ConocoPhillips · NYSE:COP
ConocoPhillips — Howard Weil Energy Conference 2006
50 slides from ConocoPhillips's conference presentation, Mar 21, 2006
Slide 1: Howard Weil Energy Conference
Howard Weil Energy Conference New Orleans Jim Mulva Chairman and CEO March 21, 2006
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The following presentation includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Slide 3: Statement Regarding Potential Acquisition of Burlington Resources Inc.
Statement Regarding Potential Acquisition of Burlington Resources Inc. ConocoPhillips has filed a Form S-4, Burlington Resources has filed a proxy statement and both companies will file other relevant documents concerning the proposed merger transaction with the Securities and Exchange Commission (S
Slide 4: General Energy Market Factors
General Energy Market Factors • Industry exploration opportunities diminished • Host governments offering less attractive terms • Intense competition for access to reserves • Producing countries investing in refining export capacity • Strong inflationary pressure on costs and capital 4
Slide 5: WTI Oil Price
WTI Oil Price $/BBL 65 55 45 2006 consensus $58.17 / BBL 35 25 15 5 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: Platt’s; 2006 data through the end of February; First Call consensus as of March 6, 2006. Note: Bars represent the range of monthly averages for each year; solid line re
Slide 6: Henry Hub Natural Gas Price
Henry Hub Natural Gas Price $/MMBTU 14 2006 consensus $8.67 / MMBTU 12 10 8 6 4 2 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: Platt’s; 2006 data through the end of February; First Call consensus as of March 6, 2006. Note: Bars represent the range of monthly averages for each yea
Slide 7: Gulf Coast Crack Spread
Gulf Coast Crack Spread $/BBL 30 $15.64 / BBL 25 3/16/06 20 15 5-year average $5.93 10 5 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: Platts; 2006 data through end of February. Note: Bars represent the range of monthly averages for each year; solid line represents the annual aver
Slide 8: The Oil Supply Challenge
The Oil Supply Challenge Baseline assumption for 120 Alternative rates of World oil demand growth 2.0% 110 demand growth 1.6% 100 1.0% 90 Million 80 Capacity additions Barrels Per Day 70 More than 65 60 MMBD in capacity needed 50 by 2020 40 30 Existing production 20 10 0 2004 2006 2008 2010 2012 201
Slide 9: U.S. Natural Gas Supply & Demand Balance
U.S. Natural Gas Supply & Demand Balance The U.S. market will likely be tighter than the rest of the world 30 81 27 Billion Cubic Feet per Day Demand 71 Trillion Cubic Feet Widening 24 gap 61 21 Lower-48 Production 51 18 15 41 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 201
Slide 10: Global LNG Supply
Global LNG Supply Atlantic Pacific 30 Potential Committed 25 Existing 20 Existing & Tillion Cubic Feet committed 15 Global demand 10 5 0 2005 2010 2015 2020 Source: CERA Global Liquefaction Capacity Inventory (January 2006) 10
Slide 11: Refining Capacity Utilization
Refining Capacity Utilization Percent Utilization 2005 100 U.S. 90% 90 Northern Europe Asia 80 70 1990 1993 1996 1999 2002 2005 2008 Source: Purvin & Gertz Summer 2005. 11
Slide 12: Global Demand Growth vs. Refinery Capacity Additions
Global Demand Growth vs. Refinery Capacity Additions Average Product Demand Growth 1,500 Average Global Refining Additions Thousand Barrels per Day ? 1,000 500 ’95 to ‘99 ’00 to ‘04 ’05 to ‘09 Strong demand growth outpacing capacity additions Source: Petroleum Economics Limited, 2005 12
Slide 13: Summary of Outlook
Summary of Outlook • Higher mid-cycle oil prices than in 1990s – Higher demand growth – Little excess production capacity – Higher replacement costs • Higher mid-cycle U.S. natural gas prices – Higher oil prices / coal prices – Higher domestic replacement costs • Tightness in LNG market through end
Slide 14: Meeting the Energy Challenge
