Earnings Call Transcript - COP Q1 FY2026

Operator

Welcome to the first quarter 2026 ConocoPhillips Earnings Conference Call. My name is Liz, and I will be your operator for today's call. At this 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 1-1 on your touch-tone phone. I will now turn the call over to Guy Baber, Vice President, Investor Relations. Sir, you may begin.

Guy Baber, Head of Investor Relations

Thank you, Liz, and welcome, everyone, to our first quarter 2026 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, after which the team will be available for your questions. For the 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 be making 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 will 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.

Ryan Lance, Chairman

With that, I'll turn the call over to Ryan. Thanks, Guy, and thank you to everyone for joining our first quarter 2026 Earnings Conference call. As we begin, I want to start by acknowledging the ongoing conflict in the Middle East. The communities directly affected by these events are also being felt across the global economy. So both U.S. and the region that resolves the conflicts, U.S. interests, stability in the region. Now turning to the first, we delivered another strong. We generated $2.4 billion and $2 billion of capital to our share. In the lower 48, where we have the deepest and highest quality inventory, We continue to improve our peer-leading capital efficiency, meaningfully increasing the number of three-mile-plus laterals for winding down another successful winter construction season, with the Willow project now 50% complete. Our teams have completed the project's gravel scope and mobilization for summer. We also recently completed our four-well exploration program in Alaska to leverage existing infrastructure to unlock additional low costs to support our long-term track record. It's still about the opportunity and the results as the broader industry increasingly recognizes Alaska's unique resource potential. We believe our long-standing position, legacy infrastructure investments, and technical expertise provide us with a meaningful competitive advantage in the LNG we recently executed a third-party tolling agreement in Equatorial Guinea facility well into the next decade this is a strategically located asset in a gas rich covered resource which supports its long-term potential additionally the Port Arthur LNG project continues to progress very well with first LNG expected next year. Turning to the outlook, while ongoing events have significantly tightened crude oil and LNG markets, we'll be able to predict. Amid such uncertainty, it's critical our priorities remain steadfast. We've delivered us well for the last decade and will continue to guide us into the future. We will continue delivering base dividend growth competitive with the top quartile of the S&P 500. Companies that delivered on our shareholder return objectives will continue returning significant CFO to shareholders right off the top. We've averaged about 45% over the past decade through the cycles. And after meeting all these priorities, we'll evaluate disciplined reinvestment. In terms of how these priorities are translating to our 2026, CFO generation is up material in lng torque five percent of cfo return of added a modest amount of permeant activity over the second half of the year to maintain our operational efficiency into 2027 to offer a compelling value proposition that is differentiated in the market we believe we have the highest quality asset base in our pool that is looking increasingly resource scarce this is a distinguishing competitive advantage we have the deepest And outside the lower 48, we have an abundance of diversified, low-cost-to-supply legacy assets. And we are uniquely investing in our portfolio to drive peer-leading free cash flow growth. Our previously announced free cash flow inflection by 2029. Cost reduction efforts, L&G projects. But let me turn the call over to Andy to cover our first quarter performance and updated outlook in more detail.

Andy O’Brien, CFO

Starting with our first quarter performance, we produced 2,309,000 barrels of oil equivalent per day. This includes the impacts of the Middle East conflict on Qatar volumes and higher royalty rates at Sermonde from higher oil prices. These impacts were partially offset by strong performance across our lower 48 and international portfolio. In the lower 48, we produced 1,453,000 barrels of oil equivalent per day. representing 4% year-over-year growth on an underlying basis. We generated $1.89 per share in adjusted earnings and $5.4 billion of CFO. Capital expenditures were $2.9 billion. We returned $2 billion to our shareholders during the first quarter, $1 billion in ordinary dividends, and $1 billion of share repurchases. We ended the quarter with cash and short-term investments of $6.7 billion, as well as $1.2 billion in liquid long-term investments. Turning to our outlook, we are updating our guidance to account for the impacts of recent macro events and the uncertainty surrounding the Middle East conflict. To be clear, this is not a call on when we think the conflict will resolve. we're simply trying to provide a clear and transparent framework due to model and assess the underlying performance of the company. For production, the midpoint of our annual guidance is updated at 2,310,000 barrels of oil equivalent per day. This reflects a 20,000 barrel of oil equivalent per day annual impact due to KESA being excluded from second quarter production guidance, and a 15,000 barrel of oil recurrent per day annual royalty rate adjustment at Sermont due to higher prices. We've made no other adjustments to our annual production guidance. The midpoint of our second quarter production guidance is 2,200,000 barrels of oil recurrent per day, which reflects the full exclusion of cattle production from guidance for the quarter, the Sermont Royalty Rate Adjustment, and planned second quarter maintenance. Moving to operating costs, full-year guidance of $10.2 billion is unchanged, reflecting a $400 million reduction from 2025 due to the benefits of our cost reduction and margin enhancement program. We made strong progress in the first quarter, and we remain confident in realizing the full $1 billion run rate by year-end. We're updating our guidance to a range of $12 to $12.5 billion versus our prior guidance of about $12 billion, representing a 2% increase at the midpoint. This increase is due to slightly more permanent activity over the second half of the year. We're adding a rig to keep pace with the completion efficiencies, and we expect higher levels of non-operated spend. These modest activity additions will maintain our operational continuity into 2027. Additionally, we're incorporating a guidance range to capture the uncertainty around the macro environment as well as the Middle East conflict, specifically as it pertains to timing for NFE and NFF spending. We delivered strong first quarter results. We executed well financially and operationally. We continue to advance our strategy. And amid a volatile macro environment, we remain committed to clear, consistent, and durable priorities that have served us well for the last decade. As Ryan mentioned, our expected CFO is up materially from the beginning of the year. We remain unhedged in oil and LNG to ensure we capture the price upside. with 40% of our crude production linked to premium markets such as A&S and dated Brent. And shareholders are directly participating in this upside as we remain committed to returning 45% of our CFO consistent with our long-term track record. Looking ahead, we remain focused on exiting our plan and enhancing our differentiated investment thesis. Unmatched portfolio quality, including leading lower 48 inventory debt, attractive long-cycle investment, strong return on and off capital, and driving sector-leading free cash flow growth through the end of the decade. That concludes our prepared remarks. I'll now turn it over to the operator to start the Q&A.

