Sanford C. Bernstein Strategic Decisions Conference Jim Mulva Chairman & Chief Executive Officer June 3, 2010 New York, New York
Economic and Political Environment Longterm demand for hydrocarbons expected to increase Nearterm energy demand increasing as economy recovers Nearterm U.S. natural gas surplus, strong worldwide natural gas demand growth Refining…
Demand for Hydrocarbons World Energy Demand World Oil Demand 350 Renewables 120 Developing Million Barrels Oil Equivalent per Day Nuclear OECD 300 Coal 100 Natural Gas Million Barrels Oil per Day Oil 250 80 200 60…
Challenging Political Environment Increased fiscal take, higher taxes Climate change policy uncertainty Increased regulatory burden Restricted access Fuelspecific mandates Gulf of Mexico Macondo incident Facing an increasing…
Constrained IOC Access Reserves Today Many large resource countries Reserves held by not accessible by IOCs NOC reserves Russian companies (equity access) Some large resources 8% accessible at unattractive Full IOC 12% access…
ConocoPhillips Today 88 B Capital Employed International, integrated, major oil and gas company 7% 50 BBOE captured resources 25% E&P 64% 10 BBOE reserves R&M LUKOIL Chemicals 2.3 MBOED production Midstream Emerging…
Challenges for ConocoPhillips Exposure to N. America natural gas and refining Current ROCE below peer average Debt levels above target range Trading at discount to peer group Competition for new resources Balancing growth vs.…
Strategic Options Emphasize absolute production growth Fully invest in available opportunities Accept incremental projects with marginal economics Higher leverage, no share repurchases Significant restructuring Divest or spin out…
Key Strategic Objectives Upstream Exploit captured resource base 100%+ organic reserve replacement Grow production / share Strengthen exploration results Reduce operating costs Improve returns on capital Downstream Portfolio…
Near Term Initiatives Constrain capital program to highest return projects Execute 10 B twoyear asset sales program Reduce LUKOIL interest from 20% to 10% Reduce debt ratio to 20% Picture Increase distributions to…
Growth in Returns Improve portfolio via asset Capital Efficiency ROCE and CROCI sales program 25% ROCE CROCI Constrain capital / invest at 20% competitive F&D costs 15% Maximize asset uptime 10% Reduce operating costs 5%…
Asset Sales Program 10 B twoyear program 2010 Potential Dispositions Asset Mix: Syncrude (9% interest) 6 8 B Exploration & Production 2 4 B Refining, Midstream, Other REX Pipeline (25% interest) 10% of Lower 48, Western Key…
LUKOIL Sale of 10% Interest Maintain strategic alliance Maintain board representation / equity accounting Initiated open market sales in April 2010 Complete over 2010/2011 Tax efficient Proceeds used for share repurchase program…
Optimizing Debt Level NetDebttoCapital Ratio 35% Target 20% near term 30% 25% 20% Achieve 15% longer term 15% 10% 5% 90% fixedrate debt 0% COP TOT BP RDS CVX XOM 5.6% pretax interest rate Rating A AA AA AA+ AA AAA Improving…
Annual Dividend Increases COP Quarterly Dividend Growth Eight consecutive annual Quarterly dividend (cents/share) 55 increases w th 50 gro 47 d l iz e a nnu a 41 Current Yield = 4.4% 3.5 % 1 36 31…
Distributions 2004 to 2009 Total Distributions as % of Cash From Operations 100% Net Share Repurchase 90% Dividends 80% 70% 60% 50% Peer Average = 45% 40% 30% 20% 10% 0% COP CVX TOT RDS BP XOM Capacity to increase…
2010 / 2011 Sources and Uses of Cash B 60 50 5 40 10 24 30 6 5 8 20 35 5 7 10 10 20 0 Cash From Asset Sales Capital Available Debt Share Remaining Operations & LUKOIL Program & Cash Reduction Repurchase Cash Dividends Cash…
Continued Reduction in Costs Controllable Costs B Targeted Reductions B 14% Reduction 08 to 09 7% operational + 7% market 15 1.0 2010 Goal +5% operational reduction Corporate 0.5 Downstream Upstream 10 0.0 2010 Controllable…
