ConocoPhillips's CEO Hosts Annual Shareholder Meeting Conference (Transcript)

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ConocoPhillips, Incorporated (NYSE:COP) Annual Shareholder Meeting Conference Call May 14, 2013 10:00 AM ET


Ryan Lance – Chairman and Chief Executive Officer

Janet Langford KellySenior Vice President, Legal, General Counsel and Corporate Secretary


Steven Heim – Boston Common Asset Management, LLC

Donna Meyer – Mercy Investment Services

Gab Plemich – Shareholder, Phillips 66

Thank you, Janet, and good morning, everybody. Welcome to the ConocoPhillips Annual Shareholder Meeting. It’s pleasure to welcome you today to our 2013 meeting. We’re a little over a year old right now and it’s our second opportunity to get together with our shareholders and share a little bit about what we’re doing as a company and where we’re headed.

Before I begin though, I’d like to introduce our Board of Directors. All of them are here today, other than Mr. William K. Reilly, who is scheduled to retire following the Annual Meeting and that represents the end of his current term.

As I introduce each Director, I’d like them to stand and face the audience and be recognized. So in addition to myself, the members of the board present today are Richard L. Armitage, Richard is the President of Armitage International and a former U.S. Deputy Secretary of State. Richard H. Auchinleck, Dick is the retired President and Chief Executive Officer of Gulf Canada Resources Limited. James E. Copeland, Jr. Jim is the retired Chief Executive Officer of the Deloitte & Touche.

Jody L. Freeman, Jody is the Archibald Cox Professor of Law at Harvard Law School and a Founding Director of the Harvard Law School Environmental Law and Policy Program. Gay Huey Evans, Gay is the Former Vice Chairman, Investment Banking and Investment Management at Barclays Capital and previously held positions with Citigroup and U.K. Financial Services Authority.

Hassan Marican, Hassan is our former President and Chief Executive Officer of the Malaysian national oil company, PETRONAS. Robert A. Niblock, Robert is the Chairman, President and Chief Executive Officer of Lowe's Companies, Inc. Harald J. Norvik, Harald is the retired Chairman and partner of Econ Management AS; and the retired Chairman, President and Chief Executive Officer of Statoil and William E. Wade Jr., Bill is the retired President of Atlantic Richfield Company.

Please join me in thanking our board members for their dedicated service to ConocoPhillips. So in addition to the board members, since we are a fairly new management team as an independent E&P company, I’d like to introduce my leadership team. So in addition to Janet Kelly, whom you’ve already met, I’d like to introduce you to the other members of my leadership team. They are all here today, and as I introduce each one of them, I’d like them to stand and face the audience to be recognized as well.

So in addition to myself, the members of the executive leadership team are Matt Fox, Executive Vice President of Exploration and Production; Al Hirshberg, the Executive Vice President of Technology and Projects; Jeff Sheets, our Executive Vice President of Finance and Chief Financial Officer; Don Wallette, our Executive Vice President of Commercial, Business Development and Planning; Andrew Lundquist, our Senior Vice President of Government Affairs; Ellen DeSanctis, our Vice President of Investor Relations and Communications, and last but not least, Sheila Feldman, our Vice President of Human Resources. So thank you. A round of applause please for our executive leadership team, thank you.

So before I begin the meeting, I’d like to share a bit of a presentation with you that describes our performance in 2012 and, but more importantly, looks at the strategy and where we’re trying to take our new independent ConocoPhillips. So I’ll spend about 20 minutes or so talking about our value proposition, how we’re going to deliver it, and what we mean – what we think we represent to our shareholders and to our peers and our competitions.

So when we launched as an independent company last May, we set out to offer our shareholders a new class of investment, one that was going to consistently deliver predictable and stable returns, and we were going to do that through organically growing our production, our margins, our cash flows and the returns to our investors. the returns to our investors. In today’s presentation, I’m going to describe how we performed in 2012, and then how we’re going to achieve this growth and these returns as we think about the future for the company.

So it has been our 2012 performance, certainly the strategic highlight for the company last year was the spinout of our downstream business in recreation and our emergence from that has been as the world’s largest E&P independent company, and we’re focused on only that side of the business, the exploration and production side of the business.

We’re running well. We’ve met our production targets. We’ve made significant progress on growing up our portfolio with divestitures that we’ve announced and ones that we’ve finished off in 2011 and 2012.

We’re running well. We had organic reserve replacement of 156%, which were a company our size is pretty substantial in this business. Our growth projects are on track, our development programs on our major projects. We’ve maintained the strong balance sheet, kept our financial rating secure, and we’ve given back over $8.4 billion back to the shareholders in terms of dividends and share buybacks. And we delivered strong returns to our shareholders, which you can see in this next slide.

So certainly strong performance, on your left you can see the grey bar 20.3%, that’s if you held both your ConocoPhillips and your Phillips 66 shares, but just looking at the upstream portion of the Conoco – of the company, we delivered over 9% return to the shareholders and you can see how that relates to the S&P 500, as well as our peers in this business.

