ConocoPhillips · NYSE:COP
ConocoPhillips — Shareholder Meeting (May 2005)
58 slides from ConocoPhillips's shareholder meeting presentation, May 5, 2005
Slide 1: 2005 Annual Meeting of Stockholders
2005 Annual Meeting of Stockholders May 5, 2005
Slide 2: Cautionary Statement
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 and Section 21E of the Sec
Slide 3: ConocoPhillips
ConocoPhillips • Competitive Integrated Energy Company - Operate in more than 40 countries - 2004 Revenues of $137 B / Assets of $93 B - Approximately 35,800 employees • Diversified Integrated Portfolio of Legacy Assets - 1.6 MM BOED produced / 8.7 B BOE reserves* - 2.6 MM BBLD refining capacity - J
Slide 4: Business Environment
Business Environment • Volatile geopolitical climate • Global economic & oil demand growth • High current commodity prices • Increased mid-cycle oil & gas price outlook • Robust refining margins
Slide 5: Global Oil Demand Growth
Global Oil Demand Growth 3.0 OECD 2.5 Non-OECD Other Million Barrels per Day China 2.0 1.5 1.0 0.5 0.0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005F Source: International Energy Agency
Slide 6: WTI Oil Price
WTI Oil Price $/BBL $49.45 / bbl 55 2005 consensus 5/3/05 $46.27 / BBL 50 45 40 35 30 25 20 April 2004 consensus 15 $29.71 / BBL 10 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: Platts; First Call consensus as of May 3, 2005 Bars represent the range of monthly averages for each year
Slide 7: HH Natural Gas Price
HH Natural Gas Price $/MMBTU 10 9 8 $6.61 / MMBTU 7 5/3/05 6 5 4 2005 consensus 3 $6.31 / MMBTU 2 April 2004 consensus $4.98 / MMBTU 1 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: Platt’s Gas Daily; First Call consensus as of May 3, 2005 Bars represent the range of monthly averag
Slide 8: U.S. Light Products Demand Growth Outpacing Capacity Additions
U.S. Light Products Demand Growth Outpacing Capacity Additions 400 Average Annual Change (MBBL/D) 350 Demand Growth Capacity Additions 300 250 200 150 100 50 0 -50 2000 2001 2002 2003 2004 2005F Refining capacity includes 50% of distillation increases and conversion capacity increases Source: U.S. D
Slide 9: U.S. Refinery Capacity Utilization
U.S. Refinery Capacity Utilization 100 Forecast (DOE) 95 90 Percent Utilization 1 90% 85 History 80 75 70 65 60 1980 1985 1990 1995 2000 2005 2010 2015 2020 Source: U.S. Department of Energy 1 Percent utilization defined as: Gross input to refineries / operable capacity
Slide 10: Gulf Coast Crack Spread
Gulf Coast Crack Spread $/BBL 12 $9.77 / bbl 5/3/05 10 8 6 4 2 5-year average $4.60 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Source: Platts Bars represent the range of monthly averages for each year; solid line represents the annual average
Slide 11: 2004 Highlights
2004 Highlights Net Income Higher Oil & Gas Prices $8.1 B Strong Refining Margins Purchased 10% of LUKOIL Cash From Operations 1.56 MM BOED E&P Production 1 $12.0 B 159 M BOED LUKOIL in 4Q04 Debt 2.46 MM BBLD Refinery Throughput Reduction 26% Debt-to-Capital $2.8 B 1 Excludes LUKOIL
Slide 12: LUKOIL Investment
LUKOIL Investment • Access to significant Russian reserves • COP sole equity partner • 10% equity ownership, option for up to 20% – Strong governance / Shareholders Agreement – Two-way exchange of personnel • JV in the Russian Arctic 1 – 30% interest – Enhances growth profile – Priority access to ex
