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Conco Phillips- Presentations & Conference Calls Credit Suisse Energy Summit
 

Conco Phillips- Presentations & Conference Calls Credit Suisse Energy Summit

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    Conco Phillips- Presentations & Conference Calls Credit Suisse Energy Summit Conco Phillips- Presentations & Conference Calls Credit Suisse Energy Summit Presentation Transcript

    • 2009 Credit Suisse Energy Summit John Carrig President and Chief Operating Officer Vail, Colorado February 5, 2009
    • 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 Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. You can identify our forward-looking statements by words such as “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “estimates,” and similar expressions. Forward-looking statements relating to ConocoPhillips’ operations are based on management’s expectations, estimates and projections about ConocoPhillips and the petroleum industry in general on the date these presentations were given. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Further, certain forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Factors that could cause actual results or events to differ materially include, but are not limited to, crude oil and natural gas prices; refining and marketing margins; potential failure to achieve, and potential delays in achieving expected reserves or production levels from existing and future oil and gas development projects due to operating hazards, drilling risks, and the inherent uncertainties in interpreting engineering data relating to underground accumulations of oil and gas; unsuccessful exploratory drilling activities; lack of exploration success; potential disruption or unexpected technical difficulties in developing new products and manufacturing processes; potential failure of new products to achieve acceptance in the market; unexpected cost increases or technical difficulties in constructing or modifying company manufacturing or refining facilities; unexpected difficulties in manufacturing, transporting or refining synthetic crude oil; international monetary conditions and exchange controls; potential liability for remedial actions under existing or future environmental regulations; potential liability resulting from pending or future litigation; general domestic and international economic and political conditions, as well as changes in tax and other laws applicable to ConocoPhillips’ business. Other factors that could cause actual results to differ materially from those described in the forward-looking statements include other economic, business, competitive and/or regulatory factors affecting ConocoPhillips’ business generally as set forth in ConocoPhillips’ filings with the Securities and Exchange Commission (SEC), including our Form 10-K for the year ending December 31, 2007. ConocoPhillips is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. Cautionary Note to U.S. Investors – The U.S. Securities and Exchange Commission permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing economic and operating conditions. We may use certain terms in this presentation such as “oil/gas resources,” “Syncrude,” and/or “Society of Petroleum Engineers (SPE) proved reserves” that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. U.S. investors are urged to consider closely the oil and gas disclosures in our Form 10-K for the year ended December 31, 2007. This presentation includes certain non-GAAP financial measures, as indicated. Such non-GAAP measures are intended to supplement, not substitute for, comparable GAAP measures. Investors are urged to consider closely the GAAP reconciliation tables provided in the presentation Appendix. 1