And even if you look over the three-year period, you can see substantial returns to our shareholders, acknowledgment of what we’re doing, the direction that we’re headed, and then we’re on the right path to compete in this business.

Now, if you look ahead, we think about commodity prices, they’ve been quite higher over the last few months, but dropped down a little bit over the last month or so. But this represents the range of uncertainty that’s out there today in the commodity price world, you can see that for Brent WTI price and for Henry Hub and this large range is subject to a number of factors, local supply demand regional and macro-supply demand fundamentals as well as geopolitical factors that are affecting the price today.

We do see some regional dislocations in the U.S. and in North America, when you think about WCS, which is Western Canadian Select so that netback of bitumen prices to the Canadian oil sands projects, and really in North America natural gas liquids or NGL prices, so we see some of these dislocations and disconnects expecting the spreads between some of these commodities.

Now, we think about our plans as we develop our plans for the company looking forward. We tend to be probably at the low end of these ranges, which you see out here, we try to have a fairly conservative, estimate of future prices, so we can set our capital programs and make sure that we’re doing the best to the best in our portfolio. But importantly, we continue to test these different outcomes against various scenarios. So we think about low side and high side prices. So we can make sure, we test our plan against these scenarios and we think about what sort of actions would we take, if we saw a different commodity price environment that is represented by that those large ranges in prices.

But in an uncertain world, the key is diversity and a key is size scale and scope and that’s what we have as a company. We believe that’s the competitive advantage and differentiates us from our competition in our peer group in this business. So we’re not relying on one product, one geography, one geology to succeed as a company.

We employed very diversified investment strategy, but we are focused on organically grown our company, growing our volumes and growing our margins that I’ll talk about. And our goal is to maintain financial flexibility, but overtime we’d like to shift our portfolio to a lower cost of supply. So resilient against swing in these commodity prices. And our plan is as we think about going forward do have slighting up demand so it’s lightly [PM&G] in our Canadian oil sands position, but we’re not in a hurry.

We are going to do the right deal. We are going to do what makes sense for the company, but the important thing is we’re going to drive choices and options in our portfolio. So we can react to the environment that we find ourselves in and continue the growth and development of the company long- term and continue to generate the kinds of returns that our shareholders expect of us.

So I’ll talk a little bit about the environment and kind of who we are, but this is, is despite of who we are today, and we start from an unmatched position in this business as an independent company. We are the largest independent based on reserves and production that I talked about, and we have a diverse asset base that has size, scale and scope with multiple sources of growth that we can achieve across the portfolio.

Today, we are about 1.5 million barrels a day equivalent, we have an 8.6 billion barrel reserves base to operate ourselves, and more importantly, a 43 billion barrel resource space that will drive future growth and development for the company. So significant legacy assets, the technical strength and the balance sheet to withstand the cycles in this business, and really I think a track record of delivering performance to the shareholders. So we have a great place to start, great place to build on for our company, and are committed to continuing the goal on the legacy that we have as a company.

So how we’re going to run the company and what the company looks like today, here is what we’re going to deliver to our shareholders, and I do believe this value proposition is really unmatched in the E&P world today, and it’s one we came out with, in May of last year, when we formed this company, ConocoPhillips, the new independent company. We are going to offer a compelling yield. We are going to ramp up this growth engine and deliver 3% to 5% growth in our volumes and in our margins.

So you take 3% to 5% volume growth, you take 3% to 5% margin growth with a compelling yield, that’s 6% to 10% growth plus that yield, that we are delivering through the dividend. And we are committed to improving our returns as well, not only on an absolute basis, but relative to our competition. That’s our value proposition to our shareholders. That’s what me and my team, are all committed to delivering.

So let me step through that in a little bit more detail for you. First and foremost, we talked to you about our relentless focus on safety and execution. It is about how well you run this business. It is about keeping your employees and the contractors safe. Our performance continues to improve, obviously though, we are never happy until we reach zero incidence across all our business units, and that’s what everybody in the company is focused on delivering. So it is about safety, it’s about operating excellence, it’s about functional excellence and it’s about technology, delivering the things we need to deliver to protect our base and add to the growth programs for the company.

Also key to this execution is your social and environmental performance, and we are raising the bar in our company, it’s important to us. It’s important to make sure that we do things with affinity and we are responsible in the communities that we operate in. We think about the environment. We think about the water that we are using. We think about the technology that we are employing to reduce our footprint and reduce our emissions, and as we think about that going forward, our Sustainable Development Report is an important document that I encourage all our shareholders to take a look at. It describes what we believe in this space and how we’re going to operate as a responsible exploration and production company.

So the next part of the value proposition is this dividend that I talked about and it’s a key to the value proposition that ConocoPhillips offers to the shareholders and a core part of our strategy. We believe in the company to giving a certain percentage of our cash flow back to the shareholders through the ordinary dividend channel is the right thing to be doing in this matured business that we find ourselves in.

