How COP (ConocoPhillips) Makes Money in 2025: A Deep-Dive With Income Statement

Welcome to the Value Sense Blog, your resource for insights on the stock market! At Value Sense, we focus on intrinsic value tools and offer stock ideas with undervalued companies. Dive into our research products and learn more about our unique approach at valuesense.io

Explore diverse stock ideas covering technology, healthcare, and commodities sectors. Our insights are crafted to help investors spot opportunities in undervalued growth stocks, enhancing potential returns. Visit us to see evaluations and in-depth market research.

Understanding how a leading independent oil and gas producer like COP (ConocoPhillips) makes money is essential for investors and anyone interested in the business of energy exploration and production. In this post, we break down COP's quarterly income statement (Q3 2025) using a Sankey chart to visualize the financial flows — what comes in, where it goes, and what's left as profit.

Quick COP Overview

ConocoPhillips (COP) operates as one of the world’s largest independent exploration and production companies, focusing on the discovery, development, and production of crude oil, natural gas, and natural gas liquids. Revenue comes primarily from the sale of hydrocarbons extracted from its global asset base, with major operations in the Lower 48 U.S. states, Alaska, Europe, the Middle East, North Africa (EMENA), and other international regions. The business is organized by geographic segments, each contributing to the company’s diversified revenue streams.

Revenue Breakdown

• Total Revenue (Q3 2025): $15.5B (+14.1% YoY)
  • Lower 48 Revenue: $10.5B (67.9% of total, +16.1% YoY)
  • EMENA Revenue: $1.58B (10.2% of total, +18.0% YoY)
  • Alaska Revenue: $1.44B (9.3% of total, -2.6% YoY)
  • Other: $1.96B (includes various international and miscellaneous sources)
  • Other International Revenue: $0.0B
• Growth is powered by higher commodity prices, increased production volumes in the Lower 48, and robust international performance, particularly in EMENA.

Gross Profit and Margins

• Gross Profit: $5.56B (35.8% gross margin)
  • Cost of Revenue: $9.96B (+6.0% YoY)
  • COP maintains robust margins due to efficient operations, scale in the Lower 48, and disciplined cost management.
• Most costs come from production expenses, transportation, and field operating costs.

Operating Income and Expenses

• Operating Income: $2.93B (-55.6% YoY, 18.9% margin)
• Operating Expenses: $2.63B (-27.8% YoY)
  • R&D: Not separately disclosed for Q3 2025
  • SG&A: $271M (+45.7% YoY, 1.7% of revenue) — covers corporate overhead, administrative functions, and sales support
  • COP continues to control costs and invest in operational efficiency, even as it faces volatility in commodity markets.

Net Income

• Pre-Tax Income: $2.93B (-9.5% YoY, 18.9% margin)
• Income Tax: $1.20B (41.1% effective tax rate)
• Net Income: $1.73B (-16.2% YoY, 11.1% net margin)
• COP converts a moderate portion of sales into profit due to its scale, operational efficiency, and prudent capital allocation.

What Drives COP's Money Machine?

• Lower 48 production: Drives 67.9% of revenue, underpinned by shale oil and gas output in the U.S.
• Production volumes: Higher output in core regions, especially the Permian and Eagle Ford, supports top-line growth.
• Strategic capital allocation: Investments focus on high-return projects in the Lower 48 and international assets.
• Future growth areas: Expansion in EMENA and continued technology-driven efficiency gains, though some regions (e.g., Alaska) face near-term headwinds.

Visualizing COP'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 production and field costs) taking the largest chunk.
• Even after significant costs and a high effective tax rate, 11.1% of revenue drops to the bottom line.

Key Takeaways

• COP's money comes overwhelmingly from Lower 48 oil and gas production
• High gross and net margins illustrate the power of COP's scale and operational discipline
• Heavy investment in production efficiency and international growth, balanced by tight control of SG&A costs
• Ongoing growth is driven by commodity price strength, production gains, and international expansion

Explore More Investment Opportunities

For investors seeking undervalued companies with high fundamental quality, our analytics team provides curated stock lists:

📌 50 Undervalued Stocks (Best) overall value plays for 2025
📌 50 Undervalued Dividend Stocks (For income-focused investors)
📌 50 Undervalued Growth Stocks (High-growth potential with strong fundamentals)

🔍 Check out these stocks on the Value Sense platform for free!

FAQ About COP's Income Statement

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

COP generates over 67.9% of its revenue from Lower 48 oil and gas production. Other significant sources include EMENA 10.2% and Alaska 9.3%, with additional contributions from other international operations.

2. How profitable is COP in Q3 2025?

COP reported net income of $1.73B in Q3 2025, with a net margin of approximately 11.1%, reflecting moderate profitability driven by operational efficiency and strong commodity prices.

3. What are the largest expense categories for COP?

The biggest expenses on COP's income statement are cost of revenue (production and field operating costs) and operating expenses, particularly SG&A, which reached $271M in Q3 2025 as COP prioritizes administrative efficiency and sales support.

4. Why does Alaska operate at a loss?

Alaska, despite generating $1.44B in revenue, faces margin pressure and posted a YoY revenue decline of -2.6% in Q3 2025. This is because COP continues to invest in maintaining production and infrastructure in the region, believing these assets will drive long-term value—even if the division is less profitable today.

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

COP's effective tax rate in Q3 2025 was 41.1%, higher than previous years. This elevated rate is primarily due to changes in geographic earnings mix and reduced tax benefits from international structuring.