ConocoPhillips · NYSE:COP
ConocoPhillips — Investor Presentation (May 2017)
37 slides from ConocoPhillips's investor presentation, May 2017
Slide 1: Investor Update
low breakeven price transformation SPIRIT Values smart growth Investor Update differentiation low cost of supply May 2017 acceleration superior returns flexibility
Slide 2: Cautionary Statement
Cautionary Statement The following presentation includes forward-looking statements. These statements relate to future events, such as anticipated revenues, earnings, business strategies, competitive position or other aspects of our operations, operating results or the industries or markets in which
Slide 3: Strategy on a Page – Disciplined and Resilient, Yet Flexible
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 • Cash flow allocations balanced $50-$60/BBL between distributions and double-digit total Brent organic gr
Slide 4: The Case For ConocoPhillips
The Case For ConocoPhillips Transformation Acceleration Differentiation • Reduced breakeven price • >$16B asset sale program1 • Focused on free cash flow from >$75/BBL to <$50/BBL funds additional debt generation and returns, not reduction and buybacks absolute growth • Lowered capital intensity to
Slide 5: The Plan We Presented in November Achieved All Priorities by 2019
The Plan We Presented in November Achieved All Priorities by 2019 Estimated Sources and Uses of Cash (2017-2019) at $50/BBL Brent Leverage Cash Allocated to Maximize >$50/BBL to Upside Brent Total Shareholder Returns Modest Growth Expected Accelerating Dispositions $3B Authorized Value Proposition S
Slide 6: Announced Transactions Achieves Priorities in 1 Year
Announced Transactions Achieves Priorities in 1 Year Estimated Sources and Uses of Cash (2017-2019) at $50/BBL Brent Leverage Contingent to Upside payment & >$50/BBL Cash Allocated to Maximize Additional Disps. Total Shareholder Returns San Juan Sale Modest Growth $6B Authorized Accelerating Canada
Slide 7: Disciplined, Returns-Focused Strategy Tied to Financial Priorities
Disciplined, Returns-Focused Strategy Tied to Financial Priorities Generate free cash flow • Low breakeven price • Low capital intensity • Differential upside as prices recover Maintain a strong balance sheet • Balance sheet a competitive advantage through the cycles; target ‘A’ credit rating • Viab
Slide 8: Prepared for Commodity Cycles
Prepared for Commodity Cycles Replacing Base Decline ~$30B <$4B Capital/Yr TO REPLACE Dividend BASE DECLINE Production $3.5B <$1B Capital/Yr Adjusted LOW-DECLINE TO SUPPORT Operating BASE PRODUCTION BASE PRODUCTION Costs $9.7B ~$12B 2017 2018 2019 2020 2021 ~$1.3B Relative Capital Intensity Capital
Slide 9: Reduce Debt to $20 Billion in 2017 and $15 Billion by 2019
Reduce Debt to $20 Billion in 2017 and $15 Billion by 2019 DELEVERAGING Maturity Profile ACHIEVED 6 Maturities retired by YE 2017 <$15B NET DEBT PLAN TO MAINTAIN NET 5 Potential maturities retired by YE 2019 DEBT ~$15B Retired at maturity 4 $27B 3 $B NET DEBT Gross Debt 2 $20B Gross ~$15B Debt Gross
Slide 10: Our Yield is Set at a Competitive Level That Can Grow
Our Yield is Set at a Competitive Level That Can Grow Shareholder Yield from U.S. E&P’s Dividend Yield + 2017 Announced Share Repurchases 2.2% 5.2% • Current dividend can withstand low prices, with room for annual increases • Targeting annual growth in per-share dividend rate • Dividend competitive
Slide 11: Returns Matter. A Lot.