You can see what the graph on the right; the yellow graph bars above the red bar are typically the European Integrated Majors. They pay a little bit higher yielding dividend than ConocoPhillips. The two yellow bars below are the U.S integrated companies, and we pay a very competitive and higher dividend in those, and the blue bars you see at the bottom of the dividend yields that the competitive independent companies are paying in this space. So we do believe this differential, what we are for relative to our independent competition.

And we know that it enhances capital discipline and make sure that we spend our capital effectively, and only spend it on the best of the best projects in our portfolio, and its part of this mix that we have to creating strong returns to our shareholders.

Now let me take a minute and talk a little bit about our growth plan, and you see this slide, this really does go to the strategy of the company as well, and this is also reaffirmation of what we talked about in May when we came out as a new independent company and it hasn’t changed.

And if you look at the left side of this bar, you will see how we allocate our capital, and think about the strategy of the company. The bottom 10% is for the base business, that’s to maintain our legacy assets, make sure that we’re putting the investments into maintain the quality of our legacy assets, so we will continue to produce over the long-term.

We will think about 45%. We will put that into development programs. These are wells that we drill in and around these legacy assets, and if you look at the right hand side of the plot, let me take our base maintenance capital and we take our development capital.

We create a situation that, a little over half of our capital, keeps our production flat over the time period that you are looking at. So we’ve got a very rich deep inventory of development projects to maintain our production in a relatively flat level of 1.5 billion barrels a day equivalent. And then, you have the major projects, where 35% or 30% of the capital on top of that they were spending, that provides the top line growth of 3% to 5% production growth that pull the outside roll and our shareholders that we intend to deliver through the portfolio.

So you can see that the, they are not only the base, the development, and the major projects add to these compelling 3% to 5% growth for our company our size. We’re also spending about 15% of our money on exploration appraisal. The organic growth engine that’s going to drive the growth in the development the company long beyond the 2017 time period that you see here on this part. So it’s important to be investing not only in the assets and the development today, but thinking about the future as well. And what is really important as we have clear line of sight to 1.9 million barrels a day by 2017, which I think is a compelling growth opportunity for our company. And differential to our peers and our competition.

Now that growth is real, you say where does that exist in the portfolio is it coming, is it real? And this is going to attempt to try to show you that not only is the growth real, but the margins that are coming with this growth are real as well. And it’s key that these projects that we’re talking about our execution today. And the left hand part of the slide shows the five major growth areas that we’re executing around the world. And this is mostly liquids and oil production and it’s coming from geographies that have a lower effective tax rate and that generates the margin that you see on the right hand side. So you can see there is significantly higher than where base portfolio exist today, which has shown as the red dot. So again it’s not just about growing production, it’s about growing high margin production that’s the key winning in this business.

But we’re not just growing for growth state because I said, return on capital is important, you are going to investing in things that are moving the return needle up both on an absolute basis and on a relative basis and this compares the ROC the return on capital employed for our company relative to our largest independent E&P peer group.

Now the integrated results are on here, because the integrated companies have chemicals and refining and so not really a fair comparison relative to where our company is now as an independent E&P company. But we do relatively well on this metric, but we want to see our returns growth. We want to see our return on capital employed improved and again both on a relative basis, we want to be at the top of this curve, and we want to be beating the competition. So how we do that? Well, it’s a focus on cost, it’s a focus on ongoing efficiency, and as we shift our capital and rebalance the portfolio towards some of the higher returning projects away from the more capital intensive projects, we will see this return move up, and that’s our value proposition to our shareholders. That’s what we are all about doing.

So how we’re going to do that? What are the pieces and the components of that? You start with your base production; remember that was the piece that’s declining in our portfolio about 10% per year, and it’s important to legacy you got to protect that base production, and we do that through a very focused operating excellence program that we apply globally around the whole world. We are not just talking about one part. We share experiences between assets and between operating areas to make sure that we are employing the best technology and the best opportunities to make sure that we are sharing those understandings across the globe. So it is about protecting our high quality base assets.

Then you move to the development side, that’s with that next wedge that 45% of our capital that’s going into the business and also the development programs. Those are all wells that we are drilling in and around our legacy assets. That does comprise about 45% of our capital, but look at what it adds on the right hand side is at 600,000 barrels a day by 2017. About 250,000 a day comes from our legacy conventional business, and about 200,000 a day comes from our three large unconventional businesses; the Eagle Ford, the Bakken and the Permian. But you see by 2017, we’ll have additional contributions from other unconventionals that we have in early stages of development today. So we have years and years of the development inventory and opportunity spread throughout our operations globally in a very diverse fashion.

Now, let me move to the major projects that represents the 30% of the capital that we are investing and we’ll give you some highlights about where we are spending our money. First, you’ll see that it’s mostly outside of the lower 48 areas, but they do provide a step function change in our growth that I talked about earlier.