Meeting the Energy Challenge • Investing for growth – Conventional business lines – Global LNG, heavy oil – Refining / infrastructure – Alternative fuels • Legislative / Regulatory – Expedited expansion / upgrades of existing capacity – More efficient permitting process – New refineries / LNG regas
Slide 15: 2005 Highlights
2005 Highlights 1.56 MMBOED E&P Production Excl. LUKOIL 0.25 MMBOED from LUKOIL Net Income $13.5 B Closed Timan-Pechora JV Finalized DEFS Restructuring Cash From Stock Split / Dividend Increase Operations $17.6 B Hurricane Impacts Wilhelmshaven Refinery Purchase Burlington Resources Transaction Debt
Slide 16: Return on Capital Employed
Return on Capital Employed Certain Transactions Adjusted for Purchase Accounting 35% Peer Group COP 30% 25% 20% 15% 31% 23% 10% 15% 5% 0% 2003 2004 2005* GAAP ROCE 10% 15% 22% Adjusted ROCE 15% 23% 31% See Tables 1 - 3 for non-GAAP reconciliation * Excludes DEFS Restructuring 16
Slide 17: Cash Use Comparison
Cash Use Comparison 2005 100% 80% 60% 40% 20% 0% COP TOT CVX RDS XOM BP Capex Net Debt Reduction Net Share Repurchase Dividends Note: CVX percentages exclude purchase of Unocal. 17
Slide 18: Burlington Update
Burlington Update • Announced BR acquisition on December 12th, 2005 • Additional key levels of management named on February 23rd for Upstream Americas and retention plans established to assure that key employees remain with the company • Required regulatory waiting period/approvals complete • Form S
Slide 19: Corporate Strategy
Corporate Strategy • Build on international scale and integration • Grow E&P portfolio • Grow R&M position • Use Commercial expertise to create value from integration and asset position • Move to AA credit rating • Manage cost and capital discipline • Utilize strengths in people, technology, and fin
Slide 20: Strategic Objectives
Strategic Objectives Target 1 ROCE 2 Competitive with Peers Debt ratio 15% - 20% 65% - 75% in E&P Portfolio balance 20% - 25% in R&M 3% - 5% in Midstream / Chemicals Production 3 3% long-term growth OECD at 65% - 70% of total 4 5-year reserve replacement 100%+ 1 After BR acquisition. 2 ROCE with cer
Slide 21: E&P ROCE
E&P ROCE Certain Transactions Adjusted for Purchase Accounting Peer Group COP 50% 40% 30% 20% 41% 42% 35% 36% 33% 27% 28% 29% 10% 0% 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 Avg WTI, $/BBL 35.23 38.31 43.86 48.29 49.70 53.03 63.05 59.99 Henry Hub, $/MCF 5.69 6.00 5.75 7.07 6.27 6.74 8.53 13.00 COP E&
Slide 22: Investing in Growth
Investing in Growth 1 Sunrise Caldita Suban II Brass LNG ANS Gas Bayu-Undan Qatargas 3 LNG Mackenzie Delta Kerisi / Hiu Plataforma-Deltana Shtokman2 North Belut Corocoro I Suban III Kashagan II Bohai Phase II Kashagan Sat’s Yuzhno Khylchuyu Kashagan I Corocoro II & III Libya Su Tu Vang West Qurna We
Slide 23: Major U.S. Gas Supplier
Major U.S. Gas Supplier Delivering gas to the U.S. from various supply sources Arctic • #1 in N. A. gas production Gas • 50% owner in DEFS • A leading gas marketer • Developing multiple LNG projects and re-gasification capabilities • Major existing positions in both Alaskan North Slope gas and Macke
Slide 24: North America Gas Production
North America 2004 Gas Production 4000 3500 Production, MMCFD 3000 2500 2000 1500 1000 500 0 COP XOM BP ECA CVX DVN RDS COP APC BR plus BR Note: Production figures are based on YE 2004 Filings. COP volumes do not include fuel gas production. CVX pro forma for UCL. 24
Slide 25: Long-Term Growth Production Profile
Long-Term Growth Production Profile CAGR ~3% 3,000 2,500 377 2,000 MBOEPD 353 246 1,500 1,562 1,650 1,000 500 0 2005 2006 2007 2008 COP LUK BR Note: Production is company estimates. 2006 includes 9 months of BR production. LUKOIL average equity is assumed at 13% in 2005, 18% in 2006, & 20% thereafte
Slide 26: R&M ROCE
R&M ROCE Certain Transactions Adjusted for Purchase Accounting 45% Peer Group 40% COP 35% 30% 25% 43% 20% 35% 33% 15% 29% 25% 26% 10% 23% 17% 5% 0% 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 Avg WTI, $/BBL 35.23 38.31 43.86 48.29 49.70 53.03 63.05 59.99 Henry Hub, $/MCF 5.69 6.00 5.75 7.07 6.27 6.74 8.