Operator

Thank you. We will now begin the question and answer session. In the interest of time, we ask that you limit yourself to one question. If you have a question, please press star 11 on your touchtone phone. 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 numbers. Once again, if you have a question, please press star 1-1 on your touchtone phone. Our first question comes from Scott Hanold from RBC Capital Markets. Your line is now open.

Operator

Yeah, good afternoon. Thank you. Hey, a lot happening, obviously, out on the macro front. And I know you all do a lot of work on the oil macro in addition to, you know, obviously having feelers out there. Can you give us a sense of, you know, your view of what's happened in the market? You know, if you've got any view of, you know, physical versus, you know, the financial kind of position of oil and, you know, how do you expect, like, operators to act and react? It sounds like you guys are going to maintain operational efficiency, but it would be good to see if you've got a view on what you're seeing and hearing from others.

Ryan Lance, Chairman

Yeah, thanks, Scott. Maybe I'll let Andy talk a little bit about some of the numbers that we see out there, and then maybe I can come back and address.

Andy O’Brien, CFO

Morning, Scott. Yeah, I'll start with, you know, I think you said this for me. There's certainly a lot of moving pieces out there right now, and I'll summarize sort of our view of the world. I'm not sure it's too different to others, but I think it's good to summarize it. You know, for about two months now, we've had about 10 million barrels a day of production offline, That even factors in the redirected volumes in countries like Saudi Arabia. We have seen inventory and SPR releases that have partially backfilled some of that lost supply. And the ongoing SPR releases that have been announced, they'll certainly help through the May-July timeframe. But I do think it's really important for people to understand that the brunt of the supply shortfall is currently being absorbed by refinery-run cuts. demand curtailments. Now, if you include the Persian Gulf refineries that, you know, have been damaged, the total global refinery run cuts right now probably amount to around 8 million barrels a day. Now, as we look forward from here, we think the biggest challenge we're about to face is that the markets sort of had a bit of a grace period initially when the tankers that left the Persian Gulf in late February. Now, all of those have reached their destination. The impacts of the lost supply is going to start to become more apparent. We could possibly see from here now inventory draws really start to accelerate. You've already seen that governments in over a dozen countries are implementing policies to ration or otherwise reduce demand in advance of physical shortages. And so given those factors, you know, I've just described, you know, we are downgrading our view of global oil demand to be sort of flat year over year with probably a bit more risk to the downside if the conflict goes on. And probably one final part I'd make before sort of passing it off to Ryan is, you know, despite efforts that are ongoing to manage demand, you know, we are going to start to see some import dependent countries, you know, potentially start to face critical shortages as we get into the June-July timeframe. So I'll probably stop there and let

Ryan Lance, Chairman

Ryan sort of add sort of a bit more to that. Yeah, maybe, Scott, how are people acting? You know, I think people are watching pretty closely to see what happens. Maybe a little bit of short cycle investments with the capital. We're just trying to maintain the efficiency gains that we've got in the lower 48, and we won't be drilled out of some of our OVO activity. But But we're trying to look longer term as well, as Andy said, assess the supply and the demand fundamentals. I think at a minimum we have to raise up a little bit, at least relative to where we were, a typical TI price of about 65, and we believe that's probably going to come up with a floor. But we're trying to assess right now, given the demand dynamics and the supply dynamics, what long-term effect that's going to have on what we would call a mid-cycle equilibrium price. and for how long that might persist. And recall, we were pretty constructive over the last few years before this got started with some uncertainty around how the physical and paper markets were acting a little bit, and this has just accelerated a lot of that. But I certainly think the floor probably has to come up to account for the changes that have occurred.