If you look at the right hand side, we got about 400,000 barrels a day by 2017. A lot of people said, well, you’ve got to wait for the growth in ConocoPhillips, where you don’t. The growth is coming. The growth is coming in, because we exit the year in 2013, the growth is coming in 2014. The growth is coming in 2015, 2016, and 2017. So you don’t have to wait for that growth and the margin improvement for our company.

And if you just look in 2014, we’ll add 150,000 barrels a day of new production to our portfolio. So that’s a little bit about what we are doing over this five-year timeframe to generate the growth and development of the company. Let me talk for a minute about the exploration. What we are doing to try to continue to generate options and traces for the company to provide growth in 2017 and beyond. And it really is organic growth for the company from the exploration channel.

Our strategy really is to have a value-based approach that combines both conventional and unconventional exploration in our portfolio. Today, we are about 50-50 between conventional and unconventional exploration, but about two-thirds of that located in the U.S. and about one-third of that’s internationally. Now, we are working hard over the last few years to rebuild our exploration portfolio and now it’s an important time. We’ve got to put the runs on the board in 2013 and 2014.

We talked last year and in years passed a lot about the unconventionals, but I want to tell you a little bit about our conventional program, because it’s starting to gain momentum as well. And if you follow the news recently, we announced some pretty significant two deepwater Gulf of Mexico discoveries over the last couple of months. Let me talk about a little bit of that. The Gulf of Mexico, the deepwater is a focus area for the company. We’ve been rebuilding our position there over the last couple of years.

And now we are moving into a stage where the inventory is ready to start drilling. And we’ve announced two pretty significant discoveries, the Shenandoah that was an appraisal well. It was a follow-up to a 2009 discovery a pre-Macandos discovery. And that discovery well had more than 300 feet in net pay. But the recent appraisal well, which is about a mile away from the original discovery well at over a 1000 feet of net pay. So we’re pretty excited about the opportunity that the Shenandoah well and the prospect that have generated for the company.

In the same neighborhood is the Coronado well, which accounted over 400 feet of pay and this was a recent discovery here just in the last couple of months. We’re now back on that prospect drilling in an appraisal side track. So we focused a lot of our acreage acquisition you can see the lips there into this neighborhood. We identified it early on three, four years ago. You can see we developed a pretty sizable acreage position in and around this area. We think it offers a lot of potential in the deep water Gulf of Mexico.

Our plans that are drilled five day wells per year. Right now, we’re drilling of the Arden well with a partner and more importantly from my perspective as we spudded with the Thorn prospect, which is our Conocco Philips first operated well in the deepwater Gulf of Mexico since about 2004, 2005. So we are back and that’s a testimony to the strength of the organization, the planning we are now back in operating the border Gulf of Mexico wells.

So we are encouraged by the portfolio, the deepwater and how it’s playing out. And you should expect to hear more from us as time plays out in this important problems.

So we’re growing in the deepwater and other areas we are as it looks back a couple of years that we’ve made quite a lot of progress in pouring up the portfolio. And that is really to enhance and optimize the portfolio, so we can take these, this cash either send it back to the shareholders through some of the distributions that we’ve had over the last couple of years. But more importantly, we invest that capital back into the capital program to grow and develop the company over the long-term.

We closed over $20 billion worth of dispositions. We have another $8.5 billion that have been announced and we expect to close over the course of this year. These represent non-strategic mature assets with limited growth, but they were sold to buyers who really saw them as a strategic asset in their portfolio. So we’ve got very good fair deals, and they’ve been tax efficient for us. And again we are going to take those proceeds and we are going to reinvest that back into higher margin opportunities and projects that will just strengthen our cash flow, and strengthen our cash position over the next couple of years, we can afford and pay for the capital program that we’ve laid out.

And as I think about this going forward, there will still be some portfolio of things that we are doing. We are going to try to rebalance the portfolio as I talked a little bit about earlier, probably not larger programs as what you are seeing here, but we will continually scrub the portfolio and make sure that we are keeping the assets that have the right strategic sense for us, right investment opportunities and they are competitive in the portfolio. Now, part of all these key is your financial flexibility and another asset in the company is our balance sheet and it’s key to maintaining our strong balance sheet.

We ended the first quarter of this year with about a little over $5.4 billion of cash. And as I talked about those remaining proceeds, we expect to come in by $8.5 billion, that’s going to supplement our capital spend, and continued to put some cash on the balance sheet to provide that flexibility over the next couple of years to fund and develop that capital program that we’ve announced.

Our current debt level would about $22 billion, that’s pretty comfortable for where we are at today that’s a debt to cap around 30%, which is pretty comparable to our peers. Longer-term we might reduce that down a little bit in the 20% to 35%, but we don’t see the need to do that in the short-term, and as you can see in the graph at the right, we place pretty well relative to our peers.

So that’s a bit of detail about the value proposition and how we’re going to deliver that, what we are going to focus our investments on, what we are trying to do to deliver this 3% to 5% margin and 3% to 5% production growth, that’s what we’re about. We are focused on execution. We are focused on running the business well. It’s about ensuring all of our employees and contractors go home safe every night.

