Welcome to the Third Quarter 2025 ConocoPhillips Earnings Conference Call. My name is Liz, and I will be your operator for today's call. I will now turn the call over to Guy Baber, Vice President, Investor Relations. Sir, you may begin.

Thank you, Liz, and welcome, everyone, to our third quarter 2025 earnings conference call. On the call today are several members of the ConocoPhillips leadership team, including Ryan Lance, Chairman and CEO; Andy O'Brien, Chief Financial Officer and Executive Vice President of Strategy and Commercial; Nick Olds, Executive Vice President of Lower 48 and Global HSE; and Kirk Johnson, Executive Vice President of Global Operations and Technical Functions. Ryan and Andy will kick off the call with opening remarks today, after which the team will be available for your questions. For Q&A, we will be taking one question per caller. A few quick reminders. First, along with today's release, we published supplemental financial materials and a slide presentation, which you can find on the Investor Relations website. 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 filings. We'll make reference to some non-GAAP financial measures today. Reconciliations to the nearest corresponding GAAP measure can be found in today's release and on our website. With that, I'll turn the call over to Ryan.

Thanks, Guy, and thank you to everyone for joining our third quarter 2025 earnings conference call. We have a lot to cover today, including our third quarter results, improved 2025 outlook, strategic updates, and our preliminary 2026 guidance. Starting with our third quarter results, this was another very strong execution quarter. We again exceeded the top end of our production guidance, demonstrating the power of our diversified portfolio with both capital spending and operating costs declining quarter-on-quarter. On the back of this strong performance, we raised our full year production guidance, and we have reduced our adjusted operating cost guidance for the second time this year. In fact, we have improved all our major guidance drivers since the beginning of 2025. CapEx, operating cost, and production, further demonstrating the strength of our team's execution. On return of capital, we raised our base dividend by 8%, consistent with our goal to deliver top quartile dividend growth relative to the S&P 500. This type of dividend growth is sustainable given the strength of our outlook and expectation for our free cash flow breakeven to decline into the low 30s WTI by the end of the decade. Year-to-date, we've returned about 45% of our CFO to shareholders, in line with our full year guidance and our longer-term track record. Turning to our strategic updates. At the Willow project in Alaska, after completing our largest winter construction season and conducting a comprehensive project review, we've increased our project capital estimate to $8.5 billion to $9 billion. This change is primarily attributable to higher-than-expected general inflation and localized North Slope cost escalation. Despite cost pressures, we have maintained the project schedule and made excellent progress on scope execution, narrowing first oil to early 2029. We also continue to advance our global LNG projects, another key driver of our expected free cash flow inflection. We have reduced total LNG project capital by $600 million. Our three equity projects, NFE and NFS in Qatar and Phase 1 at Port Arthur LNG are on track and have been substantially derisked. Capital spending is now about 80% complete with our first startup expected next year at NFE. Looking ahead to 2026, recognizing it's early, the macro remains volatile, and that our portfolio is highly flexible. Our preliminary guidance for both CapEx and OpEx is to be improved significantly, down about $1 billion on a combined basis from this year. And in fact, relative to our pro forma 2024, they are down about $3 billion. Underlying production should be flat to up next year, a reasonable starting point given the current macro environment. Looking beyond just the near term, ConocoPhillips continues to offer a compelling value proposition to the market, one that is differentiated relative to our sector and to the broader S&P 500. We believe we have the highest quality asset base in our peer space. Our global portfolio is deep, durable, and diverse with the most advantaged U.S. inventory position in the sector. We are uniquely investing in our portfolio and driving significant efficiencies throughout the organization to deliver improving returns on and off capital and a leading multiyear free cash flow growth profile. Consistent with our guidance last quarter, we continue to expect the four major projects we are progressing along with our recently announced cost reduction and margin enhancement efforts to drive a $7 billion free cash flow inflection by 2029, potentially doubling the consensus expectation for free cash flow this year. That free cash flow inflection is now underway. We expect to realize about $1 billion annually through 2026 through 2028 before an additional $4 billion in 2029 once Willow comes online. That's a growth trajectory that's unmatched in our sector. So bottom line, we're performing well. We are delivering on our plan, and we're well positioned for 2026 and beyond. Now with that, let me turn the call over to Andy to cover our third quarter performance, major project updates, and 2026 guidance in more detail.

