Agenda Value Proposition for a Disciplined, Strategic Flexibility Returns-Focused E&P Matt Fox Ryan Lance EVP, Strategy, Exploration & Technology Chairman & CEO Financial Priorities Closing Comments Don Wallette Ryan Lance…
Value Proposition for a Disciplined, Returns-Focused E&P Ryan Lance Chairman & CEO
The Question Were Going To Address Today Can an E&P company create value through price cycles with a disciplined, returns-focused value proposition 140 Brent Price (/BBL) Our Answer, Yes. Starts with a view that prices will be…
Value Proposition on a Page Clear Priorities, No Waiting Value Proposition Principles Cash Allocation Priorities Acceleration Actions Invest capital to maintain 3B share repurchase Strong 1st production and pay existing…
Strategy on a Page Disciplined and Resilient, Yet Flexible 60/BBL Value-based cash flow allocation Maintain discipline on costs and capital Strong balance sheet Our goal is to deliver 50-60/BBL Cash flow allocations balanced…
The Case For ConocoPhillips Transformation Acceleration Differentiation Reduced breakeven price 5-8B asset sale program Focused on free cash flow from 75/BBL…
What Youll Hear Today Don Wallette Low breakeven price drives free cash flow generation Advantaged capital intensity versus peers Financial Priorities Viable plan for debt reduction Priority on distributions via dividend and…
Financial Priorities Don Wallette EVP, Finance, Commercial & CFO
Disciplined, Returns-Focused Strategy Tied to Financial Priorities Generate Generate free cash flow Low breakeven price Free Cash Flow Low capital intensity Differential upside as prices recover Maintain a Strong Maintain a…
In a Commodity Business, a Low Breakeven Price Wins…
Low Capital Intensity is a CFOs Best Friend Replacing Base Decline Relative Capital Intensity Generate Free Cash Flow ADVANTAGE FROM LOW CAPITAL…
You Call It Torque; We Call It Peer-Leading Upside Generate Free 2016E CFO vs. 2017E CFO Consensus 2016E vs. 2017E Consensus Cash Flow 200% 10% GREATEST UPSIDE TOP-TIER IMPROVEMENT 180% TO PRICE RECOVERY ROCE & DEBT-ADJUSTED…
A Strong Balance Sheet is NOT Optional Generate Free Strong balance sheet is a competitive advantage in a cyclical Cash Flow business Target A credit rating provides sufficient debt capacity for delivering strategy through…
We Have a Sensible, Executable Plan to Achieve Debt Target 5-Year Maturity Schedule Total Balance Sheet Debt Generate Free 7B Cash Flow 5 TARGET ACHIEVED DEBT REDUCTION WITHIN 3 YEARS Maintain 4 a Strong Flexible Balance…
Our Dividend is Set at a Competitive Level That Can Grow Generate Yield of Dividend-Paying U.S. E&Ps Free Cash Flow Current dividend can withstand low prices, with room for annual increases S&P 500 Maintain Targeting annual…
Buybacks Reinforce Discipline and Boost Payout Generate 2017-2019 Cash Sources and Uses Free Cash Flow Demonstrates a commitment to distinctive distributions CFO 50/BBL Choices Brent Boosts current distribution Maintain a…
Returns Matter. A Lot. Generate Absolute Improvement in ROCE Free Consensus 2016 to 2017 Cash Flow Differential improvement in returns 7% as prices recover 7% Maintain 6% Significant, sustainable cost a Strong Balance 5%…
Financial Priorities Make ConocoPhillips Truly Distinctive Managing the business to generate free cash flow Low breakeven price Low capital intensity Significant upside as prices recover Viable plan to strengthen balance sheet…
Portfolio Choices Al Hirshberg EVP, Production, Drilling & Projects
Not That Long Ago We Were in 28 Places Canadian Arctic Greenland Chukchi Beaufort Alaska Russia Norway U.K. Canada Newfoundland Kazakhstan Poland Nova Scotia U.S. Lower 48 Libya Algeria China Gulf of Mexico Qatar…
Now We Are in About Half the Places Alaska Norway U.K. Canada U.S. Lower 48 Libya 16B IN Gulf of Mexico Qatar China PROCEEDS FROM 2012-2016 ASSET SALES Malaysia Brunei Colombia 50% Indonesia REDUCTION Timor-Leste…
Asset Sale Program is Focused on Improving Mix and Margins Portfolio Product Mix NA Gas Accelerating annual 1-2B of asset sales NA Gas NA Gas Strategic decision to drive returns Intl Gas improvement through product mix shift Intl…
Growing Where Were Planted More Low Cost of Supply…