Operator

Our next question comes from Neil Mehta from Goldman Sachs. Your line is now open.

Neil Mehta, Analyst — Goldman Sachs

Yeah, Ryan, Andy, great comments there, and definitely our thoughts are with your people in the region. I want to pivot over to Alaska, and we went through winter construction season here, and so love a mark-to-market on how those plans progressed. Where do you stand in terms of Willow construction, and what are the big milestones as we continue to de-risk this project and get to that recash flow inflection?

Kirk Johnson, Analyst — Other

Maybe a couple things. I'll touch on Willow directly, your question, and then very related to that, given it is the winter season, we've also had a really strong showing. So I'll take you through a little bit of how we're seeing these projects progress, starting with Willow, as mentioned in the opening room project. And achieving that requires a collection of key milestones that our teams have been able to accomplish and get behind us here. And this winter season in Alaska, we accomplished the entirety of our planned work scope, which admittedly was a little bit of a challenge. We had quite a few weather days not dissimilar from our very first winter season. And despite that, again, the teams were able to accomplish the full winter scope. And by that, certainly probably most important to us was the civil work. So we were able to get all of the bridges down and the entirety of the gravel scope and then even the airstrip. And that sets us up then for our ability to execute the summer work, and especially important with gravel, it allows you to dry and mature that gravel, create the compression necessary on that to continue the structural work that's upcoming then, obviously, in the construction of future facilities and even pipelines. And then as it relates to pipelines, important this year for us was the east-west scope. And that's important because it allows us to begin to make the connections back into the existing operations. And by that, I mean Western North Slope or Alpine. With those connections, just within the coming week, we'll be bringing fuel gas. We'll be firing up. So, again, we've laid out as we continue to commission the ops center. And then, of course, with engine complete, achieved a similar milestone, which is also being 50%, just slightly better than 50% complete there in fabrication. That's important because certainly not this summer, but next summer we have plans to sea lift those into Alaska, which becomes the next major milestone for us to get those processing modules up there. And so, again, all of this in aggregate puts us in just a very strong – for this early oil expectation that we have for 2029 and all of that is on track. And that's obviously important. It's underpinning this compelling value proposition that we have for the $7 billion free cash flow inflection. But then even thinking well beyond that is exploration. And again, also, as you heard from Ryan, we had a strong showing here, too. We speak a lot to the four wells that we had planned this year, which were successful for us. But this is the largest winter season in exploration that we've had since 2020. And with that came the four wells, but we also shot seismic. And then we also did quite a bit of gravel exploration and had a really high success ratio there on finding gravel for future pads. So when we look at that exploration program, again, as you heard from Ryan, I'm really pleased to report, and by that I mean we found prospecting and drilling, and so naturally then our subsurface teams are pouring over the results, seeking to ensure that we can well characterize what we found, and of course, commerciality comes with typically more than one season. It'll take several, but certainly with what we found, really looking forward to the opportunity to keep Willow full. So, again, and I think that underpins our objective here, which is we're in this to identify new resource and pad development opportunities to do just that, which is keep this infrastructure full. And you've seen the track record from us in the past, and with the success that we've been realizing just in the last six months, again, just a really strong showing from our line.

Operator

Our next question comes from Betty Jiang from Barclays. Your line is now open. Hi. Good morning, guys.

Betty Jiang, Analyst — Barclays

A lot of eyes right now on the short cycle response to higher oil prices and you guys being the first one out of the gate and sort of leaning into activity in the Permian, which clearly makes sense for you guys given the deep inventory, but can we just get a bit more color on the decision process from Conoco's perspective to lean into Permian activity now. And alluding to your mid-cycle views earlier, what price would it take to flex activity further and what will be the sensitivity on production outcome in 2027?

Andy O’Brien, CFO

Morning, Betty, Andy here. Maybe I'll quickly start this and then Nick can talk a bit more specific about the details of what we're doing in the Permian. And, you know, I did cover in the prepared remarks, you know, what we've done here is effectively increased the midpoint of the CapEx by about $250 million. And I think it is important sort of to describe why we're doing that. You know, it is, you know, we keep having the operational efficiency that Nick will talk to. And it's important, basically, the way we think about steady state that we keep that going. So on the operated side, it really is just a continuation, basically, of our steady state, just given how efficient we're being. And then on the non-operated side, as I said in our prepared remarks, it's more in anticipation and starting to see the early signs of this of some of our non-operated partners starting to ballot us for more wells. So I'd say it's more sort of the 250s, more around sort of operationally setting ourselves up and sort of being thoughtful about what we keep our steady state and we react to partners versus a big sort of macro call on price. Maybe with that, I'll let Nick just give a bit of the specifics on what we're doing and we can come back with anything more to cover.