Slide 13: 2004 Adjusted ROCE Peer Comparison
2004 Adjusted ROCE Peer Comparison 24.7% 23.5% 23.3% 21.3% 20.0% 17.6% XOM CVX COP* TOT BP* RD *Adjusted for purchase accounting COP, CVX & XOM based on 10K filing; RD & TOT based on 20F filing; BP based on 6K filing dated 4/13/05 See Table 1 in appendix for COP non-GAAP reconciliation
Slide 14: Debt/Capital Ratios
Debt/Capital Ratios 50 50 50 43.8 43 40 40 40 35.2 34 30.2 30 30 30 26 22.6 20 20 17.8 20 15.0 10 10 10 1/1/03 YE 2003 YE 2004 1/1/03 YE 2003 YE 2004 1/1/03 YE 2003 YE 2004 Balance sheet Debt-to-capital Equity 1 $ B debt $ B ratio, % 1 Includes minority interest
Slide 15: 2004 Cash Flow
2004 Cash Flow Asset Sales Dividends & Other 9% 12% Debt Capex Reduction Excl. LUKOIL 21% 50% CFOA LUKOIL Investment 88% 20% Sources of Cash Total Uses of Cash $13.6 B
Slide 16: Cash Use Comparison
Cash Use Comparison Full Year 2004 100% 80% 60% 40% 20% 0% COP CVX XOM BP RD TOT Capex Debt Reduction Share Repurchase Dividends
Slide 17: Total Shareholder Return
Total Shareholder Return Two-Year Annual Average January 1, 2003 - December 31, 2004 Peer Group ConocoPhillips S&P 500 Peer Average COP STOCK PRICE December 31, 2002 $48.39 December 31, 2004 $86.83 37.5 Peer Group Average = 24.8% 30.2 27.9 24.2 23.9 19.5 17.9 COP CVX TOT XOM BP S&P RD
Slide 18: First-Quarter 2005 Progress
First-Quarter 2005 Progress Net Income High Commodity Prices $2.9 B Solid Production Volumes 1.60 MMBOED E&P Production1 Cash From 201MBOED from LUKOIL Operations 92% Refinery Utilization $4.1 B Strong Chemicals Performance Debt to DEFS Restructuring Capital Ratio 23% Stock Split / Dividend Increase
Slide 19: 1Q 2005 Annualized ROCE
1Q 2005 Annualized ROCE Peer Comparison 27.1% 27.1% 26.8% 25.4% 24.7% 19.3% COP* RD XOM TOT BP CVX XOM based on ICO adjusted for a gain and capital employed published in press release; CVX based on ICO, total debt and stockholder’s equity published in press release; RD and BP based on IFRS; TOT base
Slide 20: Debt Ratio Improvement
Debt Ratio Improvement 50 46.2 50 50 43.8 40.8 40 40 40 30 30 30 28 26 23 20 20 20 15.5 15.0 14.0 10 10 10 0 0 0 3Q04 4Q04 1Q05 3Q04 4Q04 1Q05 3Q04 4Q04 1Q05 Equity1, $ B Balance sheet Debt-to-capital debt, $ B ratio, % 1 Includes minority interest
Slide 21: 1Q 2005 Cash Flow
1Q 2005 Cash Flow Asset Sales Dividends 2% & Other 8% Debt Capex Reduction Excl. LUKOIL 23% 36% CFOA Increased 98% Cash Balance 8% 25% LUKOIL Investment Sources of Cash Total Uses of Cash $4.2 B
Slide 22: Total Shareholder Return
Total Shareholder Return January 1, 2005 - May 3, 2005 Peer Group ConocoPhillips S&P 500 Peer Average COP STOCK PRICE December 31, 2004 $86.83 May 3, 2005 $103.50 19.8 10.7 Peer Group Average = 4.4% 4.9 2.0 1.0 3.3 (3.6) COP XOM BP RD TOT CVX S&P
Slide 23: Corporate Strategy
Corporate Strategy • Maintain benefits of international scale and integration • Grow E&P portfolio and improve returns • Grow R&M position to enhance value chain integration • Use Commercial expertise to create value from assets • Maintain cost and capital discipline • Utilize strengths in people, t
Slide 24: Strategic Objectives
Strategic Objectives Target ROCE 1 Competitive with peers Debt ratio 20% - 25% 65% - 70% in E&P Portfolio balance 25% - 30% in R&M 3% long-term growth Production 2 OECD at 60% - 65% of total 3 5-year reserve 100%+ replacement 1 Adjusted for purchase accounting 2 Includes equity affiliates and Syncru