Fully Burdened Cost of Supply: Everything Including the Kitchen Sink Fully Burdened Cost of Supply by Component (/BBL) Cost of supply represents the flat, real commodity price that yields an after-tax return of 10% on a point-…
Match This: 18 BBOE…
Power of Diversification: Three Asset Classes, Each Serves a Role Stay-Flat Capital 18 BBOE Resources Per Year Production Over…
LNG and Oil Sands: Big and Stable with Price and Technology Upside Greater Sunrise Barossa Fort Caldita McMurray Bayu-Undan North Field Poseidon Darwin Surmont LNG GladstoneAPLNG Qatargas 3 LNG Ras Laffan Australia Christina…
APLNG: Project Exceeding Expectations; All Aboard Train 2 APLNG APLNG Net Production Train 1 performance exceeding design (MBOED) nameplate capacity Australia 100 Train 2 first production achieved in 80 September 2016 60 20-year…
Darwin LNG: Strong Performance and Bright Future Multiyear improvement in production capacity through optimization and minor debottlenecking DARWIN LNG Improved uptime with no additional capital expense BACKFILL Maximizing capacity…
Surmont: Tomorrows Legacy Asset is Now Ramping Up Megaproject Complete Ramping Up Production Flow Control Devices (FCD) Accelerating Production 80 0.3 Cum. Production (MMBOE) Net Production (MBOED) 100% INCREASE 60 CUM. OIL…
Surmont: Picture This Reducing Footprint & Cost 33
Oil Sands Technology: Unlocking 13 BBOE Resource with 50/BBL CoS 2016 - 2017 Non-Condensable Gas (NCG) Co-Injection Pilot Efficient Steam Generation and Distribution Non-Reservoir Reduce heat losses Overburden to overburden Steam…
Power of Diversification: Predictable LNG and Oil Sands Portfolio 18 BBOE Resources Production Over…
Conventional: The Good Great Stuff No One Asks About Conventional Resources 50 6 BBOE…
New Conventional Projects: Low-Risk, High-Value, Weve Got It Alaska CD5 / DS-2S 1H NEWS / GMT1 GMT2 Europe Ekofisk South Clair Ridge Aasta Hansteen Tor II 130 MBOED INCREMENTAL PRODUCTION APME Bohai / Gumusut Malikai Bohai 3 Suban…
Alaska: 40% Cost of Supply Reduction Spurs New Activity CD5 Project Cost of Supply1 (/BBL) Shifting to performance-based contracts Improving operating efficiency through integrated planning and execution 66 Collaborating with…
Norway: 50% Cost of Supply Reduction on Future Projects Future Projects Cost of Supply1 (/BBL) Minimum facility concept significantly reduces cost 50% and improves project economics DECREASE IN FULL-CYCLE COST OF SUPPLY1…
China: 50% Cost of Supply Reduction Through Continuous Improvement Bohai WHP-J Project Cost of Supply1 (/BBL) 50% DECREASE Capturing structural and cyclical cost savings IN FULL-CYCLE COST OF SUPPLY1 Fit-for-purpose project…
Power of Diversification: Low-Risk Conventional Portfolio Production Over Time 18 BBOE…
Unconventional: This Will Surprise You NPV of Unconventional Plays vs. Competitors1 Montney ConocoPhillips Falher- Wilrich Anadarko EOG Resources Bakken Devon Energy ExxonMobil Pioneer Natural Resources Niobrara Chevron…
Eagle Ford: Match and Raise Our Eagle Ford is Best in Class Significant Remaining Resource with Low Cost of Supply ConocoPhillips Eagle Ford Acreage Position Optimal Optimal 3 BBOE T TeE xX AaS s Gonzales Spacing & Completions…
Eagle Ford: Structural, Not Cyclical, Cost Reductions Integrated Operations Faster Drilling with Advanced Analytics Increasing workforce productivity with technology integration 50% REDUCTION DRILLING DAYS Smart field enables…
Eagle Ford: Advanced Technical Analysis Increases EUR and Returns Pilot Stimulated Rock Volume (SRV) Time-Lapse Geochemistry What We Utilized cores, image logs, in-well and cross- Gathered extensive database of oil samples over past…
Eagle Ford: NPV of Learning Curve NPV of Acceleration Customized Spacing and Stacking to Geology 2014 vs. 2016 Completion Design Testing the Austin Chalk 7.5 MMlbs 15.5 MMlbs Upper Eagle Ford Lower Eagle Ford 100 Clusters 300…
Eagle Ford: Measured Pace Pays Off Texas Gonzales Bexar Medina TEXAS Wilson De Witt Eagle Ford Frio Atascosa Karnes Goliad Bee La Salle McMullen Live Oak ConocoPhillips Acreage 3,500 REMAINING…
Eagle Ford: ConocoPhillips is Perennial Champ Lowest Cost of Supply Highest Liquid Rates per Well Highest NPV per Acre 45 140 70 Gross Operated Liquids Production per Well (BPD) 40 120 60 35 Average Breakeven Price…