Returns Matter. A Lot. Absolute Improvement in ROCE Consensus 2016 to 2017 • Differential improvement in returns 10% as prices recover 7% 5% • Significant, sustainable cost 4% reductions mitigate impact of lower prices 4% 4% • Returns grow even at flat prices 3% • Major project completions improve 3
Slide 12: Financial Priorities Make ConocoPhillips Truly Distinctive
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 • Achieve target debt of $15B by year-end 20191 • Top-tier payo
Slide 13: Reset the Base; Maintaining Portfolio Strength
Reset the Base; Maintaining Portfolio Strength 2017 Estimated Pro Forma Metrics1 Post Canadian Transaction Post Canadian and San Juan Pre-Transactions (Announced March 29, 2017) Basin Transactions 2017 NAR Production 1,540 – 1,570 MBOED 1,260 – 1,290 MBOED 1,145 – 1,175 MBOED Oil Oil Oil 15 10 20 Bi
Slide 14: Announced Transactions Reduce Average Cost of Supply to ~$35/BBL
Announced Transactions Reduce Average Cost of Supply to ~$35/BBL Impact of Transactions on Resource 14 BBOE with Cost of Supply <$50/BBL with Cost of Supply <$50/BBL 60 AVERAGE COST OF SUPPLY Cost of Supply ($/BBL) REDUCED FROM ~$40/BBL TO ~$35/BBL 40 BBOE 18 14 20 Investor Canadian San Juan Post Me
Slide 15: Fully Burdened Cost of Supply: Everything Including the Kitchen Sink
Fully Burdened Cost of Supply: Everything Including the Kitchen Sink Fully Burdened Cost of Supply by Component ($/BBL) • Cost of supply represents the flat, real commodity price that yields an after-tax return of 10% on a point- forward and fully burdened basis • A fully burdened cost of supply inc
Slide 16: Low Cost of Supply Portfolio = High-Return Investment Options
Low Cost of Supply Portfolio = High-Return Investment Options <$50/BBL Cost of Supply Resource1 Returns vs. Cost of Supply (Fully Burdened) as a Function of Price ~30% RETURN 50% AT $50/BBL BRENT Burden2 50 45% $50/BBL Brent Fully Burdened Point-Forward 40% Internal Rate of Return 40 Cost of Supply
Slide 17: Our Portfolio is Designed to Create Strategic Flexibility
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 Future $30-$40/BBL Projects Sanctioned Projects LNG & Oil Sands <$30/BBL Base 0% Co
Slide 18: Power of Diversification: Predictable LNG and Oil Sands Portfolio
Power of Diversification: Predictable LNG and Oil Sands Portfolio 14 BBOE Resources Production Over Time ~$35/BBL Average Cost of Supply2 • Flat production for decades with low sustaining capex Unconventional ~6 BBOE • Megaproject investment phase complete • Near-term focus on fully leveraging insta
Slide 19: Oil Sands & LNG: Projects Complete and Ramping
Oil Sands & LNG: Projects Complete and Ramping APLNG: Two Train Delivery APLNG APLNG Net Production • Train 1 performance exceeding design nameplate (MBOED) capacity Australia 100 • Train 2 first production achieved in September 2016 80 60 • 20-year LNG offtake contracts for 8.6 MTPA 40 • >1 BBOE ne
Slide 20: Power of Diversification: Low-Risk Conventional Portfolio
Power of Diversification: Low-Risk Conventional Portfolio Production Over Time 14 BBOE Resources ~$35/BBL Average Cost of Supply1 • Short-cycle development drilling in Unconventional ~6 BBOE legacy assets expected to add ~140 MBOED over next 5 years • Low-risk, medium-cycle projects expected to add
Slide 21: New Conventional Projects: Low-Risk, High-Value, We’ve Got It
New Conventional Projects: Low-Risk, High-Value, We’ve 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 Bohai 4 BY 2021 Previous 2017 2018 2019 2020 2021 5-Year Convention
Slide 22: Power of Diversification: Low-Risk Unconventional Portfolio
Power of Diversification: Low-Risk Unconventional Portfolio 14 BBOE Resource Production Over Time ~$35/BBL Average Cost of Supply1 • Flexible source of production growth Unconventional ~6 BBOE • Industry-leading returns • Optimizing development of our large resource base Conventional ~5 BBOE • Utili
Slide 23: Eagle Ford: Match and Raise – Our Eagle Ford is Best in Class
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 Total EUR2 20% Stacking INCREASE Eagle Ford IN EUR3 De Witt ~40% ~30% 2
Slide 24: Eagle Ford: Measured Pace Pays Off