Slide 25: E&P Strategy
E&P Strategy • Grow production and reserves - Build new legacy positions - Stable OECD production • Optimize legacy business - Improving cost and production efficiency Deliver competitive returns
Slide 26: 2004 E&P Recurring Earnings per BOE
2004 E&P Recurring Earnings per BOE $/BOE produced 14 12.41 12 10.85 1Q 05 10.19 10 9.13 10.09 8 7.32 6 4 2 0 XOM CVX COP BP RD Source: Howard Weil, March 2005 COP 1Q 2005 from published data, segment net income / BOE produced including Syncrude
Slide 27: E&P ROCE
E&P ROCE Adjusted for Purchase Accounting Peer Group 40% COP 35.2% 35% 1Q 05 30% 25% ROCE 20% 34% 15% 29% 29% 26% 27% 24% 23% 22% 10% 5% 0% 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 Avg WTI, $/bbl 34.06 29.02 30.18 31.17 35.23 38.31 43.86 48.29 Henry Hub, $/MCF 6.58 5.40 4.97 4.60 5.69 6.00 5.75 7.07
Slide 28: 2004 Reserve Replacement
2004 Reserve Replacement (Pro Forma basis) Production Replacement F&D 250% $14.00 Peer Composite** Peer Composite** $12.00 200% $10.00 150% $8.00 100% $6.00 $4.00 50% $2.00 0% $0.00 2004 5yr Avg. 2004 5yr Avg.* COP COP without LUKOIL Sources: Company filings and press releases * See Tables 11-14 in
Slide 29: Sustainable Growth
Sustainable Growth Sunrise Global Gas ANS Gas Qatar GTL Brass LNG Qatargas 3 LNG Suban II Mackenzie Delta Belanak Plataforma-Deltana Kashagan II Other International Bayu-Undan Kashagan I Kashagan Sat’s Su Tu Trang Hamaca III Corocoro I Timan Pechora Corocoro II & III Hamaca Suban III LUKOIL JV Bohai
Slide 30: Near-term Growth
Near-term Growth 2.0 P ro d u c tio n (M M B O E D ) 1 Rest of World 1.5 Asia Pacific Growth Venezuela Canada 1.0 UK Legacy OECD Norway 0.5 Lower 48 Alaska 0.0 2004 2005 2006 1 Excludes LUKOIL and Libya; includes equity affiliates and Syncrude
Slide 31: Long-term Growth
Long-term Growth Future growth 2.0 Production (M M BOED) 1 LUKOIL 1.5 Near-term growth areas 1.0 Legacy OECD production 0.5 0.0 2004 2005 2006 2007 1 Includes equity affiliates and Syncrude, excludes Libya
Slide 32: R&M Strategy
R&M Strategy • Strengthen refining position – Grow U.S. conversion capability and capacity – Opportunistic expansion in Europe / Asia – Enhance integration with upstream – Execute clean fuels program • Value chain optimization – Low-cost, efficient, integrated marketing and transportation – Operatio
Slide 33: 2004 R&M Recurring Earnings
2004 R&M Recurring Earnings per Barrel Refined Product Sold $ / BBL 3.0 2.51 1Q 05 2.0 2.51 2.27 2.15 2.09 1.63 1.0 0.0 COP CVX RD XOM BP Source: Howard Weil, March 2005 COP 1Q 2005 from published data, segment net income / BBL refined product sold
Slide 34: R&M ROCE
R&M ROCE Adjusted for Purchase Accounting 35% Peer Group COP 30% 25% 22.6% 1Q 05 20% 15% 29% 25% 26% 10% 20% 16% 17% 13% 5% 8% 0% 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 Avg WTI, $/bbl 34.06 29.02 30.18 31.17 35.23 38.31 43.86 48.29 Henry Hub, $/MCF 6.58 5.40 4.97 4.60 5.69 6.00 5.75 7.07 GCCS, $/bb
Slide 35: Crude Utilization
Crude Utilization U.S. Refining Utilization 98% COP Industry Avg* • Continued focus on 96% safety, reliability 94% • Capturing strong 92% market environment 90% 88% • Intense 2005 turn- 86% around activity 2002 2003 2004 1Q 2005 * U.S. DOE, Energy Information Agency