Nick Olds, Analyst — Other

Thanks, Andy. Good morning, Betty. As Andy mentioned, that $250 million additional activity is concentrated in the Delaware, and that's a combination of operated and non-operated. On the operated side, we continue to drive significant efficiencies both on the drilling and the completion operations. On our completion efficiencies, that's slightly outpacing the drilling side, so we're adding another Permian rig versus prior plan to help us keep pace with our frack crews and maintain our level-loaded steady state operations approach that we've talked about for a number of years. The key item, and ultimately what we don't want to take place, is have any frack gaps due to the efficiency improvement that we're continuing to capture. If you recall, last year as we exited 2025, we had a 15% improvement in DNC, both operational efficiencies, and we continue to see those trends. But on the completion efficiencies, those are outpacing them. Now, if I pivot to the non-operated OVO side, we have started to see more well ballots from our partners, which will likely translate to higher level of OVO spend over the second half of the year. And, you know, we're not going to elect out of low-cost-to-supply high-return OBOE projects in this price environment. We've seen it in the past. They're competitive projects. They're short-cycle of good returns. So that's the right choice from a returns perspective. Again, this activity additions are a modest capital add to our second-half program and will maintain our operational efficiency going into 2020.

Ryan Lance, Chairman

Yeah, I would just add, Betty, these are no-brainers. These are does for us. We're not going to be drilled out of inventory by others, and we're going to keep our efficient machine running. And so these are the last half of the year. It doesn't have a large impact on 2026, but the continued growth that we're seeing in the lower 48 in our portfolio year-on-year. You saw it in the first quarter. You'll see it year-on-year, and that will continue into 2027. In the meantime, we'll be assessing what we think mid-cycle price is going to go do and what the new equilibrium might look like and then what that follow-on means to the cash flows that we generate as a company, the returns that we're going to send back to our shareholder, and what we reinvest for growth and development in the company. And that will be coming later this year just as part of this.

Operator

Our next question comes from Doug Leggett from Wolf Research. Your line is now open.

Doug Leggett, Analyst — Wolfe Research

Thanks for taking my questions. Hi, everybody. So I guess, Ryan and Andy, I'm looking at slide five. And, you know, those of us who have been around long enough, Ryan, remember what you went through in 2016 with the dividend. And now we're sitting here looking at low 70s. You're probably doing 10 billion free cash flow, according to your chart. And that's got 70% upside. side. My question is that you've stuck to the 45% cash flow payout. Your commitment is actually more than 30%. And clearly, there's a little bit of pro-cyclical stuff going on with the share price. These windfalls can be capitalized in different ways, especially through your dividend policy. So I just want if you can walk us through, in these kind of situations, why not flex down in the payout? Why not think more about the longer-term dividend, the break-even, the balance sheet? Oh, I'm just curious where your head's at on buying your shares at the top of the cycle. It might not be the top of the cycle, but it's certainly elevated for the time being.

Ryan Lance, Chairman

Yeah, no, thanks, Ted. I mean, we like to think about share repurchase sort of on a dollar cost average. We tweak around the edges, which is why it was probably a little bit lower in the first quarter but it was a good time to be buying in uh march and uh in april so uh you'll see probably is buying more in the in the second quarter as we go forward but more fundamentally to your question so our 30 percent you know floor is is that we start with for the company so we think about what mid-cycle prices are what what an equilibrium look we know we're never in a we have to understand that from a supply and demand percentage or perspective so we can understand sort of what what cash flows do we generate? What can we give back to the shareholder? And out of the downturn in 2014 and 2015, when we recast the value proposition for the company, you know, it made sense. But we've had mid-cycle price, so the actual price has been higher than our mid-cycle call for most of that time. So we've been able to afford and be able to provide more than 30% back to the shareholder. And our history has been, I think, now coming up on a decade through the cycles, even through the low point of the COVID pandemic in 2020 and the high point of 2022 when we were sending quite a bit back to the shareholder. So we think about it through cycle. We try to set a mid-cycle price. And we just are constantly trying to drive down the reinvestment rate in the company. We're trying to drive growth for as least amount of capital as we can in the business, which is why Nick talks about what we're doing in the lower 48 to drive the efficiencies that his team is doing, we have in our legacy assets, our base, and that we've made for this year because we recognize that the strength and the power the company is doing. Now, we don't want the dividend to get outsized as you referred to before, which may have been 2015, 2016. There's not many of us around anymore, Doug. Maybe you and I, that's about it. But look, we want to make sure that we can sustain the dividend And we want to make sure we can grow the dividend at a competitive S&P 500 rate, being able to constantly, continually, annually grow it. It's something we think is competitive with the S&P 500 top quartile. And that's our commitment to go continue to do that. But at the same time, we want to make sure the dividend does get an outsized portion of our cash flows at a mid-cycle price, whatever mid-cycle price we call it. So we're trying to manage both those things, and typically the dividend, but it doesn't represent that with the share repurchases. And we think that makes sense over the long haul. It reduces the absolute burden of the dividend going forward. It might have some proselytic nature to it a little bit, but we should up and down a little bit, manage some of that. But we do want to make sure we hit the 45% made up between the base dividend and whatever shares we're repurchasing in the market. and we try to take a pretty rateable...