Thanks, Ryan. Starting with our third quarter performance. As Ryan mentioned, we had another quarter of strong execution across the portfolio. We produced 2,399,000 barrels of oil equivalent per day, once again exceeding the high end of our production guidance. Regarding third quarter financials, we generated $1.61 per share in adjusted earnings and $5.4 billion of CFO. Capital expenditures were $2.9 billion, down quarter-on-quarter as we passed the peak of our major project capital investment cycle. We returned over $2.2 billion to our shareholders including $1.3 billion in buybacks and $1 billion in ordinary dividends. Through the third quarter, we've now returned $7 billion to our shareholders or about 45% of our CFO, consistent with our full year guidance and our long-term track record. We ended the quarter with cash and short-term investments of $6.6 billion plus $1.1 billion in long-term liquid investments. Turning to our outlook for 2025. We've raised our full year production guidance to 2,375,000 barrels of oil equivalent per day, up 15,000 from our prior guidance midpoint. This is even after considering Anadarko's sale of approximately 40,000 barrels a day of oil equivalent, which closed on October 1. We're reducing our operating cost guidance to $10.6 billion down from the prior guidance midpoint of $10.8 billion and our initial guidance at the beginning of the year of $11 billion. We're also making great progress on our asset sales program with another $0.5 billion on top of what we announced last quarter. That takes us up to over $3 billion of asset sales out of our $5 billion target. Of this amount, $1.6 billion was closed and the cash was received through the third quarter, and we have another $1.5 billion that will have closed in the fourth quarter. That includes the remainder of the Anadarko disposition proceeds as well as additional noncore Lower 48 assets. Turning now to our strategic updates. At Willow, we have updated our total project capital estimate to $8.5 billion to $9 billion. After successfully completing peak winter season, we undertook a detailed bottom-up reforecast of the project and as a result, have increased our cost estimate. The increase is primarily due to higher general labor and equipment inflation and increased inflation on North Slope construction. Scope execution has remained strong. We're nearing 50% project completion. This has allowed us to narrow our estimate of initial production to early 2029. Importantly, we can now level load the pace of our future work. More specifically, 2025 Willow project capital is forecast to be just north of $2 billion. We plan to reduce capital to around $1.7 billion a year from 2026 through 2028. After achieving first oil, ongoing development capital will decline to about $0.5 billion a year for several years. We continue to expect Willow to deliver $4 billion of free cash flow inflection in 2029 consistent with our prior commentary. Turning to our three LNG projects, NFE and NFS in Qatar and Port Arthur LNG Phase 1, we are reducing our total project capital estimate from $4 billion to $3.4 billion. This reduction is due to a $600 million credit from Port Arthur Phase 2. The credit is for shared infrastructure costs previously incurred by Phase 1 equity holders. As a reminder, we only have equity in Phase 1, not Phase 2. With this credit, we're approximately 80% complete with our total project capital for these three LNG projects. Approximately $800 million of project capital remains averaging just north of $250 million of spend annually with a declining trend from 2026 to 2028. All projects remain on track. We continue to expect first LNG from NFE in '26, Port Arthur in '27, and NFS after that. We're also making considerable progress in advancing our commercial LNG strategy which will further strengthen our long-term free cash flow generation capacity. As a reminder, our strategy is to connect low-cost supply of North American natural gas to higher value international markets. We are leveraging our decades of LNG experience and our global scale to advance our strategy, which nicely complements our more than 2 Bcf a day or 15 MTPA equivalent of Henry Hub-linked U.S. natural gas production. We have fully placed the first 5 MTPA from Port Arthur Phase 1 with combined regas and sales agreements into Europe and Asia. In terms of offtake, we've recently agreed to take 4 MTPA from Port Arthur Phase 2 and 1 MTPA from Rio Grande LNG, bringing our total offtake portfolio to about 10 MTPA, the lower end of our stated 10 to 15 MTPA ambition. Now turning to our outlook for 2026. We are providing a high-level framework, assuming about a $60 a barrel WTI price environment. First, we continue to expect a significant reduction to our capital spend next year, about $0.5 billion lower than the midpoint of our 2025 guidance. So in round numbers, that's about $12 billion for 2026. The year-on-year decline is driven by a reduction in our major project spend, including Willow and the steady-state activity we achieved on the Lower 48 Marathon Oil assets earlier this year. In addition to lowering our capital spend in 2026, we also expect to lower our operating costs. This is largely due to the $1 billion of cost reduction and margin enhancement efforts we disclosed last quarter. We expect our cost in 2026 to be approximately $10.2 billion, down $400 million from our current year guidance and down $1 billion from our pro forma 2024 operating costs, including Marathon Oil. Turning to our production, we expect to deliver flat to 2% underlying growth in 2026, a reasonable planning assumption considering the ongoing macro volatility. Additional guidance can be found in our earnings material including our oil mix and our equity of full year distributions. Now addressing our multiyear outlook, there are a few important points I'd like to make. First, the free cash flow inflection guidance we previously provided remains unchanged. We expect our four in-progress major projects and our $1 billion cost reduction and margin enhancement efforts to deliver $7 billion of free cash flow inflection by 2029. In terms of the timing of that $7 billion, we expect to realize about $1 billion of improvement each year from 2026 through 2028, amounting to $3 billion of free cash flow improvement by 2028. The remaining $4 billion will come in 2029 once Willow starts up. Bottom line, using 2025 consensus as a baseline, this translates to a double-digit free cash flow growth CAGR through 2028 before another material step-up in 2029, which will approximately double our 2025 free cash flow. So to wrap up, we continue to execute well, operationally, financially, and across our strategic initiatives. We are well positioned for a strong finish to the year and a good start to 2026 and we continue to find ways to enhance our differentiated long-term investment thesis.