Slide 27: $4B to $5B U.S. Investment Program
$4B to $5B U.S. Investment Program E&P Integration (MBPD) Crude Capacity (MBPD) 2,410 2,180 +230 580 +380 200 Current Future Current Future Advantaged Crude Capability (MBPD) Clean Product Capacity (MBPD) 2,100 1,640 1,800 +300 1,175 +650 Current Future Current Future Incremental crude capacity incl
Slide 28: Commercial
Commercial • Scope - 2.5 B BBL/yr crude oil and refined products - 4.5 – 5.0 TCF/yr gas marketing business - Global trading operation • Objectives - Optimize value chain to maximize earnings - Trade around asset base & market knowledge for additional value • Financial contribution - Improves total c
Slide 29: Chevron Phillips Chemicals JV
Chevron Phillips Chemicals JV Net Income1 ($MM) CVX – 50%, COP – 50% 323 300 • Improving ROCE 249 - Margin improvement - Solid operations 150 - Cost efficiencies 7 • Overseas Growth 0 - World-scale facilities (14) - Advantaged feedstocks (128) - Access to growing markets -150 2001 2002 2003 2004 200
Slide 30: Duke Energy Field Services JV
Duke Energy Field Services JV Net Income1 ($MM) DUK – 50%, COP – 50% 300 285 • Large NGL producer - 353 MBPD in 2005 200 - Focus on North America 143 • Improving ROCE 100 - Lower cost structure 72 - Rationalize portfolio 23 • Selective growth 0 2002 2003 2004 2005 1 Net Income to COP, 2005 excludes
Slide 31: LUKOIL Update
LUKOIL Update • LUKOIL’s sole equity partner • 16.1% equity ownership1, moving to 20% • JV partner in Timan-Pechora • Jointly pursuing upstream and downstream opportunities globally • 2005 segment earnings of $714 MM 1 Equity ownership as of the end of 12/31/2005. Note: After BR acquisition. 31
Slide 32: Financial Strategy
Financial Strategy • Fund Growth Program • Move to AA credit rating – Debt reduction – Equity improvement – Target debt/capital ratio of 15-20% • Annual dividend increases • Share repurchases Note: After BR acquisition. 32
Slide 33: Debt Ratio Improvement
Debt Ratio Improvement 100 95 80 80 83 70 70 80 60 60 50 50 60 54 44 40 40 34 40 35 30 25.2 30 26 23 20 17.8 18.2 19 15.0 20 16 20 12.5 10 10 0 0 0 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 Equity* $B Balance sheet Debt to capital debt* $B ratio % * Based on First Ca
Slide 34: Cash Scenarios - 2006
Cash Scenarios - 2006 25 Debt Repayment CFOA + asset sales ($Billions) ($6.5B) 20 LUKOIL ($2.4B) 15 $23.7 B 10 $19.4 B $17.0 B Investing Activities ($14.7B) 5 Dividends 0 ($2.3B) Capex + dividend 2006 cash First Call breakeven breakeven 2006 Crude - WTI $41.48 $47.41 $58.17 Gas - HH $6.18 $7.07 $8.6
Slide 35: Outlook
Outlook • Burlington Resources integration • Libya exploitation • Qatargas 3 execution • ANS/Mackenzie Delta gas • Deep Bossier exploration / exploitation • R&M strategic investment program • Wilhelmshaven deep conversion Note: After BR acquisition. 35
Slide 36: Rising to the Challenge
Rising to the Challenge • Deliver strong operating and financial performance – Continued focus on Operating Excellence – Manage cost inflation and project execution • Well-defined, sustainable growth plan – Portfolio of strong E&P / R&M growth projects – Increased production and refining capacity /
Slide 37: Howard Weil Energy Conference
Howard Weil Energy Conference New Orleans Jim Mulva Chairman and CEO March 21, 2006 37
Slide 38: Appendix
Appendix Howard Weil Energy Conference March 21, 2006 38
Slide 39: Return on Capital Employed Adjusted for Purchase Accounting (2003)
Return on Capital Employed Adjusted for Purchase Accounting 2003 2003 by Segment Midstream, Emerging Adjusted for Businesses, Purchase Chemicals and GAAP ROCE Accounting E&P R&M Corporate Total Income from Continuing Operations 4,593 4,593 4,160 1,397 (964) 4,593 Add: Interest Expense 844 844 844 84
Slide 40: Return on Capital Employed Adjusted for Purchase Accounting (2004)