Slide 36: U.S. Refining Enhancements
U.S. Refining Enhancements Capacity Distribution High TAN Capability Heavy Sour Heavy Sour 28% 41% Sour 24% Sour Sweet 11% Sweet Current Future Current Future • Further integration with upstream • Attractive incremental economics • Enhanced refining profitability • Increased capabilities $3 billion
Slide 37: Commercial
Commercial • Scope - 2.5 B BBL/yr crude oil and refined products - 4.2 TCF/yr gas marketing business - Global trading operation • Objectives - Sell owned production for highest netback - Provide highest margin supply for R&M - Enhance global natural gas business - Optimize value chain to maximize ea
Slide 38: Chevron Phillips Chemicals JV
Chevron Phillips Chemicals JV Net Income1 ($MM) CVX – 50%, COP – 50% 300 249 • Improving ROCE $133 - Margin improvement 150 1Q 05 - Solid operations - Cost efficiencies 7 0 • Overseas Growth (14) - World-scale facilities (128) -150 - Advantaged feedstocks - Access to growing markets 01 02 03 04 20 2
Slide 39: Duke Energy Field Services JV
Duke Energy Field Services JV Net Income1 ($MM) DUK – 69.7%, COP – 30.3% 200 • Moving to 50% interest 143 • Large NGL producer $53* 101 1Q 05 - 363 M BBL/d in 2004 100 72 - Focus on North America • Improving ROCE 23 - Lower cost structure 0 - Rationalize portfolio 01 02 03 04 • Selective growth 20 2
Slide 40: Financial Strategy
Financial Strategy • Balance sheet improvement - Modest debt reduction - Equity improvement - Target debt/capital of 20 – 25% • A / AA credit rating • Annual dividend increases - 24% increase • 2:1 stock split • Stock repurchase to maintain ~700M (1.4B) shares
Slide 41: Uniquely Positioned
Uniquely Positioned • Balanced E&P / R&M integrated portfolio • Well-defined, sustainable growth plan • Access to resource-rich opportunities • Improving Chemical & Midstream returns • Strong financial position Setting Delivering Raising Objectives Performance Expectations 2003 2004 2005+ Continuous
Slide 42: Spirit of Performance
Spirit of Performance Use our Pioneering Spirit to responsibly deliver energy to the world • Core values of: Safety People Integrity Responsibility Innovation Teamwork
Slide 43: 2005 Annual Meeting of Stockholders
2005 Annual Meeting of Stockholders May 5, 2005
Slide 44: Appendix
ConocoPhillips Appendix
Slide 45: Return on Capital Employed Adjusted for Purchase Accounting Table 1
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 46: Adjusted Return on Capital Employed Table 2
Adjusted Return on Capital Employed Excluding DEFS Transaction Impact First Quarter 2005 First Quarter 2005 by Segment Adjusted for Purchase Midstream Emerging Accounting & and Businesses GAAP ROCE DEFS E&P R&M Chemicals Lukoil and Corporate Total Income from Continuing Operations 2,923 2,923 1,787
Slide 47: Return on Capital Employed Adjusted for Purchase Accounting Table 3
Return on Capital Employed Adjusted for Purchase Accounting 1Q03 1Q03 by segment Midstream, Emerging Adjusted for Businesses, purchase Chemicals and GAAP ROCE accounting E&P R&M Corporate Total Income from continuing operations 1,263 1,263 1,125 389 (251) 1,263 Add: Interest expense 239 239 239 239
Slide 48: Return on Capital Employed Adjusted for Purchase Accounting Table 4