Operator

Our next question comes from Lloyd Byrne from Jefferies. Your line is now open.

Lloyd Byrne, Analyst — Jefferies

Hey, good morning, Ryan and team. Can we talk about OpEx a little bit? It continues to stand out. And if you could just maybe comment on the trajectory from here. And then is there anything other than maybe conservatism that keeps you from bringing the full-year guide down?

Andy O’Brien, CFO

Hey, morning, Lloyd. Andy here. Yeah, so I think I can take this one in terms of, you know, we did set our budget at $10.2 billion, and that was, as a reminder, $400 million lower than last year. And as you point out, our 1Q results, you know, were very strong. We're really pleased with them. And it's probably being driven by that we are taking costs, you know, out faster than we'd originally premised from our cost reductions, both on the labor side and on the non-labor side with our lease operating costs. Q1 is reinforcing this. We're very confident that we're going to hit that $1 billion in run rate savings by the year end. But really, to get to the heart of your question in terms of guidance, I think it is only the first quarter. We're very, very pleased with how things have gone. But we'd like a little bit more time before we revisit whether we would want to reduce guidance or not.

Operator

Our next question comes from Devin McDermott from Morgan Stanley. Your line is now open.

Devin McDermott, Analyst — Morgan Stanley

Hey, thanks for taking my question. I wanted to ask on the LNG portfolio outside of the Middle East first, just a little bit of additional detail on this EG agreement you signed. And more broadly, you have this big commercial portfolio of LNG offtake contracts, including 5 million tons off of Port Arthur. I was wondering if you could just give an update on where you stand in marketing and placing those commercial LNG volumes. I would imagine they've gotten more valuable with everything going on in the market right now.

Andy O’Brien, CFO

Sure. I can start with the second half of your question, then specifically to Equatoria Guinea. I'll let Kirk jump in and maybe share a bit more on that. So, yeah, our LNG strategy, on the commercial side, we really couldn't be more pleased with the progress we're making. You know, I think as you say that what's happening in the market right now, you know, our view is that we have seen, you know, a structural tightening of global energy, not just for this year, but for quite some time to go. You'll recall that, you know, pre all the events in the Middle East, we actually had a bit of a contrarian sort of view versus consensus where we thought the market was, you know, more in balance versus sort of a thesis of, you know, a bit of a glut. So, you know, that's obviously all gone away now. And if anything, you know, I think everyone is now sort of seeing sort of the tightening market. And as we look at it specifically, you know, where we're in a situation where we've got sort of, you know, first move of advantage here now where we've, you know, pretty pleased that we put in place, you know, just like we think about our E&P portfolio, low cost supply in this world, low liquefaction costs, you know, very important. We've got that, you know, where, you know, we've already placed the first five million tons, you know, predominantly into Europe and a bit into Asia on phase one. And as you can imagine, sort of the conversations we're having about placing sort of what else we have is intensifying right now with interest in sort of in those volumes that we have. So I think it's just reinforced, you know, the global security element of it as well in terms of sort of the importance of having, you know, positions, you know, on the Gulf Coast and the value of that. And, you know, that, you know, that's really just played into our strategy, really. I'd say the first mover event has been very important to us on the commercial side. And probably one last comment to make before just passing it off to Kirk, it's, you know, we'd be remiss not to also mention sort of the rest of our resource LNG business outside a commercial with, you know, AP LNG and, you know, others that were, you know, where effectively those projects are priced off of long-term contracts linked to Brent for the most part. So, they're also sort of, you know, doing well in this environment as well. So, I think the LNG strategy is all proving out very nicely for us sort of along the lines that we would hope. And then maybe specific to your Equatorial Guinea question, I'll let Kirk jump in.

Kirk Johnson, Analyst — Other

Yeah, morning, Devin. Certainly, as you're pointing to, the EGL&G asset came to us through the Marathon acquisition, and it came with a strong reputation of performance. And so the question for us was really about longevity and understand just the performance and the capability of that asset and that organization. We've just been really quite pleased. And as described, certainly in the release, we were able to an agreement, a tolling agreement with a third party at EGL&G. And so, again, maybe to just step back a bit, this EGL&G asset for us or the Equatorial Guinea asset comes with an upstream operation from the Alba unit. Obviously, we have production facilities offshore and then there on the island next to Malabo, the capital. And then, of course, we have an equity position in EGL&G as well. And so our ability then through EGL&G to strike this agreement then comes with an opportunity to further extend the life of this EGL&G asset. It allows us to run that facility at a strong utilization rate and pushes the life of that asset, again, well into the 2030s. And that gives us a bit of time, which you've also seen some press from us around the HOAs that we've been striking there with the ministry in Equatorial Guinea, looking at discovered resource. And I think that's an important clarification, which is there are opportunities, known resource, specifically gas, in and around the island and Equatorial Guinea waters that we can begin pursuing to understand what those look like for us, commercial opportunity. and, again, utilize the olage of the capacity that will exist for us long-term in that asset. So, again, it's an interesting asset. Sales out of EGLNG consist of both SPA and a long-term SPA as well as SPOT, and it's in a great position to take cargos both north into Europe or around the Horn into Asia. So, again, pleased with how this asset is continuing to prove itself out.