    • Difficult Industry Environment Difficult Industry Environment Global economic crisis Low and volatile commodity prices Uncertain investment climate High-cost production challenged Energy and climate legislation 2
    • Oil Prices Oil Prices 2008 $/BBL WTI Price 120 100 80 60 40 20 January 15, 2009 settlement $35.40 0 68 96 00 04 08 76 80 84 88 92 60 64 72 19 20 20 20 19 19 19 19 19 19 19 19 19 Currently in cyclical downturn Source: Oil and Gas Journal, Platts 3
    • Global Oil Demand Destruction Global Oil Demand Destruction Average Annual Growth / Decline Million Barrels per Day 4 3 2009 forecast 2 1 0 -1 Possible additional decline -2 -3 1975 1980 1985 1990 1995 2000 2005 2010 Source: Oil and Gas Journal through 2007, International Energy Agency for 2008 and 2009, Goldman Sachs for low forecast in 2009 4
    • Current Oil Reserve Replacement Cost Curve Current Oil Reserve Replacement Cost Curve Dollars per Barrel 90 Man- Non-Mandated Biofuels 80 dated Bio- 70 fuels, Replacement Cost shown 60 as zero cost 50 High Cost Conventional, 40 EOR, Medium Cost Conventional Unconventional, 30 U.S. Stripper Wells 20 10 Low Cost Middle East 0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 World Oil Supply, 2009, MMB/D Source: PIRA Energy 5
    • U.S. Natural Gas Supply Challenge U.S. Natural Gas Supply Challenge 26 Projected U.S. natural gas demand uction Alaskan Prod 24 65.8 LNG Imports Trillion Cubic Feet 22 60.3 Net Pipeline Imports 20 54.8 BCFD Non-Associated Unconventional 18 Growth 49.3 16 43.8 14 38.4 Existing Production 12 32.9 10 27.4 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Source: Wood Mackenzie 6
    • Refined Product Supply/Demand Balance Refined Product Supply/Demand Balance Growth, Thousands of Barrels per Day 3,500 Supply Surplus 3,000 Supply Deficit 2,500 Supply Deficit 2,000 1,500 1,000 500 0 -500 -1,000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Refinery CDU Biofuels Demand Source: International Energy Agency, December 2008 and January 2009 reports 7
    • COP’s Response to Current Environment COP’s Response to Current Environment Maintain strong financial position and live within our means Fund capital program Pay dividend Fund projects that offer greatest growth and return potential Prioritize our programs Operate safely, reliably and in an environmentally responsible manner Capture benefits from improving cost environment 8
    • Financial Strategy Financial Strategy Fund attractive capital projects Competitive distributions Annual dividend increases Share repurchases Maintain optimum capital structure Target debt / capital of 20-25% 9
    • Capital Program Capital Program $ in billions 24 19.9 20 16.3 16 15.2 12.8 11.8 12.5 12 8 4 0 2005 2006 2007 2008 2009 Capital Program Cash Capex Lukoil Affiliate Loans & EnCana JV Capitalized Interest Origin 2006 Reflects 9 months of BR 10
    • 2009 Capital Program 2009 Capital Program Segment Composition ($ in billions) Segment Composition ($ in billions) E&P - 82% ($10.3) Production Exploration Other- 2% ($0.2) Other: RM&T- 16% ($2.0) Emerging Bus - $100mm Corporate - $150mm Midstream - $7mm Total includes loans to affiliates, EnCana JV obligations and capitalized interest 11
    • 2008 Overview 2008 Overview $16.4 B in Adjusted Earnings Net Loss Significant Adjustments $17 B 2.23 MMBOED Production Cash From 90% Refining Utilization Operations $22.7 B $8.2 B Share Repurchases 15% Dividend Increase Debt-to-Cap 33% Origin Energy Joint Venture 12
    • Total Company Cash Flow Total Company Cash Flow 2008 2008 $MM Debt Increase Dividends Asset Sales & Other* 5,768 Share 2,854 2,532 Repurchases 8,249 Capital Program CFOA 19,855 22,658 Sources of Cash Uses of Cash Total $30,958 * Includes reduction in cash balance 13
    • Debt Ratio Debt Ratio 100 35 35 34 33 90 84 30 30 80 27.1 27.5 26 25 25 24 21.7 60 56 54 20 20 19 19 17.8 44 15.0 40 15 15 35 12.5 10 10 20 5 5 0 0 0 '03 '04 '05 '06 '07 '08 '03 '04 '05 '06 '07 '08 '03 '04 '05 '06 '07 '08 Equity * $B Balance Sheet Debt-to-Capital Debt $B Ratio % * Includes minority interest 14