Return on Capital Employed Adjusted for Purchase Accounting 2Q03 2Q03 by segment Midstream, Emerging Adjusted for Businesses, purchase Chemicals and GAAP ROCE accounting E&P R&M Corporate Total Income from continuing operations 1,096 1,096 1,077 321 (302) 1,096 Add: Interest expense 217 217 217 217
Slide 49: Return on Capital Employed Adjusted for Purchase Accounting Table 5
Return on Capital Employed Adjusted for Purchase Accounting 3Q03 3Q03 by segment Midstream, Emerging Adjusted for Businesses, purchase Chemicals and GAAP ROCE accounting E&P R&M Corporate Total Income from continuing operations 1,249 1,249 967 485 (203) 1,249 Add: Interest expense 190 190 190 190 Mi
Slide 50: Return on Capital Employed Adjusted for Purchase Accounting Table 6
Return on Capital Employed Adjusted for Purchase Accounting 4Q03 4Q03 by segment Midstream, Emerging Adjusted for Businesses, purchase Chemicals and GAAP ROCE accounting E&P R&M Corporate Total Income from continuing operations 985 985 991 202 (208) 985 Add: Interest expense 197 197 197 197 Minority
Slide 51: Return on Capital Employed Adjusted for Purchase Accounting Table 7
Return on Capital Employed Adjusted for Purchase Accounting 1Q04 1Q04 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: Interest expense 145 145 145 145
Slide 52: Return on Capital Employed Adjusted for Purchase Accounting Table 8
Return on Capital Employed Adjusted for Purchase Accounting 2Q04 2Q04 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: Interest expense 159 159 159 159
Slide 53: Return on Capital Employed Adjusted for Purchase Accounting Table 9
Return on Capital Employed Adjusted for Purchase Accounting 3Q04 3Q04 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: Interest expense 101 101 101 101
Slide 54: Return on Capital Employed Adjusted for Purchase Accounting Table 10
Return on Capital Employed Adjusted for Purchase Accounting 4Q 2004 4Q 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) 2,480 Add: Interest Expe
Slide 55: Finding and Development Cost per BOE
Finding and Development Cost per BOE (2004 excluding LUKOIL) Costs 1 Reserve 2 Incurred Additions $B BBOE ConocoPhillips 2004 (GAAP Basis) 6.639 1.286 Less: Estimated amounts associated with LUKOIL (2.036) (0.894) Costs incurred and reserve additions 4.603 0.392 F&D / BOE 3 $11.73 1 Includes acquisi
Slide 56: Finding and Development Cost per BOE
Finding and Development Cost per BOE (2004 including LUKOIL) Costs 1 Reserve 2 Incurred Additions $B BBOE ConocoPhillips 2004 (GAAP Basis) 6.639 1.286 F&D / BOE $5.16 1 Includes acquisitions. 2 Includes additions due to revisions, improved recovery, purchases and extensions and discoveries. Table 12
Slide 57: Finding and Development Cost per BOE
Finding and Development Cost per BOE (Pro forma 2000 – 2004 Average excluding LUKOIL) Costs 1 Reserve 2 Incurred Additions $B BBOE ConocoPhillips 2000 - 2004 (GAAP Basis) 38.940 8.853 Less: Estimated amounts associated with LUKOIL (2.036) (0.894) Conoco pre-merger net of purchase adjustment (2.948)
Slide 58: Finding and Development Cost per BOE
Finding and Development Cost per BOE (Pro forma 2000 – 2004 Average including LUKOIL) Costs 1 Reserve 2 Incurred Additions $B BBOE ConocoPhillips 2000 - 2004 (GAAP Basis) 38.940 8.853 Conoco pre-merger net of purchase adjustment (2.948) (1.723) Pro forma costs incurred and reserve additions 35.992 7