Our first question comes from Neil Mehta from Goldman Sachs.

I appreciate the time here, and I want to unpack Willow a bit because while there was a lot of good stuff in terms of execution in the quarter, the Willow update, obviously, was a little disappointing. So I wanted your perspective on the bridging from the $7 billion to $7.5 billion to $8.5 billion to $9 billion. Do you feel, Ryan, that we've got a good handle around the project at this point because the history of major capital projects sometimes is there are multiple legs of announcements around overruns. And on the bright side, it seems like while there's cost overrun here, the timing is really intact. So just unpacking Slide 4 would be great.

Yes. Thank you, Neil. Appreciate the question. And certainly, I appreciate key project for the company. And I know giving some clarity on where we've been, where we're at today, and what that future looks like is important to provide that insight and clarity. So I've asked Kirk to unpack this a little bit using your words, Neil, and spend a little bit of time to make sure you all understand sort of where we're at today and where we're going in the future. So let me ask Kirk to do that and provide a lot more clarity to that.

Certainly, as you heard in our prepared remarks here this morning from Ryan and from Andy, we are increasing our guide on total project capital for the Willow project to a range of $8.5 billion to $9 billion. And I'll start by recognizing the strong execution that we've been achieving through our project team. Certainly, as you've heard from me before, we're hitting the key milestones that we premised in our project plan that, of course, we laid out at FID back in 2023. In this past quarter, we chose to perform a pretty rigorous bottoms-up comprehensive project review, and we were looking at scope, schedule, and of course, total project costs. And we were doing that in recognition that we knew we were coming in on about 50% completion, expect to see that as we move into this next winter season. And it's common practice for us to take on a pretty rigorous, again, bottoms up at this place and projects of this nature and of this size. And coming out of that exercise, we were able to provide two new guides on the project, not just capital but also on schedule. So starting with the first, the new guide on capital is a confirmation really largely of one driver, and that's what we've realized higher inflation post FID in 2023. So addressing that maybe a little bit more detail here. Total inflation is roughly 80% of the increase on our new capital guide. And I'll start with general inflation, which has been modestly higher across a few key categories that we've seen on the projects, general labor materials, and then engineering equipment as well. And all of that makes up over half and in fact, about 60% of our total project spend. So seeing that higher inflation is really culminating largely in what you're seeing in this new capital guide. As you can imagine, just a few percent higher. We originally expected just a couple of percent of routine standard inflation across the period of the project, but just a couple of percent higher in inflation rates across the 5-year duration on our project is driving this 15% increase against what was our original expectations at FID expecting lower inflation. And then a bit more unique to this project, we've also incurred some localized escalation, particularly in our Alaska North Slope specific markets. And that's really been driven by the fact that we've incurred more overlap of the peak construction seasons between our project and other projects ongoing in Alaska than we had originally expected. And that's resulting in roughly a 2x increase in the regional activity there in the state. That stressed the local markets, think labor, logistics, such as trucking, marine, and then even the availability of camps for our construction work there on the slope. We're often asked about tariffs. We have seen some impacts on tariffs, but albeit it's really been low single-digit percentages as a total of the increase we're seeing on that project. And then the last component on the upward cost pressure is related to a few decisions that we've made to ensure that we're mitigating total project risk and especially schedule risk, just to ensure that we're hitting the milestones that we need especially on the front end of this project. And you've heard from me that we're hitting those. And so those have really paid well for us. We pre-staged equipment on winter seasons to ensure that we can knock out all the scope that we had originally premised. And again, that's giving us the ability and the confidence to be able to guide you a bit more even on schedule. So to summarize, we've moved from about 50% of our contracts being locked up at FID back a couple of years ago to now being well over 90% of our facility contracts being secured. And a bulk of those are tied to market indices that gives us transparency as the market moves and creates a lot of accountability with us and our business partners as we move through a project of this size. And so this summer, again, was the time for us to reconcile the actual inflation that we've been seeing over the last couple of years against the forward-looking expectation. And you're hearing from me, we're, in essence, taking forward the type of inflation that we've been realizing forward into the next couple of years just to ensure that we're being conservative through this process. So looking ahead, again, back to execution. We've wrapped up detailed engineering that compels us to keep moving forward on the process module fabrication. That's a longer duration activity. It moves from this year into early 2027 in which we'll see lift those modules to the slope, spending 2028, getting those into the Willow development area and hooking up and commissioning those first oil in 2029. So again, I'll wrap this up with an acknowledgment that we're just seeing really strong execution across the project, and that's foundational. It's paramount for us in a project of this kind and we're on track with all of our major scopes of work. And again, all of this is culminating and not just to guide on capital, but then our ability to provide an accelerated guide on first oil to the early part of '29.