Permian: We Have a Shiny Object, Too Competitive Permian Basin Position with 1 MM Acres NW Shelf and Midland Basin Central Basin Platform Midland 163 M net acres; 9 MBOED net production2 Basin Legacy conventional position and…
Delaware: 1.8 BBOE Resource and Just Getting Started Wolfcamp 1 -- 6 Month Cum. (MBOE) ConocoPhillips Focus Areas Coring Up Multi- 1.8 BBOE 80% Acreage for Zone Net Resource INCREASE IN 10,000 laterals…
Bakken: Increasing EUR While Driving Down Costs Lowest Well Cost/BOE1 Middle Bakken 300 2014-2015 Completion Optimization 40% Well Cost (/BOE) Cumulative Oil 200 INCREASE (MBO) 100 0 0 100 200 300 400 Days Online…
Western Canada: 1 BBOE Today, But Watch This Resource Grow 1 BBOE unconventional…
Future Unconventionals: Pipeline of Low Cost of Supply Possibilities Niobrara Cumulative Production vs. Time 100 M net acres Mid & Long Confirmed Cemented 2x Improvement (MBOE) Sustained performance from longer laterals Short…
Power of Diversification: Low-Risk Unconventional Portfolio 18 BBOE Resource Production Over…
Match This: 18 BBOE…
Strategic Flexibility Matt Fox EVP, Strategy, Exploration & Technology
Low Cost of Supply Portfolio = High-Return Investment…
Our Portfolio is Designed to Create Strategic Flexibility Production Over Time 5-Year Capital Flexibility 100% Exploration Unconventionals 40-50/BBL Flexible Development Multi-Year Conventionals Drilling Contracts…
Because Flexibility is Essential in an Uncertain World Potential Scenarios Scenarios describe broad sector environments Unrelenting Robust Unconventionals Recovery Each scenario embeds key drivers of supply and demand fundamentals…
Price Forecasts Through 2021 Reflect Significant Uncertainty Oil Price Projections General consensus around near- 100 term price recovery 90 Absolute price and degree of cyclicality varies Nominal /BBL Brent 80 70 Wide…
Flexible Strategy Delivers Across a Range of Prices 50/BBL 50/BBL 60/BBL 60/BBL 70/BBL Brent BrentPrice Price Brent Price Brent Price ALL PRIORITIES ACHIEVED 1st Priority Maintain Production AT 50/BBL BRENT WITH…
Uncertainty Compounded by Cyclicality Oil Price Projections Example to demonstrate viability 100 of ConocoPhillips strategy across a price cycle 90 Nominal /BBL Brent 80 70 60 50 40 30 2016 2017 2018 2019 2020…
Strategic Flexibility in Action: Oil Price Cycle Example Expected Performance vs. Priorities Example of Strategic Flexibility 1st Maintain through Price Cycle Achieved 15 Priority Production 2nd Grow Achieved Priority Dividend…
What to Expect from 2017-2019 with Acceleration Actions Leverage to Upside 50/BBL Cash Allocated to Maximize Total Shareholder Returns Brent Modest Growth Expected Accelerating Dispositions 3B Authorized Value Proposition…
We Have Transformed Our Strategy and Increased Strategic Flexibility Breakeven Price High Low Capital Intensity High Low Financial Debt 30B 20B Priorities Distribution Philosophy Dividend Dividend and Buybacks Portfolio Focus…
Our Strategy Is Distinctive, Interesting, Viable and Achievable Free cash flow generation with strong balance sheet and low breakeven price Financial Priorities Focus on absolute and relative returns Accelerating strategy with…
Closing Comments Ryan Lance Chairman & CEO
The Case For ConocoPhillips Transformation Acceleration Differentiation 70
Appendix
2017 Operating Plan Guidance Capital Production Adjusted Operating Costs 1,540-1,570 6.6B 5.2B 1,535-1,5451 5B MBOED MBOED 6B Europe Europe Europe Europe Alaska Alaska Alaska Alaska APME APME APME APME Canada Canada…
2017 Annualized Cash Flow Sensitivities Consolidated Operations1 Equity Affiliates2 (45-65/BBL Brent) (50-65/BBL Brent) Crude: Expect distributions from all equity affiliates at 50/BBL Brent/ANS: 105-115MM for 1/BBL change WTI:…
Current Marker Price Differentials at 50/BBL Brent ANS (Oil) NW Europe (Gas) 100% of Brent 70% of Brent 50/BBL 5.8/MMBTU Alaska Alberta BRENT Ref Point 50/BBL WCS (Oil) Oklahoma 70% of Brent Louisiana 35/BBL AECO (Gas)…
Investor Information Stock Ticker Investor Relations Contacts: NYSE: COP Telephone: +1 281.293.5000 Website: www.conocophillips.com/investor Ellen DeSanctis: ellen.r.desanctisconocophillips.com Andy OBrien:…
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