ConocoPhillips' Resilient Free Cash Flows Build Long-Term Value

ConocoPhillips COP, a leading upstream energy company, continues to generate resilient free cash flow that enables it to improve shareholder returns and strengthen its balance sheet amid a volatile commodity price environment. In the second quarter, ConocoPhillips generated $4.7 billion in cash flow from operations. The company anticipates stronger free cash flow generation in the second half of 2025, supported by higher APLNG distributions and lower capital expenditures.

The company stands out among leading exploration and production players due to its diversified asset portfolio that supports low-cost production. COP is also investing in improving its portfolio, particularly in longer-cycle projects in the LNG space and the Alaska Willow project. Furthermore, the company intends to deliver more than $1 billion in cost reductions and margin enhancements by year-end 2026. These efforts are expected to strengthen COP’s free cash flow generation. Notably, the combination of these factors and assuming a commodity price environment of $60-$70 per barrel WTI, COP expects to add $7 billion of free cash flow by 2029.

The robust free cash flow generation allows the company to pursue strong growth opportunities while maintaining a solid balance sheet, positioning it well to navigate market cycles. It also enables COP to increase shareholder returns through consistent dividends and share buybacks. 

Strong Free Cash Flow Across Other Industry Leaders

Like ConocoPhillips, Exxon Mobil Corporation XOM and Shell plc SHEL also report solid free cash flow.

ExxonMobil generated about $5.4 billion in free cash flow in the second quarter. The company’s integrated operations span upstream, downstream, chemicals and specialty products. This diversification enables it to deliver strong results amid market cycles. Notably, high upstream production and structural cost savings aid the U.S. energy giant’s earnings and cash flows.

Shell, meanwhile, reported $6.5 billion in free cash flow for the quarter. Its strategy remains anchored to liquefied natural gas (LNG), where it maintains the world’s largest portfolio, alongside a trading and optimization business that adds earnings resilience.

COP's Price Performance, Valuation & Estimates

Shares of COP have plunged 14.4% over the past year compared with the 19.6% decline of the industry.

From a valuation standpoint, COP trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 5.49x. This is below the broader industry average of 11.10x.

The Zacks Consensus Estimate for COP’s 2025 earnings has been revised upward over the past seven days.

COP, XOM and SHEL each currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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