I want to conclude by expressing our disappointment regarding the higher costs; however, we have implemented measures throughout our portfolio to mitigate this increase. You can see evidence of that in our first quarter, which is why we felt it was necessary to provide guidance for 2026. The teams are performing well, and the projects are meeting all the milestones as Kirk mentioned. We believe this project remains world-class and will significantly boost our free cash flow in the next 3 to 4 years, leading us toward completion by the end of the decade. Additionally, we are planning to launch one of our largest exploration programs in Alaska in several years. This is an opportunity to leverage the infrastructure we are developing for the company's long-term growth. If our assessment of market conditions holds true, we will require this conventional oil to meet the increasing global demand we anticipate. Therefore, this aligns with all our strategic objectives. I understand this response was lengthy, but we felt it was important to provide clarity and context to reassure you. We are aware of our past, our current position, and our future direction.

Ryan, could you provide a quick follow-up on Willow? The forecasted development and production costs for the project have increased by $200 to $250 per barrel based on your updated outlook. How does this affect your project returns and overall breakeven points, assuming a mid-$60 Brent price?

Thank you, Arun. The increase in estimates does affect the cost supply of this project moving forward, but it still fits well within our portfolio and remains competitive. We believe that the long-term opportunities arising from this infrastructure, which has been established on the North Slope, will benefit us. We've benefited from satellite discoveries thanks to the infrastructure we've built, and we expect this to hold true with Willow as well. Additionally, I want to emphasize that our margins remain attractive since Alaska's oil typically sells at a premium to Brent on the West Coast of the United States. Therefore, even with a slight increase in finding and development costs, we are still confident in the margins, as it remains competitive in our portfolio and will contribute to the company's future growth and development.

I want to shift focus to the Lower 48. We often discuss the free cash flow from major capital projects, but I've noticed that the Lower 48 capital expenditures are also trending lower in the second half of 2025 compared to the first half. If this trend continues, capital expenditures will be lower year-on-year in 2026, while still potentially growing in that asset. Can you address the capital expenditures trajectory there? Also, how do you see free cash flow progressing from the Lower 48?

Yes, Betty, you're exactly right. Let me provide some context on the capital projection and the efficiencies we're experiencing in the Lower 48 portfolio. In the second quarter, we achieved a level-loaded steady state in our development strategy by integrating the Marathon assets. We reduced our rigs from 34 to 24, which is a significant cut, yet we are still seeing low single-digit growth. This reduction in capital from the first half to the second half will be reflected in our future capital projections. A critical aspect of this is the efficiency improvements we've made in the level-loaded steady state program. We're noticing substantial enhancements in our drilling and completions performance, which we anticipate will continue through 2026. Looking ahead, we expect to operate at a similar capital run rate in 2026 as we did in the third quarter, sustaining the level-loaded steady state program with approximately 24 rigs and 8 frac crews. Regarding free cash flow, I'll let Andy address the company-wide perspective, but we continue to see growth driven by all the efficiency improvements and the strong productivity we demonstrated in the third quarter.

