ConocoPhillips Earnings: Higher Production, Higher Realizations Boost Earnings 

Narrow-moat ConocoPhillips reported second-quarter adjusted earnings of $2.3 billion compared with $2.2 billion a year ago, slightly exceeding market expectations. The result was driven by higher production and greater price realizations than the year before. Production grew 4% from the year before, adjusting for acquisitions and dispositions. After a strong second quarter, management narrowed full-year production guidance from 1.91-1.95 mboe/d to 1.93-1.94 mboe/d. However, it increased capital-expenditure guidance to $11.5 billion from $11.0 billion-$11.5 billion previously, given progress on Willow and greater Lower 48 activity. It also raised operating expense guidance to $9.2 billion-$9.3 billion from $8.9 billion-$9.1 billion thanks to increased transportation and processing costs and inflationary pressures in the Lower 48. We plan to incorporate the updated guidance into our model but do not expect a material change to our $112 fair value estimate.