ConocoPhillips (COP)

How it makes money

The company sells physical commodities at market prices it does not set. Revenue is essentially volume produced multiplied by the realized price per barrel or per thousand cubic feet, and the price is decided by world markets: the 10-K notes that WTI crude ranged from $80 a barrel in January 2025 to $55 in December. In 2025 consolidated sales and other operating revenues were $58,944 million, of which crude oil $39,068 million, natural gas $8,854 million, NGLs $3,705 million and $7,317 million of 'other' (bitumen, power and LNG). Part of the gas and power business is sold under physical contracts that qualify as derivatives — $7,201 million in 2025 — so those revenues are marked to market rather than recognised as ordinary customer contracts. There are no subscriptions and no recurring fees: profit comes from keeping the cost of producing a barrel below what a barrel fetches, which is why the company describes its portfolio in terms of 'low cost of supply'. Cash from operations was $19.9 billion in 2025, against capital expenditures and investments of $12.6 billion.

Revenue by segment

ConocoPhillips cannot charge more than anyone else for a barrel — the price is set in world markets — so any advantage has to sit on the cost side. What it has is a large, diversified, long-lived resource base (3.4 billion barrels of proved crude oil reserves, 84% of proved reserves in OECD countries), the scale to fund $12.6 billion of annual investment from its own cash flow, and positions in Alaska, Qatari LNG and the oil sands that a newcomer could not assemble. That is real but narrow: the company's own 10-K describes exploration and production as 'a highly competitive business' in which it competes with private, public and state-owned firms for acreage, equipment and people, and adds that it expects growing competition from alternative fuels. A cost advantage of this kind protects margins during a downturn; it does not protect the price.

The volume of oil and gas the world burns is fairly steady from year to year, but the price is not, and the price is what drives this company's results. Demand for crude tracks global economic activity — industrial output, road and air transport — while gas demand also swings with weather and with power generation; supply responds to OPEC+ decisions, to shale drilling and to conflict in producing regions. The result is a business whose revenue can fall by a third in a bad year without the company losing a single customer. The 2025 filing shows the mechanism at work in both directions: revenues rose $4,199 million on higher volumes ($6,197 million) and higher gas prices ($824 million), while lower realized crude prices took $4,615 million away. Costs, by contrast, are largely fixed once a well is drilled, so profits swing harder than prices do.

Key risks

• Volatile or persistently low commodity prices — The filing names sales prices for crude, bitumen, LNG, gas and NGLs as among the most significant factors affecting revenues and growth, and they move for reasons outside the company's control — WTI went from $80 to $55 a barrel during 2025 alone. A prolonged low-price period would hit revenues, cash flow and liquidity, could force cuts to capital spending, dividends and buybacks, could impair asset carrying values, and could make some reserves uneconomic to produce at all.
• Failure to replace produced reserves — Every barrel produced shrinks what is left. If the company does not replace resources through organic development or acquisitions, the business declines by arithmetic. Success depends on things partly outside its hands: obtaining and renewing rights to drill, navigating political and regulatory obstacles, bringing long-lead capital-intensive projects in on time and on budget, and running mature fields profitably.
• Intense competition in exploration and production — The company competes with private, public and state-owned firms for new sources of supply and for efficient production, and also for the materials, equipment, services and specialist staff — geologists, geophysicists, engineers — needed to run the business. The filing also expects the industry to face additional competition from alternative fuels.
• Acquisitions and divestitures may not deliver — The company regularly reshapes its portfolio, and the filing warns that deals may not close on favourable terms or at all; that acquired assets may not earn the expected returns and may have to be written down; that noncore assets may not be sellable on satisfactory terms; that unknown liabilities, including environmental ones, may surface without adequate contractual protection; and that integrating operations, technologies and people is itself difficult.
• Climate targets, litigation and regulation — Meeting the greenhouse-gas intensity, flaring and methane targets in its Climate-related Risk Strategy depends on government policy, the acceptance of carbon capture technologies, permitting and the pace at which abatement technology actually develops — none of which the company controls — and executing the strategy is expected to be costly. Separately, the company is a defendant in lawsuits over climate change, expects to incur substantial legal costs defending them, and notes it could face claims alleging it misrepresented or failed to meet its stated ESG goals.
• Counterparty default — The business requires transactions with many counterparties, several of them in the same oil and gas industry and therefore exposed to the same price swings. They may default through operational failure, lack of liquidity or bankruptcy; the company's rights against a defaulting counterparty may be inadequate or, in some circumstances, unenforceable, and enforcing them costs money.
• Cybersecurity threats — As the business leans more on digital technology, it faces growing threats extending to suppliers, third-party service providers, contractors and joint venture partners: unauthorised access to or disclosure of sensitive information, corruption or sabotage of data and systems including those of third-party cloud and IT providers, theft of proprietary information, ransom and extortion, threats to facilities and infrastructure, and cyber terrorism.
• Dividends and buybacks are discretionary — The Board may decide not to pay a dividend in any quarter, or to stop declaring one, based on cash available for distribution, results, financial condition against future capital needs, operating expenses and peer payouts. The $25.7 billion of remaining repurchase authority at 31 December 2025 obliges the company to buy nothing: buybacks were suspended in the 2020 downturn and could be suspended again. Any cut to either could weigh on the share price.

Top customers account for 10% of revenue

The 10-K discloses one customer above the reporting threshold: in 2025 sales by the Lower 48 segment to a certain pipeline company were approximately $5.3 billion, about 10 percent of total consolidated sales and other operating revenues. The same counterparty accounted for roughly 12 percent in 2024 and 10 percent in 2023, so the relationship is long-standing. No other individual customer is identified, and the disclosure names no other concentration; commodities are in any case fungible, so the practical risk of losing a buyer is lower than the number suggests — though the filing does flag counterparty default as a risk in its own right.