Yes, Betty, it's Andy. I'll just jump in and sort of add on to what Nick was saying there. So we feel it's important sort of on the free cash flow inflection to talk specifically to the three LNG projects of Willow. But of course, there's a lot more than that going on in our company, and Nick just described what we've got with Lower 48. And the flexibility we have within the Lower 48 without inventory if we wanted to ramp up that cash flow growth. But even beyond that, there are other things that we don't factor into that free cash flow inflection. Commercial, for example, when we talked about the commercial sort of strategy, we've got put off of Phase 2. We've got Rio Grande that we just mentioned today that will come on after Willow. That's going to be sort of the 2030 time frame. So there's a lot more going on in a company than just those four projects. We've got other things going on sort of in Canada, in Alaska and around some other international assets, but we just wanted to keep line of sight on this specific free cash flow inflection and then we obviously have ability to add to that.

Andy, you mentioned some of the other assets, and I was curious if you could share your insights on the organic and capital-efficient opportunities in the portfolio. Specifically in Alaska, could you discuss the regulatory and permit changes and any incremental opportunities you see in legacy operations or at Willow? Additionally, could you elaborate on Surmont? You've mentioned the potential for more steam, but I understand there may be other improvements you could pursue now that you have a better understanding of that asset and how to enhance it with minimal capital.

Thanks, Steve. I appreciate that. Regarding Andy's previous response, this update focuses significantly on Willow and our key projects to provide the market with clarity about our activities and free cash flow growth. However, it does not address some ongoing assessments within our portfolio. You mentioned several points related to our long-term strategic considerations, particularly regarding the sourcing of conventional oil to meet rising demand, which we anticipate will grow by approximately 1 million barrels per day annually for the foreseeable future. Within our portfolio, we are not only focused on Willow and its potential additional pads but are also working with the administration to find ways to streamline the permitting process. An early indication of this is the new development rules for NPRA. This is just the beginning, and we expect more developments that will enhance clarity in permitting approvals in Alaska moving forward. Our goal is to make the process more profitable, efficient, and resilient to changes in administrations. Additionally, there is significant activity on the base side in Alaska, and I commend our team for their management efforts. We also have the flexibility at the Montney asset to ramp up production if needed. Currently, we are debottlenecking the Surmont plant, which we now fully own, allowing us to make investments that our previous partner did not approve. This will increase the plant's productive capacity. Looking ahead, we are exploring options to add steam generation capacity to expedite development around Surmont, which remains competitive with a supply cost below $40. Overall, considering our extensive inventory in the Lower 48 and various conventional opportunities worldwide, we are well positioned for decades of growth. I am pleased with our current position, the portfolio we have, and the options it creates for the company in the short, medium, and long term.

Ryan or Andy, could you elaborate a bit more on the operating expenses? The $400 million improvement is significant, especially considering this is the second adjustment this year. What has changed? Please highlight the key factors that have contributed to this improvement and whether there is potential for further enhancement.

Yes, thank you, Lloyd. I can address that. At a high level, I want to highlight that we are executing very well in managing our costs and capturing savings. This success is reflected in our second reduction in guidance this year. Specifically, I want to point out that we've achieved 75% of the synergies from Marathon that we've discussed in previous quarters. By the end of this year, we expect to fully integrate those savings into our costs. We're very pleased with how smoothly this process has gone in achieving the cost reductions we've mentioned before. As we look towards 2026, we plan to further decrease costs by realizing the full annual benefit of the Marathon synergies, along with capturing a significant portion of the cost improvements announced in our last quarterly call. This will lead to substantial reductions in our costs throughout next year. It's important to note that our approach to cost reduction is focused on continuous improvement. We are committed to challenging ourselves to find ongoing ways to lower costs over time. Overall, we are satisfied with our progress and the positive impact on our bottom line.

And I would add, Lloyd, you know us well. These reductions aren't conflated with capital kinds of things. They're not due to dispositions in the portfolio. We don't have 30 lines of reconciliation because the net doesn't ever show up, and they're not cumulative. These are costs that will show up on our bottom line. And as I've said before, just watch us every quarter, and you'll see them materialize. They'll be real and they'll head straight to the bottom line and to our free cash flow inflection that we've been talking about for the next number of years.

I understand it can be difficult to give future guidance with certain uncertainties in commodity prices. I appreciate the information on 2026. When examining total production and capital, it seems to align with consensus projections, but there appears to be a discrepancy regarding oil guidance compared to consensus. Could you clarify where we might have missed the mark? We recognize the complexities involved, especially considering the variety of assets and issues like Surmont post payout. It would be helpful if you could explain some of that to us.