Operator

Our next question comes from Arun Jayaram from J.P. Morgan. Your line is now open.

Nick Olds, Analyst — Other

Yeah, thanks for taking my question. I had a quick follow-up on LNG. I was wondering if you could comment how some of the Middle East disruptions are impacting your view of the LNG macro picture. And I was wondering if perhaps you'd give us a little bit of an update on the NFE and NFS projects, just given some of the disruptions in that part of the world.

Andy O’Brien, CFO

Yeah, I can start with the macro and then Kirk can go into the specifics on NFE and NFS. You know, from a macro perspective, you know, I kind of touched on this on an earlier answer, but, you know, if you think about what's actually, you know, happened with the two months that we've basically had, you know, Qatar production shut in in terms of not going through the strait, so that's 20% basically of the LNG sort of that's not flowing. Maybe a better way to put that into context so people can visualize it, that equates to something like 200 cargos that have not basically sailed. So 200 cargos haven't been delivered. So our view of the macro is that we likely have already seen a little bit of a structural change here where there's going to be LNG shortages for quite some time. And, you know, when we look at basically where we're at with this is that it's going to be a situation where, you know, prices are likely going to be quite constructive for a period of time as, you know, really people are going to have to, you know, basically bid up price to sort of manage the demand supply piece of this equation. You know, and I think, you know, when you look at what Qatar has, you know, publicly said around, you know, the damage to Rastafan, it's going to take some time to get that capacity back on the market as well. So, you know, our in-house view is that we've essentially seen, you know, a bit of a structural change on LNG with all that's happened. And, you know, it's going to take quite a long time to basically get anything back close to where we used to be. so I think with that I can let Kirk talk specifically about our position in NFE and NFS but the broader macro is one where I think this is sort of crystallizing to be a little different to the oil in terms of where we know where we are with this

Ryan Lance, Chairman

and I would add too Arun we're watching gas inventories in Europe that today are well below where they should be given and the build that they should be experiencing. So I'm really concerned, depending on northern Europe and how is the gas going to be there. Certainly the inventories that today, at this moment, have a blinky light on maybe Kirk and...

Kirk Johnson, Analyst — Other

Yeah, maybe just if this certainly is affecting us. Actually, I think you understand and folks know that our single producing asset there in Qatar is in three. It's roughly 80,000 barrels of oil equivalent. So a good run rate and largely unaffected. by these recent events. So it's really been quite contained to just simply this N3 asset. And naturally, as you'd expect, Qatar Energy QE executed a very controlled ramp down and ultimately largely a shutdown across most of their trains there at Rostlefon for both security and process integrity reasons, but also because clearly, as Andy mentioned, with the straight close, there's just limited capacity, if any, to lift cargo. As QE disclosed, two trains were struck. those were not ours. And again, that took just under 12 MTPA off the market. And Qatar Energy has been quite explicit about the fact that they expect that to impact the global. Again, unaffected for us. And while it's easy to conflate the construction of NFE and NFS with the operation of those, they're really quite separate. And what we are pleased to see is despite the conflict, construction on NFE and NFS both has been progressing. Now, naturally, there has been and some impacts and some interruptions, but much different than operations. And so also while QE has disclosed that they do expect delays, it's a bit premature to provide really strong guidance on just specifically to be to the tune of months. We'll call QE guided on a second half of this year's startup, and so it could be possible certainly that that extends into the early part of next year. So, again, we chose to simply guide on production for the company on 2Q. Removing that from guidance certainly felt like that was best in terms of clarity for all. And then we'll be watching this closely as both construction and our own production we continue to involve.

Operator

Our next question comes from Bob Brackett from Bernstein Research. Your line is now open.

Bob Brackett, Analyst — Bernstein Research

Good afternoon. Apologies for a bit of an educational question, but there's a couple topics that I'm working on educating folks, and you may help. One is just the idea of 101 on price realization, especially as they pertain to timing, given the very sharp moves in crude price we've seen. And the second would be a bit of 101 around the engineering of shut-ins. You guys have certainly a 2020 track record of understanding that stuff. shut-ins and the potential long-term impacts to production. I'd appreciate that.

