ConocoPhillips (COP): Earnings Up 128% - And The Oil Price That Did It Has Already Left

ConocoPhillips (COP) Q2 2026 — Q2 2026 (quarter ended June 30, 2026): adjusted diluted EPS $3.24 vs a ~$2.89 bar (+12%), up 128% y/y; GAAP EPS $3.23. Revenue $19.5B (+32.4%). CFO $7.4B, capex $3.0B, FCF $4.4B. Production 2,248 MBOED, DOWN 6% y/y. Realized $62.33/BOE, +36%. The 8-K was accepted 7:23 a.m. ET on Aug 6, so the $116.76 close IS the reaction - and the stock rose only 1.5% on a day Brent itself rose 4.9%. ConocoPhillips printed adjusted EPS of $3.24 against a ~$2.89 bar, up 128% year on year, with $4.4B of free cash flow in 91 days and the buyback doubled to $2.0B. It is one of the best quarters the company has ever reported and we say so repeatedly. Our disagreement is entirely about the barrel. Dated Brent averaged $104.52 in the quarter; it closed at $83.34 on the day of the print. We decompose the beat straight off Exhibit 99.2: price added $3,604M of revenue, volume gave $811M back - price is more than 100% of the beat. Then we regress six quarters of ConocoPhillips' own adjusted earnings against six quarters of dated Brent (r-squared 0.945, zero-earnings Brent $39.53) and feed it today's price: $2.21 a quarter, not $3.24. Weighting a $68 Brent bear at $83, a $78 Brent base at $119 and a $90 Brent bull at $140 gives fair value ~$112 against $116.76. Run it backwards and today's price needs $77 mid-cycle Brent; the Street's $138 needs $89. THE CALL: HOLD (3/5, A SUPERB QUARTER BOUGHT WITH A WAR PRICE THAT HAS ALREADY LEFT) — base-case value ~$112.0 vs ~$116.76 today. KEY METRICS: - CALL: HOLD 3/5, fair value ~$112 vs the $116.76 reaction close (-4%). Bull $140, base $119, bear $83. Street: 52 analysts, Buy, ~$138 avg target. Their $138 IS our bull case. - Adjusted EPS $3.24 vs ~$2.89 (+128% y/y); GAAP $3.23. Revenue $19.5B. CFO $7.4B, capex $3.0B, FCF $4.4B. Buyback doubled to $2.0B; share count -1.4% in one quarter. Net debt $15.6B, 0.6x EBITDA. - But: production fell 6% to 2,248 MBOED (Qatar). Brent averaged $104.52 in the quarter and closed at $83.34 on print day. Lower 48 realized gas was NEGATIVE $1.44/Mcf. What to watch: UP: Brent settling above $90 rather than fading; Lower 48 gas realizations turning positive as Permian takeaway comes on; the first $1B of the 2029 inflection showing up in reported FCF; distributions running above 45% of CFO. DOWN: Brent below $75 into the November print; Willow capital rising again from $8.5-9B; Kirkuk or Syria requiring real capital at a 75% tax rate; the buyback being cut back to protect the balance sheet. Also on YouTube: @ChargedAlpha DISCLAIMER: For informational and educational purposes only. Not financial advice. Do your own research before any investment decision.