Scott, this is Andy. I'll start with a few points, and then Nick can give more details about the Lower 48. In our third quarter, the company had a mix of about 53% oil. This marks the first quarter where we feel the full impact of Surmont that you mentioned, which now has a higher royalty. The third quarter serves as a good benchmark as we look ahead to 2026. We've provided guidance that we hope is helpful, indicating an oil split forecast of around 53% for the whole company, which includes the higher royalties from Surmont. For the Lower 48, we are guiding an oil percentage of about 50%. Finally, I would like to emphasize that our guidance for 2026 indicates a range of 0% to 2% for BOEs, which also serves as a good reference for our oil outlook. We acknowledge there are many moving parts in the portfolio, but we believe that 53% for the total company is a solid target for next year. Nick can now share additional insights on the Lower 48.

Thanks, Andy. Yes, if you look at 3Q Lower 48 oil mix, we are around above 50% and you can compare that to 2Q, it was about 50.5%. And that was in line with our expectations and our development plan going forward. As Andy mentioned, we're guiding to oil mix at 50% when you look at 2026 forward. And again, that's simply an output of our plan and an output of our development plans where we're developing in the various basins. Now as a reminder for the group within the Delaware, that is our most significant growth driver within the Lower 48. So it shouldn't be a surprise to this group that oil mix will trend in that direction. It's low cost of supply, higher gas content, but very good strong oil content and good returns. Another key component to think through is we've got two decades plus of drilling inventory at current rig activity levels in the Delaware. It's a peer-leading opportunity set out there. Now one other component that you need to think through is that oil mix can fluctuate depending on the relative contributions from these basins as we drill in different areas. So you might have some higher oil mix and some lower oil mix and variations from quarter-to-quarter. But overall, as Andy mentioned, 50% on Lower 48 oil mix going forward.

I'm going to try to keep this to one question, but I'm hoping you can help clarify some details. My question focuses on Willow and the capital expenditures, particularly what comes after Willow, but it's really about how your dividend breakeven is evolving. I believe the news about Willow has overshadowed another significant update, which is your dividend increase. So, how impactful is the rise in Willow's spending on the timing of the cash flow? Specifically, since qualified capital expenditures in Alaska have favorable tax deductions, can you explain how significant this is and what the implications are for the dividend breakeven as Willow starts production?

Doug, this is Andy. I can address that. You've partly answered my question regarding how this operates from a tax perspective, and Ryan also touched on this in his prepared remarks. At a total company level, our breakeven is decreasing significantly. Currently, our breakeven for this year, just related to CapEx, is in the mid-40s, and you would add another $10 million for the dividend. Based on what we've outlined today and our plans for '25 to '26, we expect our breakeven to drop by $2 to $3. We're on a positive trajectory where cash flow is improving, which is excellent, and our breakeven is also on the decline. Ryan mentioned in his remarks that we will eventually reach a low 30s capital breakeven by the time Willow is operational. I don't believe the increase in CapEx for Willow, alongside the decrease in LNG CapEx, will have any significant impact on our breakevens or our ability to generate cash flow during this period, and our cash flow inflection remains intact. I think you began your question with the dividend, and I hope that doesn’t get overshadowed by today’s updates. We have increased our dividend by 8%, marking the fifth consecutive year of achieving top quartile dividend growth compared to the S&P 500, and we are very confident that with our breakeven, this trend will continue.

Yes, I would also like to add, Doug. It's sustainable as the breakeven point is decreasing, and as Andy mentioned, the dividend now constitutes a smaller percentage of our overall cash flow returned to shareholders. We want to assure our shareholders and stakeholders that we can maintain top quartile dividend growth compared to the S&P 500 for the foreseeable future due to the projects we're working on, their costs, and the growth in free cash flow we expect to generate. This sustainability also allows us the opportunity to repurchase some of our shares, which we are actively pursuing at this time.

As much as I'd love to ask a few questions on Willow, I'll change the topic a bit, and that is to talk about the 2026 guide at 0% to 2%. And we've seen other large E&Ps and integrators with similar sorts of guides in a backdrop where WTI is sitting below $60. So can you talk about what macro world you envision or which you plan for that we're going to see next year? And how does that inform that capital guide and production guide?

