment Disclosures and Related Information - Summary of Segment Level Net Income (Loss) (Details))

| Member | Value | Share |
|---|---:|---:|
| Operating Segments And Corporate Nonsegment | $19.8B | 103.3% |
| Operating Segments | $19.8B | 103.2% |
| Intersegment eliminations | -$633.0M | -3.3% |

The members do not sum to total revenue.

### Energy (Segment Disclosures and Related Information - Sales and Other Operating Revenues by Product (Details))

| Member | Value | Share |
|---|---:|---:|
| Crude oil | $14.3B | 74.5% |
| Other | $2.6B | 13.7% |

The members do not sum to total revenue.

### ReserveQuantitiesByTypeOfReserve (Segment Disclosures and Related Information - Sales and Other Operating Revenues by Product (Details))

| Member | Value | Share |
|---|---:|---:|
| Natural gas | $1.1B | 6.0% |
| Natural gas liquids | $1.1B | 5.8% |

The members do not sum to total revenue.

## Key insights

### Profit doubled while the company produced less

Price rose and most costs held still, so a higher realized price passed almost straight through to earnings.

The average realized price was $62.33 per barrel of oil equivalent against $45.77 a year earlier, and crude realized $99.40 a barrel against $64.23, a rise the filing ties to Middle East supply disruptions. Production fell to 2,248 MBOED from 2,391 MBOED. Sales still rose 36.8% to $19.2B. _(from the filing)_
Costs barely moved. Production and operating expenses fell 5.5% to $2.4B, which the filing attributes primarily to increased efficiencies, and depreciation, depletion and amortization rose 5.1% to $3.0B. Pretax income rose 101.6% to $6.1B, 31.7% of sales against 21.5% a year earlier. Net income was $3.9B against $2.0B. _(from the filing)_
Fewer shares then split the larger profit. Diluted shares averaged 1,214M against 1,259M a year earlier, so diluted earnings per share of $3.23 against $1.56 rose faster than net income. _(from the filing)_
Analysis: this is operating leverage in its plainest form. When most of the cost of a barrel is set by geology and capital already spent, a change in price lands almost entirely in profit. The company does not hedge, so the same mechanism works in reverse when prices fall. _(analysis)_

### Using up reserves now costs more than running fields

The charge for capital already sunk exceeds day-to-day field costs, and it is rising while output falls.

Depreciation, depletion and amortization was $2,983M in the quarter against production and operating expenses of $2,431M, or 122.7%. A year earlier the same comparison was 110.3%, on $2,838M against $2,572M. Depletion took 15.6% of sales. _(from the filing)_
The filing attributes the higher charge to higher depletion rates, driven by higher book values from the final allocation of the Marathon Oil purchase price and by lower proved developed reserves at the end of 2025. Production fell to 2,248 MBOED from 2,391 MBOED, which it puts down primarily to normal field decline, partly offset by new wells. _(from the filing)_
Analysis: depletion is the accounting echo of a shale-weighted portfolio. Wells that produce most of their oil early must be replaced constantly, so the capital needed to stand still shows up as a large non-cash charge. A rising rate on falling volume means each remaining barrel carries more past investment. _(analysis)_
Caveat: part of the rise is an accounting effect of the Marathon Oil acquisition rather than a change in the fields themselves, so the ratio overstates how much harder the barrels have become to produce. The direction, with output falling and the rate rising, is the part the filing's own words support. _(analysis)_

### An oil and gas producer paid mostly for oil

Gas prices fell while crude rose, so the quarter's gain came from oil and gas barely registered in sales.

Crude oil brought in $14.3B of $19.2B in sales, 74.5%. Natural gas brought in $1,149M, 6.0%, and natural gas liquids $1,117M, 5.8%. The rest, $2.6B or 13.7%, is bitumen, power and LNG. _(from the filing)_
The two prices moved apart. Crude realized $99.40 a barrel against $64.23 a year earlier, while natural gas realized $2.58 per thousand cubic feet against $4.16, which the filing links to rising US production and a well-supplied market. The onshore US supplies 74% of the company's natural gas production and 69% of its liquids. _(from the filing)_
Analysis: gas volumes are substantial but their dollar weight is small at these prices, so in its earnings the company behaves like an oil producer. That is why the LNG strategy matters: it is a route to sell gas into markets that price it higher than the US does today. _(analysis)_

## For members

Signed-in members read, on the page: the investor's and the founder's views of ConocoPhillips (its fundamentals against its peers, where the profit is made, how the model works, where every $100 of revenue goes against the industry, the path to scale), its performance over time with every line as filed, and the edge and the risks. Membership is free.

## Member research

Signed-in members read, on the page: what ConocoPhillips's numbers depend on from here, and the playbook behind each mechanism (what needs scale, what transfers, how to test it, the metric that would show it).

## Sources

- ConocoPhillips 10-Q for the period to 2026-06-30: https://www.sec.gov/Archives/edgar/data/1163165/000116316526000032/ (2026-08-06)

Methodology business-lens-1.0 · schema 1.2.0 · run business-lens-2026-11-03 · as of 2026-11-03