How COP (ConocoPhillips) Makes Money in 2026: A Deep-Dive With Income Statement

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Understanding how a major integrated energy company like ConocoPhillips makes money is essential for investors and anyone interested in the business of oil and gas. In this post, we break down ConocoPhillips's quarterly income statement (Q4 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick ConocoPhillips Overview

ConocoPhillips operates as an independent exploration and production company focused on oil and natural gas, with assets across key basins worldwide. Revenue comes primarily from the sale of crude oil, natural gas liquids, and natural gas production. All revenue is categorized under "Other" in the segment breakdown for Q4 2025, reflecting consolidated upstream operations without granular geographic splits reported.

Revenue Breakdown

• Total Revenue (Q4 2025): $14.2B (-0.3% YoY)
  • Other: $14.2B (100% of total)
  • Growth is powered by stable production volumes amid fluctuating commodity prices, though slight YoY decline reflects market dynamics.

Gross Profit and Margins

• Gross Profit: $9.0B (63.4% gross margin)
  • Cost of Revenue: $5.2B (-48.2% YoY)
  • ConocoPhillips maintains robust margins due to favorable realized prices for hydrocarbons and significant reductions in production costs through operational efficiencies.
• Most costs come from lease operating expenses, production taxes, and gathering/transportation.

Operating Income and Expenses

• Operating Income: $2.3B (+0.0% YoY, 16.2% margin)
• Operating Expenses: $6.7B (+60.0% YoY)
  • R&D: Not applicable (N/A)
  • SG&A: $6.7B (+63.5% YoY, 47.2% of revenue) — Primarily general and administrative costs, including overhead for exploration activities and corporate functions.
  • ConocoPhillips continues to prioritize innovation in drilling technologies while expanding operations in high-return basins.

Net Income

• Pre-Tax Income: $2.3B (-22.6% YoY, 16.2% margin)
• Income Tax: $0.9B (39.1% effective tax rate)
• Net Income: $1.4B (-39.3% YoY, 9.9% net margin)
• ConocoPhillips converts a significant portion of sales into profit due to scalability in upstream operations and pricing power in energy markets.

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What Drives ConocoPhillips's Money Machine?

• Upstream hydrocarbon sales: 100% of revenue from oil, NGLs, and gas production across global assets.
• Production volumes and commodity prices: Key metric with realized prices driving topline amid cost controls.
• Exploration and development: Strategic investments in low-cost basins like Permian and Eagle Ford.
• Future growth areas: LNG projects and international expansions, though not yet profitable in isolation.

Visualizing ConocoPhillips's Financial Flows

The Sankey chart below visualizes how each dollar flows from gross revenue, through costs and expenses, down to net income. This helps investors spot where value is created, what areas weigh on profits, and how efficiently the company operates.

• Most revenue flows into gross profit, with operating expenses (especially SG&A) taking the largest chunk.
• Even after significant costs, 9.9% of revenue drops to the bottom line.

Key Takeaways

• ConocoPhillips's money comes overwhelmingly from upstream hydrocarbon sales
• High gross and net margins illustrate the power of ConocoPhillips's asset portfolio and cost discipline
• Heavy investment in exploration, balanced by efficiency in operating costs
• Ongoing growth is driven by production optimization and commodity price exposure

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FAQ About ConocoPhillips's Income Statement

1. What is the main source of ConocoPhillips's revenue in 2025?

ConocoPhillips generates over 100% of its revenue from upstream hydrocarbon sales under "Other". No significant geographic segments like Alaska, APAC, Canada, or EMENA contributed in Q4 2025.

2. How profitable is ConocoPhillips in Q4 2025?

ConocoPhillips reported net income of $1.4B in Q4 2025, with a net margin of approximately 9.9%, reflecting moderate profitability driven by strong gross margins despite elevated operating expenses.

3. What are the largest expense categories for ConocoPhillips?

The biggest expenses on ConocoPhillips's income statement are operating expenses, particularly Sales, General & Administrative (SG&A) costs. SG&A investment reached $6.7B in Q4 2025, as ConocoPhillips prioritizes exploration and global operations.

4. Why does Other operate at a loss?

Other, despite generating $14.2B in revenue, contributed to overall pressures after costs. This is because ConocoPhillips aggressively invests in production enhancements, believing these will drive long-term growth—even if margins face commodity volatility today.

5. How does ConocoPhillips's effective tax rate compare to previous years?

ConocoPhillips's effective tax rate in Q4 2025 was 39.1%, potentially higher than previous years. This high rate is primarily due to profitable operations in high-tax jurisdictions and limited tax benefits.