E&P Overview Alaska North Sea Russia / Caspian 270 MBOED 390 MBOED 50 MBOED 6.0 BBOE Canada 2.3 BBOE 1.6 BBOE 290 MBOED 20.1 BBOE Lower 48 490 MBOED 4.4 BBOE Asia Pacific 170 MBOED 2.1 BBOE Total 2009 Production 1.85 MMBOED…
E&P Cash Margins /BOE 1year 3year 5year 25 25 25 20 20 20 15 15 15 10 10 10 5 5 5 0 0 0 CVX COP TOT BP RDS XOM CVX COP XOM TOT BP RDS COP CVX XOM TOT RDS BP Consistent delivery of top quartile margins Cash…
Discovered Resource YE2009 Resource by Product BBOE YE2009 Resource by Region BBOE Russia Middle East Caspian & Africa Asia Pacific Lower 48 Gas Alaska 37% Australia North Sea Liquids 63% Canada Arctic Canada Canada…
Proved Reserves Replacement Reserves Replacement % 2010 2014 Reserve Additions 200% Russia Exploration Caspian Middle East & Africa 150% Lower 48 Alaska Asia Pacific 100% Australia 50% North Sea Canada 0% 2005 2009…
Production & Reserves Growth Production MBOED Proved Reserves BBOE 2.5 Liquids Gas Dispositions 12 2014E 5yr avg. RRR 100 % 10 2.0 Dispositions LNG 8 LNG 1.5 Gas 6 Gas 1.0 4 Heavy oil Heavy oil 0.5 2 Oil Oil 0.0 0 2008…
E&P Production per Share Growth 0.56 BOE Production / share Returns focus creates short term production plateau 0.52 Share repurchases create nearterm production per 0.48 share growth 0.44 Longterm production growth 0.40…
2010 E&P Capital Program Capital B Major Projects 12 10 Other FCCL 8 partnership 6 Kashagan Surmont 2 Jasmine, 4 Clair Ridge & GEA2 2 Qatargas 3 0 APLNG 2008 2009 2010 Bohai II Malaysia Maintenance Major projects…
L48 & W Canada Portfolio Advantages Net Acreage Positions 000s 22 MM net acres with extensive optionality and limited lease expiries Horn River 100 2.5 BBOE net proved reserves Montney 170 WCG Deep (85% proved developed)…
L48 & W Canada Capital Programs 2010 Capital Spend = 1.9 B1 2010 Production 630 MBOED Offshore GOM Offshore GOM Bakken Other Panhandle Barnett Eagle Ford & other WCG conventional Permian Permian Eagle Ford WCG Other…
Western Canada Brit Cash Margins /BOE is h C o lum bia Horn River Albert 80 a Saskatchew an Northern Plains 60 40 36 Montney Elmworth 14 19 Deep Basin Grand Prairie 20 Kaybob Edson 0 1 Central Plains 2008 2009 2010E…
San Juan Cash Margins /BOE 80 60 40 23 20 17 11 0 1 2008 2009 2010E 2 O&O Taxes & other Cash Gas Oil COP leasehold Production MBOED Largest consolidated acreage position 250 and producer in basin 200 150 24% 24% 24%…
Permian Cash Margins /BOE 80 60 36 40 30 22 20 0 1 2008 2009 2010E 2 O&O Taxes & other Cash Gas Oil COP leasehold Production MBOED Longlife cash flow generation from 100 low decline, high liquids production 80 60…
Eagle Ford Capital MM Austin Chalk 800 Incremental 600 400 Reallocated1 200 0 2010 2011 2012 Gas Oil COP leasehold Production MBOED Premier shale play acquired at 300/ac 25 20 68% Well results exceeding expectations…
Bakken Cash Margins / BOE 80 60 52 45 40 32 20 COP minerals 0 1 2008 2009 2010E 2 O&O Taxes & other Cash Gas Oil COP leasehold Production MBOED Continued robust well results 25 20 COP operated rig count increasing to 5…
L48 & W Canada Resource Plays Cost of service (/MMbtu)1 COP acreage Other resource plays 10 1,300 M acres 3,300 M acres 170 M acres 240 M acres2 100 M acres 8 6 4 2 0 r le ie s r e ey an s…
L48 & W Canada Value Proposition Portfolio Returns (CROCI1) 30% 1.4 Generate cash for global growth Cash Contribution 1.2 25% 1.0 Provide capital optionality Indexed (2010 = 1) 0.8 CROCI 20% Capital Invested Deliver…
Canadian SAGD Production Growth MBOED (NBR)1 MBOED (NBR)1 140 2007 to 2014 350 2007 to 2019 Saleski CAGR 20% CAGR 20% (WI 100%) 120 Syncrude 300 (WI 9.03%) 100 250 80 200 Thornbury Surmont (WI100%) (WI 50%) 60 150 40…
Australia Pacific LNG APLNG Resource Maturation TCF Over 8 MM gross acres 35 30 25 3 LNG trains & existing contracts1 LNG marketing progressing 20 2 LNG trains & existing contracts1 15 Proposed Australian tax 10 Total…
Exploration 2009 Results 2010 Exploration Spending 1.3B1 Poseidon and Tiber significant discoveries Resource additions exceeded 2009 production ILX2 & other Step change improvement in finding costs Building deeper portfolio focused…