Andy O’Brien, CFO

Okay, Bob, Andy here. I'll start with maybe the first part of that question on pricing. I'm looking forward to reading your report on this because you can probably teach us a thing or two as well. But maybe I'll describe it from sort of our perspective from ConocoPhillips, and hopefully that's helpful. And I'll let Ryan maybe talk about the other parts of your question. So in terms of sort of, I think it might be if I answer your question from the pricing, really from our portfolio perspective, and then you can infer from that. When you think about our portfolio, we're in a situation where about 40% of our crude volume is linked to either, and conveniently that's split pretty equally between the two. And then specifically to what we're linked to and how the pricing works, the international crude oil volumes, they're mainly linked to date-rented pricing, which you've been seeing. I think everyone's now talking about dated and ICE like we haven't done in a long time. But you're seeing basically how the dated Brent basically has been trading at a premium to ICE, so more the physical to ICE. Now, on the A&S side of things for us, A&S is effectively priced off of ICE Brent. So we basically have a bit of a 50-50 split between the two. But with a lot of Brent lag, specifically to your question around then, you do see a bit of a lag basically in terms of when do you see the cash versus when do you see the earnings related to these things. So you'll see it flow through the earnings first obviously, but with the lag basically in timing of when the cash actually comes in, and that varies basically market to market for us. But, you know, you'll start to see sort of the cash more meaningfully come in sort of, you know, a month or so later. So that hopefully helps to explain our exposure to sort of it and sort of maybe helps you sort of understand sort of how the importance of whether we're on dated or whether we're on. I am going to take an opportunity while you ask the question. I think there's another point that sometimes gets lost in all of this quarter. But, yes, we've got that global exposure, and that's really important. But I also want to sort of just mention on our realizations that, you know, we have a large lower 48 component as well, which is obviously priced off the WTI. And, you know, we were really pleased with the realizations we were getting on our WTI. I think we had about a 98% realization this quarter. And that might get a bit lost when you look at our total company realization when it all gets mixed together. Because when you mix it all together, you had three or four things happening with, You saw the WTI to Brent diff really, really expand out to about $9 a barrel. And then, obviously, you've got the timing of the sales that we have in places like Norway. But it is a pretty complicated set of moving parts right now. And there's going to be some timings between cash and earnings that are going to take a month or two to sort of all start to line back up.

Ryan Lance, Chairman

I guess some of our experience would be don't have direct experience with a lot of the Middle Eastern assets, Saudi and UAE and others, but probably similar to what we have on the North Slope, high permeability assets would be coming back to pretty much full capacity minus any surface constraints or issues that were created as a result of damage that they might have above ground. But in some of these, you know, you have to ask here, are they keeping the water flood going while they're shutting in? If that's the case, they're probably building pressure and you probably get some flush production. Very, very high level, huge supply impact or damage, damage to them.

Operator

Our next question comes from Josh Silverstein from UBS. Your line is now open.

Josh Silverstein, Analyst — UBS

Thanks, everyone. I wanted to get an M&A update from you guys, maybe more from a divestiture angle. You know, I know you guys are very resource-rich, as you mentioned, and you do have an ongoing divestiture program. I was just curious if these non-core assets, are you seeing strengthening valuations for these right now, given the higher pricing? Does it make you want to be more aggressive in selling assets into this market? And then maybe just an update as to how you're thinking about, you know, the part of third phase one, you know, equity stake that you have in there on the divestiture front.

Andy O’Brien, CFO

I can take that question. So, you know, probably worth just putting our divestative program that we've announced sort of in context. You know, we'd announced a $5 billion program and $3 billion of that's already behind us. So there's about $2 billion of the program that's to go. And I would really very much put this in sort of the business as usual for us. I think it's, you know, I'll say because I think it's out there in the public markets and being talked about a lot. You know, we do have, you know, a daily room open in the Permian right now. And, you know, we've got a couple of, you know, packages in that. And, you know, but this, it's really important when we think about this. It's not, the Permian is not one sort of big thing. You know, it's, you know, it's a collection of assets within a basin. And, you know, these are assets that we would consider within the Permian that are, you know, non-core to us. Probably something that we wouldn't get to in, you know, in 10 to 15 years, given the depth of our inventory. and of course we are seeing a lot of interest in that but I think it's very, very important to emphasize and I think our track record will show this that we are not going to be schedule driven by this we won't sell anything that we're not getting full value for so we'll go through a process and if we get offers for full value for non-core assets that we're not going to develop for a while we'll certainly take a look at it but it's very much around the edges and just the usual portfolio-type cleanup work that we always do. And then to the last part of your question on, you know, Port Arthur Phase 1, you know, we're kind of in a perfect situation here where we certainly don't need to sell anything. That asset is being de-risked every day as it comes closer to first production, and, you know, we'll have that asset online in, you know, in 2027, so, you know, we can't wait to see that happen. And I think everything that's happened in the Middle East has just reemphasized sort of the importance of having these secure assets that we have in our portfolio. So, you know, maybe a day will come in the future where, you know, we get an offer that basically, you know, it fits into sort of an infrastructure type investment. But we're certainly under sort of no need to basically sell that asset. And I can't really see why we would contemplate that while it's still under construction. and we'd rather get it on. And, you know, maybe in the future, you know, it isn't cool, but nothing there that I would say that we're not happy with.