    • E&P per BOE Metrics E&P per BOE Metrics E&P Income per BOE E&P Cash Contribution per BOE $ / BOE $ / BOE 30.00 40.00 35.00 25.00 30.00 20.00 25.00 15.00 20.00 36.94 34.53 23.74 30.70 22.10 15.00 10.00 18.44 20.60 22.35 22.96 14.79 13.76 10.00 19.86 12.19 15.07 5.00 9.97 7.08 8.10 5.00 11.62 0.00 0.00 2003 2004 2005 2006 2007 3Q08 YTD 4Q08 2008 2003 2004 2005 2006 2007 3Q08 YTD 4Q08 2008 3Q08 3Q08 Peer Group Based on total E&P BOE production. All companies Income adjusted to exclude certain non-core earnings impacts (based solely on publicly available information). Cash Contribution is calculated as Income plus DD&A. See Tables 1 and 2 of Appendix for additional information. 15
    • R&M per BBL Metrics R&M per BBL Metrics R&M Income per BBL R&M Cash Contribution per BBL $ / BBL $ / BBL 7.00 8.00 6.00 7.00 6.00 5.00 5.00 4.00 4.00 3.00 3.00 4.50 5.16 2.00 3.59 3.85 4.64 3.13 2.00 4.28 3.90 2.39 2.33 2.60 2.40 3.06 3.09 3.34 3.16 1.00 1.26 1.00 1.88 0.00 0.00 2003 2004 2005 2006 2007 3Q08 YTD 4Q08 2008 2003 2004 2005 2006 2007 3Q08 YTD 4Q08 2008 3Q08 3Q08 Peer Group Based on total petroleum product sales. All companies Income adjusted to exclude certain non-core earnings impacts (based solely on publicly available information). Cash Contribution is calculated as Income plus DD&A. See Tables 1 and 2 of Appendix for additional information. 16
    • Return on Capital Employed Return on Capital Employed 30% Peer Group COP 25% 20% 15% 22% 10% 17% 18% 17% 15% 14% 15% 5% 10% 7% 0% 2003 2004 2005 2006 2007 3Q08 1Q-3Q 2008 4Q08 2008 Annualized Annualized Annualized Peer group adjusted to reflect all major combinations on a purchase-accounting basis; see Table 4 of Appendix; COP capital employed adjusted to add back Goodwill impairment at year-end 2008 for comparability to peers on a purchase basis. All companies adjusted to exclude certain non- core earnings impacts; see Table 1 of Appendix for additional information. 17
    • Appendix
    • COP Non-GAAP Reconciliations COP Non-GAAP Reconciliations 2003 2004 2005 2006 2007 3Q08 1Q-3Q 2008 4Q08 2008 GAAP E&P Net Income - $MM 4,302 5,702 8,430 9,848 4,615 3,928 10,814 (24,293) (13,479) GAAP E&P Net Income - $ / BOE 7.33 9.97 14.79 13.78 6.73 24.43 22.37 (141.43) (20.59) non-core earnings impacts - $MM gains and (losses) on asset dispositions 565 138 162 428 590 asset impairments (118) (4,752) (28) (28) (26,042) (26,070) tax legislation / regulatory / other 142 (4) 133 436 - (71) (71) E&P Income - $ / BOE 7.08 9.97 14.79 13.76 12.19 23.74 22.10 8.10 18.44 E&P DD&A - $ / BOE 4.54 5.10 5.81 8.59 10.77 13.20 12.43 11.76 12.26 E&P Cash Contribution - $ / BOE 11.62 15.07 20.60 22.35 22.96 36.94 34.53 19.86 30.70 2003 2004 2005 2006 2007 3Q08 1Q-3Q 2008 4Q08 2008 GAAP R&M Net Income - $MM 1,272 2,743 4,173 4,481 5,923 849 2,033 289 2,322 GAAP R&M Net Income - $ / BBL 1.14 2.39 3.52 3.53 5.00 3.13 2.47 1.00 2.09 non-core earnings impacts - $MM gains and (losses) on asset dispositions 339 2 127 97 224 asset impairments (441) 112 - (13) (537) (550) tax legislation / regulatory / other (125) (83) 34 141 - - (24) (24) R&M Income - $ / BBL 1.26 2.39 3.59 3.85 4.50 3.13 2.33 2.60 2.40 R&M DD&A - $ / BBL 0.62 0.67 0.69 0.79 0.66 0.77 0.76 0.74 0.76 R&M Cash Contribution - $ / BBL 1.88 3.06 4.28 4.64 5.16 3.90 3.09 3.34 3.16 2003 2004 2005 2006 2007 3Q08 1Q-3Q 2008 4Q08 2008 GAAP ROCE 10% 15% 23% 17% 11% 18% 18% -126% -17% non-core earnings impacts - $MM gains and (losses) on asset dispositions 306 904 140 289 525 814 asset impairments (559) (4,640) (28) (41) (34,104) (34,145) tax legislation / regulatory / other 142 (22) (111) 167 639 35 (99) (64) Goodwill impairment equity adjustment - $MM - - - - - - - 25,443 25,443 ROCE 10% 15% 22% 17% 14% 18% 17% 7% 15% Table 1 19