2010 Exploration & Appraisal Activity Alaska Chukchi Sea: Environmental North Atlantic & Europe and drilling studies UK & Norway: Central Graben HPHT MidNorway Eastern Canada: Laurentian basin Poland: Shale gas North America…
Gulf of Mexico COP Leases COP Producing Assets COP Exploration Activity 1% of COP 2009 production COP Refining Assets Lake Charles Alliance DEEPWATER HORIZON Drilling moratorium LOOP New regulations Magnolia Shenandoah…
Downstream Improvement Initiatives 2008 Solomon Operating Cost Peer Ranking Reduce operating expenses Alliance Material, service and s Billings supply costs ent Borger vem Ferndale Streamline organization m pro Humber g I…
Downstream Portfolio Management Asset sales Asset Sales1 B 5 B+ of assets sold since 2003 1.6 1 B in asset sales in 2010 1.2 Evaluating further dispositions 0.8 0.4 Implement portfolio options at 0.0 the right time and value…
Taking Decisive Action Sell assets and reduce debt Increase ROCE / CROCI 10 BBOE resources to reserves in 10 years Grow production per share 3% per year Increase distributions Closing the valuation gap 41
Sanford C. Bernstein Strategic Decisions Conference Appendix June 3, 2010 New York, New York
Definitions RESOURCE The company uses the term resources in this presentation. The company has estimated its total resources based on a system developed by the Society of Petroleum Engineers. The system classifies recoverable…
2010 Sensitivities MM 1/BBL Crude Worldwide E&P 150 Worldwide R&M (fixed & other coproducts) (fixed & other coproducts) (20) Net Crude Impact 130 1/MMBtu Natural Gas Worldwide E&P 600 Worldwide R&M (utilities) (utilities) (100)…
2010 Other Drivers Selected Items Estimates PreTax Expense Estimates Corporate: 1.2 B (aftertax) Turnaround costs: 0.5 B Pension funding: 0.7 B Exploration expenses1: 1.3 B US: 0.5 B DD&A: 9.2 B Intl: 0.2 B 1 Includes dry…
COP NonGAAP Reconciliations Consolidated COP 2008 2009 Earnings (loss) (16,998) 4,858 Less: Goodwill impairment 25,443 - LUKOIL investment impairment 7,410 - Impairments - other 1,292 729 Net gain on asset sales/share issuance (814)…
COP NonGAAP Reconciliations 2005 2006 2007 2008 2009 1 GAAP R&M U.S. Net Income - MM 3,329 3,915 4,615 1,540 (192) GAAP R&M U.S. Net Income - / BBL 3.31 3.95 4.96 1.76 (0.22) non-core earnings impacts - MM gains and (losses) on asset…
COP NonGAAP Reconciliations Consolidated COP 2009 GAAP ROCE 6% non-core earnings impacts - MM gains and (losses) on asset dispositions 87 asset impairments (729) tax legislation / regulatory / other 26 ROCE 7% Consolidated COP…
COP NonGAAP Reconciliations Lower 48 2008 2009 GAAP CFOA - MM 5,895 2,514 GAAP CFOA - / BOE 32.40 14.12 excluded GAAP items - MM asset impairments 620 5 non-cash working capital 96 (191) 1 non-working capital adjustments 53 83 E&P…
Major Projects Significant Project Gross Peak Start Current Project Region WI% Production Up (start date) Phase MBOED Golden Pass 12 Construction Lower 48 Eagle Ford 95 TBD1 Appraise Canada Christina Lake C 50 402…
Major Projects Significant Project Gross Peak Start Current Project Region WI% Production Up (start date) Phase MBOED Lower 48 Tiber 18 TBD1 Appraise Foster Creek F/G/H 50 902 Optimize Christina Lake D 50 402 Execute…
Major Projects Significant Project Gross Peak Start Current Project Region WI% Production Up (start date) Phase MBOED Prudhoe WRD1 36 20 25 Define ANS Gas 36 600 700 Appraise Alaska WNS Developments2 78 35 40 Define…
Major Projects Significant Project Gross Peak Start Current Project Region WI% Production Up (start date) Phase MBOED Kashagan 1 8 4501 Execute Kashagan 2 8 10501 Optimize Russia / Caspian Kalamkas 8 70 90 Appraise Aktote 8…
Major Projects Significant Project Gross Peak Start Current Project Region WI% Production Up (start date) Phase MBOED Gumusut 33 140 Execute Kebabangan 301 130 140 Define Malikai 35 60 70 Define Malaysia Ubah 35 30 50…
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