Operator

Our next question comes from Philip Youngworth from BMO Capital Markets. Your line is now open.

Phillip Youngworth, Analyst — BMO Capital Markets

Thanks. Your money position has a lot of resource and you've had better results than some of the offset operators up there. Just wondering what's the appetite or valuation creation opportunity to add to this liquids-rich position where others might not have the same technical understanding or operational capabilities? And separately, could Canada at all fit into the LNG octake strategy if you were to target the high end of 10 to 15 MPPA?

Kirk Johnson, Analyst — Other

Good question on Montney. I'm getting to see some really smart Montney assets. We've been in the appraisal phase. We are admittedly still in what we would describe as early development. It's quite unique to the basin. All of the optimizations that we're able to reap from our mature and very distinguished position here in the lower 48, we've been running roughly one rig and expect to continue in a very similar pace and fashion because, again, the lower 48, when we naturally pair up really strong crews, whether it be drilling and completions with each other, we too are seeing some really strong performance across the two. Again, because it is so strong, 50% liquids, NGLs, and we're able to take advantage within that liquids market of each one of those. And so it's a very competitive resource. Naturally, we do, in fact, because we have such a strong position and we've been seeing such good performance, we're watching the opportunities. We watch the landscape, but certainly as it relates to M&A or BD work, we'll be smart about this. And if we see there's an opportunity that creates a lot of synergies for us, naturally we'd entertain that. And then, of course, on the gas side, you know, because we are so dominant in the liquids position, this is not a major driver for us. And, in fact, we're naturally hedged to some degree because we use fuel gas. We use the gas directly operations there in the oil sands. So I would say we're encouraged to hear that there are plans for the next LNG offtake coming out of Canada. We'd like to see Canada bringing much more scope and scale at a better pace there. Plans are certainly dependent on offtake to get very aggressive in the Montney with our own development plans. We're going to need to see a call on those barrels and on that gas and more offtake coming out of BC. So, again, I would just say this is something for us to watch carefully, and we'd like to see some more progress by those who are maturing those projects.

Andy O’Brien, CFO

Maybe I'll just quickly jump in there as well, very directly from a commercial energy perspective. We'd be very happy to have a bit more offtake on the West Coast. But just like our EMP portfolio, we know cost of supply, liquefaction fees basically drives everything. And, you know, as we look at it, you know, if there's competitive liquefaction fees, you know, from expansions that happen and new projects in Canada, we'd certainly want to take a look at that, just like we'd like to look at, you know, offtake from many other locations. So, yeah, I think having some West Coast offtake wouldn't be a bad thing in our portfolio.

Operator

Our next question comes from Alistair Syme from Citi. Your line is now open.

Bob Brackett, Analyst — Bernstein Research

Thank you very much. I wonder if I can get you to talk to the attractiveness of incremental capital of the Delaware versus refrac opportunities in the Eagleford. How would you compare and contrast those? Thank you.

Nick Olds, Analyst — Other

So if you look at the Delaware and the Eagleford, obviously they're quite different, but on the refrax in the Eagleford, we do typically do 50 or 60 in a year. You can think about you can execute one for about 60% of a development well and get a 60% uplift on that original completion on your EOR. So in that case, you're looking at kind of mid-$30 cost to supply to upper 30 for refrax. If you then go to the Delaware, which is some of our lower cost of supply, you're executing currently kind of the low 30s to mid 30s. So from an overall, Delaware will have a stronger overall return than a refrac, but they're very, very close. We're talking probably $2 to $5 a cost supply difference. So very, very, very competitive in the portfolio between those two opportunity sets.

Operator

Our last question comes from Kevin McCurdy from Pickering Energy Partners. Your line is now open.

Kevin McCurdy, Analyst — Pickering Energy Partners

Hey, good morning. Looking at the updated capital program this year, you addressed the Permian activity earlier, but on slide five of your deck, you show some potential variance in regard to the macro Middle East uncertainty. Can you expand on that a little bit? Would this just be deferred Middle East spending? Are there any other considerations represented in that chart?

Andy O’Brien, CFO

I think it's really a range of uncertainty on what NFE and NFS capital during the year. I think Nick also covered one of the other uncertainties, and Ryan covered that we don't know exactly what's going to happen on the non-operated side in the lower 48, but we're not going to, as we described, we're not going to put ourselves in a situation where if we get balloted that we won't participate in low-cost supply projects. So I would just take it as a general uncertainty bar right now in a very uncertain world, basically.

Operator

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