We are efficiently running the business as best we can with the highest amount of uptime. We are protecting the environment. The dividend remains the priority for the company. We will continue to grow our dividend overtime as our cash flows grow. We’re going to be delivering real production, real margin growth for this company, and we are focused on improving our returns. So it is the full package. That’s what we’re doing. That’s what we offer to our shareholder base.

So when I think about the next couple of years, a little bit of highlights for you to consider where we’re headed. I think you can see a pretty significant inflection point coming in our company in 2013. So as we sell the assets that we’ve identified and we core up the portfolio, we do reach a low point in our production, but we come out growing in the fourth quarter of 2013, in this year, and the growth that I showed you in 2014 and beyond. We’re really focused on closing these assets sales. They are important. They are important to add the flexibility to the company, put the cash on the balance sheet, so we can fund these incredible development programs that we have in our portfolio.

We’re going to have some very key startups coming this year and into next year, so it’s important to keep those on track, keep those milestones, and keep the organization going and delivering those safely, efficiently under budget, and ahead of their timelines. You will see some more results on the exploration side, both on the conventional and the unconventional as we think and execute our programs over the next two, three, four, and five years. And so as our volumes start to grow, we still do in the fourth quarter of this year and you are going to start to see the margin grow as well that we talked about. But I think when we do that the outside world is going to recognize the power of the portfolio and the capability of our company in terms of delivering on our plans and really outperform and outperforming the competition.

So this is important part of our legacy of our company. It’s kind of where – it’s we’re all in today. So we talk about some of the changes that we are tying to implement in the company on the culture where we are heading, the new independent E&P company. But it’s important to remember our past, it’s important to remember our traditions and important to remember our legacy, and this describe that in one word and that’s our spirit values.

So it is about safety, it’s about the people, it’s an integrity, its responsibility, its innovation and its team work. And that’s really key to what we are driving as a company and that hasn’t changed and that’s our commitment to our shareholders going forward as we execute and deliver on the programs that we’ve talked about today that are going to grow and develop this company for the very, very long future.

So with that let me turn to the business of the day. There will be some time if you end, you’ve got some questions which you would like to ask me about our 2012 performance and our plans going forward. But right now I’d like to call the meeting to order. We’ll first present the three proposals submitted by management for approval and then we’ll ask each of the stockholder representatives present today to come forward and present their proposals.

Now, we found in the past the best way to ensure we have plenty of time at the end for comments on any other proposals, as well as questions that you may have for me is to save those comments and those questions for Q&A session after the proposals have been presented.

After that Q&A period, we’ll take ballots from everyone in the audience. We haven’t already voted by proxy and announced those results of the voting. So Janet, can you please report whether our quorum is present for the conduct of business.

Janet Langford Kelly

Our Inspector of Elections reports that stockholders entitled to cast more than 85% of the vote eligibly, to cast at the meeting are present in person or represented by proxy. Therefore quorum is present and the meeting may proceed.

Unidentified Company Representative

Thank you, Janet. So the meeting will now consider the fixed business items on the agenda. We will present each of the business items one at a time. When the stockholder presenting the proposal or a representative is recognized, the meeting host will provide them with a microphone. Please state your name and verify that you’re a stockholder or a representative of the stockholder. If you are a representative, please state the name of the stockholder that you represent.

So item one on the agenda is a proposal to elect 10 directors for a term of one-year. As indicated in the proxy statement, the Board of Directors recommends that the stockholders elect the director nominees. Item two on the agenda is a proposal to ratify the appointment of Ernst & Young as the company’s independent registered public accounting firm for 2013. The Audit and Finance Committee reappointed Ernst & Young to serve as ConocoPhillips’ independent registered pubic accounting firm for 2013 and seeks ratification of that appointment by the stockholders today. As indicated in the proxy statement, representatives of Ernst & Young are here today, and they are available to answer questions you may have for them during the stockholder question-and-answer session.

Item three on the agenda is the advisory proposal to approve the compensation of the named executive officers as disclosed in the proxy statement. As indicated in the proxy statement, the Board of Directors recommends that the stockholders vote in favor of this proposal.

Item four on the agenda is a proposal for the company to provide an Annual Report on payments used for lobbying and grassroots lobbying and perhaps where it’s lobbying. This is Ms. Donna Meyer here to introduce this proposal and make a brief supporting statement.

Donna Meyer – Mercy Investment Services


Ryan Lance

Are you in the back?

Donna Meyer – Mercy Investment Services


Ryan Lance

Okay, please, please go ahead, yes. You are fine. Thank you or kindler, friendlier kind of going forward please.

Donna Meyer – Mercy Investment Services

I am sorry about that.

Ryan Lance

No worry.

Donna Meyer – Mercy Investment Services

And good morning everyone, good morning Mr. Lance.

Ryan Lance

Good morning.