Thank you, Bob. I want to emphasize that we have significant flexibility within the company. Our production aligns with our plans, maintaining a consistent output level in the Lower 48. Nick discussed the implications of that for production growth. Our macro outlook remains supportive. We have set our expectations based on a $60 WTI, although WTI is currently trading slightly below that. We anticipate some inventory increases, which we observed last week, and we will monitor the situation onshore in the OECD countries. We foresee potential downward pressure towards the end of this year and possibly into early next year. This awareness is why we have a strong balance sheet and cash reserves, allowing us to continue funding our programs. We projected a growth range of 0% to 2%, which aligns well with the current macro conditions and is also based on our optimistic medium to long-term outlook. We expect demand growth of about 1 million barrels a day, persisting throughout this decade and well into the next. We believe there will be demand for both crude and conventional crude, particularly depending on the unconventional supply outlook from the U.S. at current or elevated prices. We anticipate modest growth in unconventional production, potentially remaining flat or slightly increasing next year, contingent on pricing. As we approach 2026, our outlook appears favorable, which is reflected in our 0% to 2% guidance. Importantly, we maintain a great deal of flexibility in our portfolio. We can adjust our capital expenditures if necessary, leveraging our balance sheet for that purpose, as well as the option to increase spending when the time is right. Overall, we believe we are in a strong position based on our perspective of the near-term macro landscape and its ongoing development.

I'll bring it back to Willow, if I could, and I want to say, I appreciate the detail earlier in the call that spoke to the breakdown there on the refreshed expectations. Can you also talk about the confidence level in the updated range? And essentially, what might be locked in from here? It would be great to just get a sense for what flexibility there might be up or down if things change enough over the course of the build-out or if the wider range that you have now captures the most likely scenarios in your view, and it's more a function of where you end up within that range.

We're taking a step back to acknowledge that there was significant inflation following COVID over the past couple of years leading up to our final investment decision in late 2023. However, we are seeing that inflation start to ease a bit at this time. We made the decision to assume an increase of just a couple of percent, considering the global monetary actions that could help mitigate further inflation. Being at a pivotal point in the project allows us to assess what we've observed in recent years. As you're aware, inflation impacts labor markets and engineered equipment, with averages hovering around 4.5% to 5%, which has been both actual and realized, as confirmed by available data from the past couple of years. Currently, inflation rates are showing signs of easing, now sitting between 3% and 3.5%. Nevertheless, we believe that ongoing inflation, tied to our market-based contracts, could still fluctuate around 4% to 5%. We have budgeted accordingly for the next three-plus years to avoid reverting to earlier inflation assumptions made during our final investment decision. We are confident in our capital guidance at this juncture. I feel assured in our position because the team is executing the project exceptionally well without any schedule delays or significant hurdles. While there is upward cost pressure, our focus is primarily on inflation across the broader market, and we've chosen a cautious approach for the upcoming years. Overall, we are confident in our direction and pleased with the project's progress moving forward.

Ryan, as you mentioned earlier, you believe there may be an increase in oil, even in the conventional sector. Over the past 10 years, your company has significantly reduced reliance on exploration due to a strong profile in the Lower 48. As shale oil continues to mature, how should we assess this situation? Do you think your portfolio is large enough that increased exploration efforts are unnecessary, allowing you to depend on shale oil to sustain your production? Or do you feel that long-term challenges are significant enough that an increase in exploration efforts might be required, considering the long-cycle nature of the business?

No. Thanks, Paul. You raise an important industry-wide question about whether enough investment is being made in exploration and large project execution. Within our company, after entering the Eagle Ford in the early 2000s and significantly changing our portfolio to focus on low-cost supply opportunities, we've relied less on exploration. However, we still allocate $200 million to $300 million annually on exploration to support our legacy assets, which have included projects in Malaysia and Norway, and we are shifting our focus to Alaska next year to support the Willow development. This redirection allows us to work within our existing budget. We recently began drilling a well in the Otway Basin of Australia to discover more gas resources. While this spending hasn't led to a large increase in capital allocation, it’s indicative of broader trends in the industry. We are positioned well, as we are a resource-rich company in a resource-scarce environment, which gives us an advantage over many of our peers as we consider future capital investments.

I would like to ask a broad question regarding your global LNG strategy. You distinguish between resource LNG and commercial LNG, and I'm curious if you could explain how you approach these two aspects of the business differently, how they support each other, and whether there is competition between them. Additionally, it could be argued that given the resource availability you have in the Lower 48, making a distinction between resource LNG and commercial LNG might not be necessary. I would appreciate your thoughts on the validity of that argument.