    • COP Non-GAAP Reconciliations COP Non-GAAP Reconciliations 2003 2004 2005 2006 2007 3Q08 1Q-3Q 2008 4Q08 2008 GAAP E&P CFOA - $MM 7,751 9,109 12,126 16,978 16,228 6,456 18,588 2,388 20,976 GAAP E&P CFOA - $ / BOE 13.20 15.92 21.27 23.77 23.65 40.15 38.46 13.90 32.04 excluded GAAP items - $MM non-cash working capital 356 221 31 244 393 430 1,713 (1,324) 389 non-working capital adjustments* 573 267 350 770 78 86 187 301 488 E&P Cash Contribution - $ / BOE 11.62 15.07 20.60 22.35 22.96 36.94 34.53 19.86 30.70 2003 2004 2005 2006 2007 3Q08 1Q-3Q 2008 4Q08 2008 GAAP R&M CFOA - $MM 2,208 2,671 4,914 4,625 6,757 1,052 456 1,447 1,903 GAAP R&M CFOA - $ / BBL 1.99 2.32 4.14 3.65 5.70 3.88 0.55 5.00 1.71 excluded GAAP items - $MM non-cash working capital (104) (702) 267 (1,095) 1,188 (14) (1,449) 155 (1,294) non-working capital adjustments* 225 (142) (427) (172) (546) 8 (638) 325 (314) R&M Cash Contribution - $ / BBL 1.88 3.06 4.28 4.64 5.16 3.90 3.09 3.34 3.16 *Includes items such as deferred tax, accretion on discounted liabilities, and undistributed equity earnings For Peer Companies, Cash Contribution is calculated as adjusted Income plus DD&A for each full year 2003 through 2007. For 2008, Peer Company DD&A data has not yet been made public by E&P and R&M segments, so 2008 Peer Company DD&A splits by segment have been made based on year end 2007 DD&A segment weightings as applied to 2008 total company DD&A expense. Table 2 20
    • COP Non-GAAP Reconciliations COP Non-GAAP Reconciliations $MM 4Q07 2007 3Q08 4Q08 2008 Consolidated Net income (loss) $ 4,371 $ 11,891 $ 5,188 $ (31,764) $ (16,998) Goodwill recoverability impairment (25,443) (25,443) LUKOIL investment impairment (7,410) (7,410) Impairment - expropriated assets (4,512) Impairments - other (111) (161) (28) (1,251) (1,292) Gain (loss) on asset sales 188 1,047 140 525 814 Tax rate changes 186 365 Severance accruals (99) (99) Total Adjustments 374 1,412 140 426 715 Consolidated Adjusted earnings $ 3,997 $ 10,479 $ 5,048 $ (32,190) $ (17,713) E&P Net income (loss) $ 2,608 $ 4,615 $ 3,928 $ (24,293) $ (13,479) Goodwill recoverability impairment (25,443) (25,443) Impairment - expropriated assets (4,512) Impairments - other (120) (273) (28) (599) (627) Gain (loss) on asset sales 172 708 138 428 590 Tax rate changes 171 209 Severance accruals (71) (71) Total Adjustments 343 917 138 357 519 E&P Adjusted earnings $ 2,265 $ 3,698 $ 3,790 $ (24,650) $ (13,998) R&M Net income $ 1,122 $ 5,923 $ 849 $ 289 $ 2,322 Impairments 9 112 (537) (550) Gain (loss) on asset sales 16 339 2 97 224 Tax rate changes 141 Severance accruals (24) (24) Total Adjustments 25 592 2 (464) (350) R&M Adjusted earnings $ 1,097 $ 5,331 $ 847 $ 753 $ 2,672 LUKOIL Investment Net income (loss) $ 649 $ 1,818 $ 438 $ (7,410) $ (5,488) Impairment (7,410) (7,410) LUKOIL Investment Adjusted earnings $ 649 $ 1,818 $ 438 $ - $ 1,922 Emerging Businesses Net income (loss) $ 2 $ (8) $ 35 $ (25) $ 30 Impairments (85) (85) Emerging Businesses Adjusted earnings $ 2 $ (8) $ 35 $ 60 $ 115 Corporate Net income (loss) $ (271) $ (1,269) $ (281) $ (388) $ (1,034) Impairments (30) (30) Tax rate changes 15 15 Severance accruals (4) (4) Total Adjustments 15 15 - (34) (34) Corporate Adjusted earnings (expenses) $ (286) $ (1,284) $ (281) $ (354) $ (1,000) Table 3 21
    • Peer Capital Employed Peer Capital Employed XOM CVX BP TOT** Equity issued for purchase* 72,795 35,690 49,091 65,055 Less: Equity of companies acquired (19,015) (14,330) (15,682) (20,458) Excess Capital Employed under 53,780 21,360 33,409 44,597 Purchase Accounting Peer Group: ExxonMobil, Chevron, BP, TOTAL and Royal Dutch Shell (note: no adjustments for Shell) * Based on the number of shares issued in the transaction and the average price two days before and two days after the deals were announced ** Shown in Euros Table 4 22