Donna Meyer – Mercy Investment Services

Board members, fellow shareholders, my name is Donna Meyer. I live here in Houston and work for Mercy Investment Services, but I am pleased to be here again this year at this meeting on behalf of Walden Asset Management, and 15 other coal filer. Walden is based in Boston, and they are a long term shareholder of ConocoPhillips, presently owning about 332,000 shares for their clients.

Walden really wants to go and record as appreciating ConocoPhillips leadership on environmental, social, and government issues. We also appreciate the dialogues that we’ve had with ConocoPhillips over the years on management, the issues related (inaudible) people traits, oil sands, fracking, as well as political spending and lobbying. Investors and management have a great feel to be proud off, regarding our company. As you see in the proxy, our resolution seeks to expand our company’s disclosure on lobbying, describing what our lobbying priorities are, how much we spend on lobbying, and how we lobby through trade associations or work to influence state policies.

We are very happy to report today to the board and shareholders that in light of the April 25th disclosure by our company, both the resolution and the company’s response to the resolution are albeit out of date. The company has moved into a new era of disclosure and we hurriedly command them for this forward motion. For example, the disclosure on political spending is excellent. We see 18 months of reports on political spending and learn that no shareholder money has been spent on elections in those last 18 months.

In that trade associations where we are members cannot use or reduce for electioneering purposes, and that there is strong oversight by both management, and the board of our political spending. Finally, we’ve learned that ConocoPhillips is not a member of our contributor to [alike] the controversial organization that 25 companies have withdrawn from because of its active lobbying against renewable energy. Why then have a resolution before provoke simply put the company has roomed for improvements. For example, in our report, there is no summary of the issues, ConocoPhillips focuses on in lobbying. So we don’t know what our lobbying priorities are?

We also appreciates that ConocoPhillips like other companies files a quarterly report with the government, detailing the quarter’s expenditures to influence legislation, but it’s hard to decide for that without direction, but most important ConocoPhillips, does not disclose the specific dollar amount of reduced payments to trade associations that engaging lobbying nor the portion used for lobbying.

For example about 50% of reduced dollars to the U.S. Chamber of Commerce are send on lobbying yet we say nothing about this instead we have 15 -13 actually trade associations where we pay over 50,000 induced, but we have no sense for the size of these dues, is it 50,000, 500,000 or is the percent of the money spend on lobbying by these trade association. As a result, shareholders have an incomplete picture of how that company’s funds are used to influence the legislative process.

This is important since in the last three years, ConocoPhillips, and of course that was the oil company ConocoPhillips spend a significant $43 million on lobbing, and ConocoPhillips is a member of – and sit on the board of some major trade associations, they play a substantive role in shaping elections and public policy.

For example our senior VP for government affairs sits on the Board of Directors of the U.S. Chamber of Commerce, which is this country’s largest lobbying group between 2009 and 2012, the Chamber spent more than $500 million on lobbying.

This is an integrity issue for ConocoPhillips, because the Chamber has an active campaign opposing environmental regulation and actually sued the EPA when it attempted to exercise its authority regulate certain greenhouse gas emissions. Yes, climate change and greenhouse gas reductions are not peripheral issues to ConocoPhillips, but are central to its business strategies, goals, and product developments.

In summary, as investors we believe that enhanced lobbying disclosure will provide information necessary to evaluate any business risks associated with the company’s efforts to influence the regulatory and legislative process. If ConocoPhillips expands its lobbying disclosure, the investors will be happy to withdraw the resolution going forward. We ask shareholders to vote for its resolution, number four, which would improve the company’s policy and procedures, governing lobbying. Thank you.

Unidentified Company Representative

Thank you, Ms. Meyer. The Board’s response to this proposal begins on Page 81 of the proxy statement and the Board recommends that you vote against this proposal. Item 5 on the agenda is a proposal for the Board to set goals for reducing total greenhouse gas emissions from the company’s products and operations, Steven Heim with here today to introduce this proposal and make a brief supporting statement, Mr. Heim.

Steven Heim – Boston Common Asset Management, LLC

Hello. Good morning, Mr. Chairman, Board of Directors and fellow shareholders. My name is Steven Heim and I work for Boston Common Asset Management, but I am here today on behalf of the Presbyterian Church (U.S.A.) through the general assistance fund of the Church’s Board of Pensions, which is a stockholder in ConocoPhillips. This proposal was resubmitted, proposal five on page 82 out of our deep concern about climate change, an issue we have worked on since 1987. This proposal essentially asked our company to adopt quantitative goals based upon current technologies for reducing total greenhouse gas emissions from the company’s products and operations, and report to the shareholders by September 30, 2013 on our plans to achieve such goals.

Such report will [need] proprietary information to be prepared at a reasonable cost. We are mindful of the company’s efforts to become more energy efficient and to reduce greenhouse gas emissions. We know that as the company has stated in its response to this resolution that ConocoPhillips operates in many countries that already have regulations in place regarding greenhouse gas emissions. However, none of this preclude is setting a company wide goal or being transparent about goals sets for divisions or facilities.