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 LOCATIONS <$40/BBL COST OF SUPPLY • Maximizing ultimate recovery through improved understanding • Continuin
Slide 25: Eagle Ford: Advanced Technical Analysis Increases EUR and Returns
Eagle Ford: Advanced Technical Analysis Increases EUR and Returns Pilot Stimulated Rock Volume (SRV) Time-Lapse Geochemistry What We Utilized cores, image logs, in-well and cross- Gathered extensive database of oil samples over past 5 Did well monitoring to gain insights on fracture years; analyzed
Slide 26: Eagle Ford: NPV of Learning Curve > NPV of Acceleration
Eagle Ford: NPV of Learning Curve > NPV of Acceleration Customized Spacing and Stacking to Geology 2014 vs. 2016 Completion Design Testing the Austin Chalk 7.5 MMlbs 15.5 MMlbs Upper Eagle Ford Lower Eagle Ford 100 Clusters 300 Clusters 60-Acre High Low 60-Acre Triple 80-Acre Triple Thinner Thicker
Slide 27: Bakken: Increasing EUR While Driving Down Costs
Bakken: Increasing EUR While Driving Down Costs Lowest Well Cost/BOE1 Middle Bakken 300 2014-2015 Completion Optimization 40% Well Cost ($/BOE) Cumulative Oil 200 INCREASE (MBO) 100 0 0 100 200 300 400 Days Online 2011-2013 Design 2014-2015 Design Competitors2 • ~620 M net acres; 0.7 BBOE resource <
Slide 28: Delaware: 1.8 BBOE Resource and Just Getting Started
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 Development <$50/BBL CoS RESOURCE SINCE 2015 Red Hills New Mexico • 75 M net unconventional acr
Slide 29: Unconventionals: Massive Flexible Growth
Unconventionals: Massive Flexible Growth Resource # Remaining ~6 BBOE Eagle Ford, Delaware and <$50/BBL Locations CoS (Net) Bakken Production (MBOED) Asset (BBOE) <$50 CoS $40-$50/BBL 20% 3-Year CAGR From 2017 Average CoS Eagle Ford 2.4 3,500 ~4 BBOE Delaware 1.8 1,400 $40-$50/BBL 10% CoS $30-$40/BB
Slide 30: Announced Transactions Achieves Priorities in 1 Year
Announced Transactions Achieves Priorities in 1 Year Estimated Sources and Uses of Cash (2017-2019) at $50/BBL Brent Leverage Contingent to Upside payment & >$50/BBL Cash Allocated to Maximize Additional Disps. Total Shareholder Returns San Juan Sale Modest Growth $6B Authorized Accelerating Canada
Slide 31: Core Portfolio Strength + Transformational Transactions
Core Portfolio Strength + Transformational Transactions • Low cost, low capital intensity high-margin portfolio • 14 BBOE of resource at <$35/boe average CoS1 • Strong base business performance generating free cash flow • Announced transactions deliver >$16B of proceeds2 • Enables achievement of thr
Slide 32: Appendix
Appendix
Slide 33: YTD Announced Transaction Metrics
YTD Announced Transaction Metrics Full-Year 2017 Estimated Disposition Impacts Canadian San Juan Basin Post-Transactions Pre-Transactions Disposition Disposition Pro Forma1 Full-Year 2017 Production 1,540-1,570 MBOED 280 MBOED 115 MBOED 1,145-1,175 MBOED 2Q17 Production 1,495-1,535 MBOED 265 MBOED 1
Slide 34: 2017 Annualized Net Income Sensitivities
2017 Annualized Net Income Sensitivities $45-$65/BBL Brent Full-Year Pre-Transactions Full-Year Post-Transactions Pro Forma • Crude • Crude • Brent/ANS: $100-120MM for $1/BBL change • Brent/ANS: $100-120MM for $1/BBL change • WTI: $30-40MM for $1/BBL change • WTI: $30-40MM for $1/BBL change • WCS¹:
Slide 35: 2017 Annualized Cash Flow Sensitivities
2017 Annualized Cash Flow Sensitivities Full-Year Pre-Transactions Full-Year Pro Forma Post-Transactions CFO from Consolidated Operations ($45-$65/BBL Brent) CFO from Consolidated Operations ($45-$65/BBL Brent) • Crude • Crude: • Brent/ANS: ~$105-115MM for $1/BBL change • Brent/ANS: ~$105-115MM for
Slide 36: Abbreviations and Definitions
Abbreviations and Definitions • A&D: acquisitions and divestitures • GAAP: generally accepted accounting principles • ANS: Alaska North Slope • GHG: greenhouse gas emissions • B: billion • LNG: liquefied natural gas • BBL: barrel • M: thousand • BBOE: billions of barrels of oil equivalent • Margin G
Slide 37: Investor Information
Investor Information Stock Ticker Investor Relations Contacts: NYSE: COP Telephone: +1 281.293.5000 Website: www.conocophillips.com/investor Ellen DeSanctis: ellen.r.desanctis@conocophillips.com Andy O’Brien: andy.m.obrien@conocophillips.com Headquarters Renee Rosener: renee.omsberg.rosener@conocoph