Yes, that's a great question. It's a significant topic when comparing the two and how we approach them. Going back to the start, we've been in the LNG business since the 1960s, essentially helping to establish this industry. We have considerable expertise in this area. Traditionally, we focused on resource LNG, which involved finding stranded gas assets, securing buyers for the LNG, and then building facilities. This model served us well with our assets in Australia and Qatar over the years. However, when we look at what's happening in the Lower 48, the model shifts. There's an abundance of gas there, and it doesn't require a facility-by-facility approach since we don't need to tie stranded gas to a single facility. Our strategy is straightforward: we want to take what we see as low-cost North American gas and access international pricing at TTF and JKM. We've made significant strides in this area, such as placing 5 MTPA in Port Arthur Phase 1 and moving forward with Port Arthur Phase 2 and an additional 1 MTPA at Rio Grande. Our aim is to convert Lower 48 gas into international pricing. It’s worth noting that our commercial strategy aligns perfectly with our operations; we produce over 2 Bcf a day in the Lower 48, which roughly translates to about 15 MTPA. This acts as a natural hedge for our Lower 48 gas exposure. So, I don't view resource LNG as competing with our Lower 48 strategy; they operate under different models. We've learned valuable lessons from resource LNG, enabling us to implement our current strategy of controlling the entire value chain. Only with our global size and scale can we capture economic benefits effectively. In summary, both pieces of the business are crucial, and we're glad to operate in both realms, as illustrated by our activities with NFE and NFS on the resource side and our commercial efforts with Port Arthur and other recent announcements.

I wanted to follow up on the LNG question. Obviously, the strategy is pretty clearly defined here. You had a lot of commercial movement. During the quarter, you're at 10 MTPA now, I think you've said in the past, 10 to 15 is kind of a range. Are we at a point where maybe you pause and digest? Or do you lean in and go up to that 15?

Our strategy remains the same, and we are executing as planned. We are comfortable with the 10 to 15 MTPA capacity, which allows us to optimize our portfolio and manage cargo distribution effectively. We feel confident in controlling the value chain, and our focus is on filling out that 10 to 15 MTPA range.

And I think, James, it's also a function of not getting too much commitments on the front and make sure you can place it on the back end. So we're being deliberate about that. And if we get more opportunity for low liquefaction costs opportunities, we'll add more to the 10 million MTA, but we got to back it up with regas on the other end and have a plan for it. So we're being deliberate now that we've reached that 10 million-ton mark.

I want to return to Slide 7 for a moment to discuss the incremental free cash flow. I know you have previously mentioned the $4 billion of free cash flow from Willow, and I find that figure quite striking. Could you provide some high-level insights on how you arrive at that number in terms of margins, production, maintenance, and capital expenditures in the first year? Also, is that a reliable figure to consider for Willow going forward after 2029?

Kevin, this is Kirk. Certainly, as you saw in the waterfall in the details in the supplementals on Willow, you can really take it directly from that. So as we compare against what was a historical and expected spend here this year of just over $2 billion, as mentioned by Andy, in the prepared remarks, we're expecting that here on the Willow Capital spend here this year, and then that moves down, plateaus for the next couple of years. And then on sustaining capital, post first oil, we're expecting to spend roughly $0.5 billion and just continue development drilling for the Willow Project. Obviously, we're starting predrill. We've got some predrill planned in 2027. And then that will extend and that predrill is all baked within our total Willow project spend. But then post first oil, that $0.5 billion. So in essence, what you're seeing is this inflection downward of capital from roughly $2 billion to an average of $0.5 billion first oil and then first oil, you're getting the CFO associated with, again, why we like Alaska. It's 100% oil sales, it's Brent premium. And again, that is the balance then of the $4 billion free cash flow improvement against a reduction of roughly $1.5 billion on CapEx.

And I'd just remind, Kevin, that you see all the prices that, that's assumed at $70 prices, and we've given a sensitivity to that as well in the materials. Well, let me thank everybody for participating today. Just a few summary comments. We continue to execute well. We're improving our plan, and we're well positioned for a strong 2026 as evidenced by the new guidance we provided today. And I'd say the team continued to find a lot of ways to enhance value in what we think is a differentiated investment thesis. We have an unmatched portfolio quality. We've got a leading Lower 48 inventory depth, combined with attractive longer-cycle investments in the LNG in Alaska that we've described today in quite a bit of detail. And we continue to have a strong track record of returns on and of our capital, and that's all leading to a sector-leading free cash flow growth profile that takes us all the way to the end of this decade. So thank you all for your interest in ConocoPhillips, and we appreciate the questions.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.