We believe our company’s shareholders face significant financial and competitive risk if we are unprepared to meet existing and impending requirements to reduce the greenhouse gas emissions from our operations and products. Recently, the SEC issued interpretive guidance on existing SEC disclosure requirements relating to climate change. The SEC noted that “for some companies the regulatory, legislative and other developments could have a significant effect on operating and financial positions”

The company wide quantitative reductions goals for products and operations provides the clear signals to investors in ConocoPhillips is seriously preparing for low carbon future. Secondly, we are concerned that our company is lagging behind its peers. For other company such as (inaudible) of such companywide emission targets at least for operations. They two are global companies operating at a variety of regulatory environments. ConocoPhillips is also developing internal targets for its business units.

Moving a side, the position that these various targets could be added up to represent the companywide target as the individual unit targets are not disclosed. In fact in our company’s 2012 response to the carbon disclosure project, the company said that in 2011, it has climate change action plans, involving scope one, and to ambition that includes some projects related to improving energy efficiency reducing [JS emissions].

The percentage of emissions addressed by these projects were 30% for upstream activities and 51% for downstream activities. However, it was noted that Brazil using 2010 as a base share we are not controlled by an overall voluntary corporate goal. No information was included about any goals per activity or even weather the results were better or worse than expected. Results were reported at a one year reductions for upstream of 0.9% and only 0.1% for downstream.

We noted that there is a time of transformation and transition for ConocoPhillips and as the future landscape, all to be changing, however we still believe setting goals is essential to share and shareholders that our company can survive and thrive in the current and proposed regulations of greenhouse gases.

Our experience with the setting goals helps the company to make progress in that transparent reporting provides investors with the tools to evaluate performance overtime. And access effectiveness of mitigation measures implemented by our company.

Thank you for the opportunity to present this proposal this morning.

Ryan Lance

Thank you, Mr. Heim. The Board’s response to this proposal begins on Page 83 of the proxy statement, and the Board recommends that you vote against this proposal. Items 6 on the agenda is a proposal for the company to amend its equal employment opportunity policy is Mark Edmiston lying here to introduce this proposal and make a brief supporting statement.

Nick, I was told, he did not make it today. Okay, the Board’s response to this proposal is found on Page 84 of the proxy statement, and the Board recommends a vote against this proposal. So I will take general questions and comments from the stockholders. If you have a question or comment, you may approach the microphone nearest to you, and our host will be available to assist you. Please note that if any stockholder has not delivered his or her proxy, you may cast your vote by ballot at this meeting.

If you’ve already submitted a valid proxy, your vote will be cast as indicated on your proxy card. You do not have to vote a ballot, unless you wish to change your prior proxy vote. If you need a ballot, please stand or raise your hand, and then meeting hosts will provide you with a ballot. And at the end of the question-and-answer period, we’ll go ahead and collect all those ballots. So please I’ll open it up to you any questions or comments from our shareholders.

Question-and-Answer Session

Jimmy Dunne

Good morning. My name Jimmy Dunne. I’m a stockholder. I spelled it out, because I spoke last week at (inaudible) session on the transfer we’ve had my last name spelled Dom. All right, anyway, I’m here to say that I think that we always have to make a choice we are seeing between buying back stock or paying stock dividends, right. I think that you should always pay the dividends. I think that will benefit the stockholders and the company most of all, as people see the stockholders – the stock dividends going up, they are more likely to buy the stock. This is especially always for senior citizens who may be getting 0.01% in their bank accounts. So the stock buybacks, I don’t see that they really benefit the stockholders much at all. They often do not raise the stock price at also, let’s go with the dividends 100%. I think that’s the way to go for the company. Thank you.

Unidentified Company Representative

All right, thank you. As I mentioned, the dividend is a compelling part of our value proposition and one that we expect to continue to grow with time. Thank you. Any other questions? Yes, please.

Steven Heim – Boston Common Asset Management, LLC

Good morning again. My name Steven Heim. I’m a Managing Director for Boston Common Assets Management. I’m speaking on behalf of the Sisters of St. Joseph of Springfield Massachusetts as a shareowner in ConocoPhillips. Mr. Chairman since 2006 Boston Common Assets Management and Church to rather benefit trust. It helped to lead a group of institutional shareowners that have raised returns about ConocoPhillips operations that impact indigenous people (inaudible) Southwestern U.S., and we are broadly around the world. I come every year since 2006 to our Annual Meeting to speak on this topic.

We have urged our company to protect this reputation and its future ability to operate in an indigenous nations and communities by adopting a transparent and accountable corporate policy only operating in areas, where the company has secured the free, prior informed consents of affected indigenous peoples. This profit is collectively to file shareholder proposals in 2006, 2007, and in 2008, due to progress by the company and it opens to consider these issues, we have not filed share proposal since then.