Return on Capital Employed Adjusted for Purchase Accounting 2004 2004 by Segment Emerging Adjusted for Businesses, Purchase Midstream and Lukoil and GAAP ROCE Accounting E&P R&M Chemicals Corporate Total Income from Continuing Operations 8,107 8,107 5,702 2,743 484 (822) 8,107 Add: Interest Expense
Slide 41: Return on Capital Employed Adjusted for Purchase Accounting (2005)
Return on Capital Employed Adjusted for Purchase Accounting 2005 2005 by Segment Adjusted for Emerging Purchase Midstream Businesses and GAAP ROCE Accounting* E&P R&M and Chemicals LUKOIL Corporate Total Income from Continuing Operations 13,640 13,640 8,434 4,256 1,011 714 (775) 13,640 Less: Impact
Slide 42: Return on Capital Employed Adjusted for Purchase Accounting (Q1 2004)
Return on Capital Employed Adjusted for Purchase Accounting First-Quarter 2004 First-Quarter 2004 by Segment Midstream, Emerging Adjusted for Businesses, Purchase Chemicals and GAAP ROCE Accounting E&P R&M Corporate Total Income from Continuing Operations 1,603 1,603 1,257 464 (118) 1,603 Add: Inter
Slide 43: Return on Capital Employed Adjusted for Purchase Accounting (Q2 2004)
Return on Capital Employed Adjusted for Purchase Accounting Second-Quarter 2004 Second-Quarter 2004 by Segment Midstream, Emerging Adjusted for Businesses, Purchase Chemicals and GAAP ROCE Accounting E&P R&M Corporate Total Income from Continuing Operations 2,013 2,013 1,354 818 (159) 2,013 Add: Int
Slide 44: Return on Capital Employed Adjusted for Purchase Accounting (Q3 2004)
Return on Capital Employed Adjusted for Purchase Accounting Third-Quarter 2004 Third-Quarter 2004 by Segment Midstream, Emerging Adjusted for Businesses, Purchase Chemicals and GAAP ROCE Accounting E&P R&M Corporate Total Income from Continuing Operations 2,011 2,011 1,420 708 (117) 2,011 Add: Inter
Slide 45: Return on Capital Employed Adjusted for Purchase Accounting (Q4 2004)
Return on Capital Employed Adjusted for Purchase Accounting Fourth-Quarter 2004 Fourth-Quarter 2004 by Segment Emerging Adjusted for Midstream Businesses, Purchase and Lukoil and GAAP ROCE Accounting E&P R&M Chemicals Corporate Total Income from Continuing Operations 2,480 2,480 1,671 753 183 (127)
Slide 46: Return on Capital Employed Adjusted for Purchase Accounting (Q1 2005)
Return on Capital Employed Adjusted for Purchase Accounting First-Quarter 2005 First-Quarter 2005 by Segment Adjusted for Emerging Purchase Midstream Businesses and GAAP ROCE Accounting* E&P R&M and Chemicals LUKOIL Corporate Total Income from Continuing Operations 2,923 2,923 1,787 700 518 110 (192
Slide 47: Return on Capital Employed Adjusted for Purchase Accounting (Q2 2005)
Return on Capital Employed Adjusted for Purchase Accounting Second-Quarter 2005 Second-Quarter 2005 by Segment Adjusted for Emerging Purchase Midstream Businesses and GAAP ROCE Accounting E&P R&M and Chemicals LUKOIL Corporate Total Income from Continuing Operations 3,131 3,131 1,929 1,110 131 148 (
Slide 48: Return on Capital Employed Adjusted for Purchase Accounting (Q3 2005)
Return on Capital Employed Adjusted for Purchase Accounting Third-Quarter 2005 Third-Quarter 2005 by Segment Adjusted for Emerging Purchase Midstream Businesses and GAAP ROCE Accounting E&P R&M and Chemicals LUKOIL Corporate Total Income from Continuing Operations 3,804 3,804 2,288 1,390 101 267 (24
Slide 49: Return on Capital Employed Adjusted for Purchase Accounting (Q4 2005)
Return on Capital Employed Adjusted for Purchase Accounting Fourth-Quarter 2005 Fourth-Quarter 2005 by Segment Adjusted for Emerging Purchase Midstream Businesses and GAAP ROCE Accounting E&P R&M and Chemicals LUKOIL Corporate Total Income from Continuing Operations 3,782 3,782 2,430 1,056 261 189 (
Slide 50: Financial Analysis Assumptions
Financial Analysis Assumptions 2006 2007 EPS COP First Call earnings 13,699 12,659 COP FD shares at 12/31/05 of 1,405 BR First Call earnings * 2,230 2,771 additional shares issued of 271 After Tax Incremental DD&A (598) (798) After Tax Incremental Interest Expense (339) (297) After Tax Synergies **