In 2009, ConocoPhillips began to report in detail on it’s relation with indigenous people in its sustainability reporting and meets regularly with concerned shareholders and stakeholders. In part due to our efforts, ConocoPhillips now meets with concerned shareholders and stakeholders on other critical topics such as natural gas, shale energy and hydraulic factoring. Our company has publicly stated “for our exploration, production projects, we have publically pledged to indigenous inhabitants in our areas of our operations in Peru to obtain complete understanding agreement of our activities with all communities prior to conducting operations.

This is before ConocoPhillips in October 2012, announced its plans to end the company’s exploratory operations in Peru as part of its global asset restructuring, but the statement regarding Peru is still significant. We applaud our company for going further in July 2011, when it revised its global human rights policy to recognize the rights of indigenous peoples. The new policy states the company’s approach to engagement with indigenous communities and locations where they are important stakeholder group for our operations is consistent with the principles of the International Labor Organization Convention 169 concerning indigenous and tribals peoples and the United Nations Declaration on the Rights of Indigenous Peoples.

We also commend our company for seeking to protect the biodiversity in one Amazon region in Peru, when it asked the government successfully to redraw ConocoPhillips concession map for Block 123 in order to exclude the Pucacuro nature reserve. We highlight this because of abundant biodiversity is necessary for indigenous people to pursue their traditional livelihoods.

In conclusion, we encourage ConocoPhillips on its path to fully and transparently implement a free, prior and informed consent policy globally, similar to its pledge to meet with indigenous communities in Peru. We would like our company to both obtain their consent and integrate the views and aspirations of indigenous peoples in developing decisions consistent with the principles in the UN Declaration on the Right of Indigenous Peoples and ILO 169.

In the long-term we believe this is critical component with ConocoPhilips ability to maintain its social license to operate and therefore gain access to net reserves. The risks of extractor companies infringing instrument rights to indigenous peoples is well known, we believe ConocoPhilips is now putting a place corporate policies to mitigate these risks and avoid doing harm. Therefore my question Mr. Chairman given our company’s new policies to respect the human rights of indigenous peoples well that company move towards greater transparency and independently verify their implementation like ConocoPhilips does another critical areas of the company. Thank you.

Ryan Lance

Thank you Mr. Graham, well as you mentioned we’ve exited our proven Ecuador position which you mention in your question I guess it is important for our company and our commitment as we will do concentration of all the communities everywhere we operate that’s a core part of what we do it’s important from our sustainability perspective and an important part of how we think about our developments globally, not just in the U.S. but in all the countries around the world. So consultation, with those effective communities is important part of our planning process.

Unidentified Analyst

Yes sir.

Steve Mason

Sorry I have the wrong color name tag as well my name is Steve Mason I’m coordinator of socially responsible investing activities for Church of the Brethren Benefit Trust our offices are located in Elgin Illinois and we are the lead shareholder in the continuing conversation regarding the rights of indigenous people in the areas where our company does business and I stand before you I’m not going to recycle my colleague as we have enjoyed the change in the nature of our interaction as a shareholder group with our company over the years and we affirmed that we look forward to continuing conversations and we believe that the interests and concerns that we bring to the table are helpful to our company.

And as our company explores its growth opportunities, it is also mindful of the fact that it’s becoming member of the community where there are people already living, and to be attentive to the concerns and issues that that community has as you would become a community member.

We look forward to continuing conservations with the company, and we appreciate the opportunity for input, as the company brings its response in this important area. Thank you, and it’s all read, I won’t ask you a question.

Unidentified Company Representative

And I’m wondering, thank you. Any other questions?

Gab Plemich

My name is Gab Plemich I’m a shareholder – I’ve been a shareholder with Phillips 66 since 1965.

Unidentified Company Representative

Thank you.

Gab Plemich

I’m real thrilled when you merged together ConocoPhillips. And I’m thrilled with the way it has been separated. It looks like two companies now are going to be real strong. I don’t represent anybody else except myself. And I just wanted to know how pleased I am with the approach you are doing with the dividends, s lot of those dividends?

Unidentified Company Representative

Thank you.

Gab Plemich

I’ve brought with me today a young lady, she is just purchased ConocoPhillips stock.

Unidentified Company Representative

All right.

Gab Plemich

It’s her first stock that she has purchased and I wanted her to be at the meeting today that she had operates and really thank you for the privilege of saying what I said. Thank you.

Unidentified Company Representative

All right, thank you very much. Thank you for joining ConocoPhillips. All right any other questions? All right. Thank you. I really appreciate your input and certainly if you have any further questions or comments following the meeting please come to the front of the room here representatives of the company would be happy to discuss any of those questions that you have. So now will take a vote on all the proposals properly presented before the meeting to declare today so I declare that the polls are now open. So if you not completed your ballots please do so at this time we have one here. The meeting also will collect those ballots and please pass them to the arm that will be collected. Are there any other ballots you need collecting no.

So the inspectors of election have filed certifications of the preliminary results of the voting. So Janet would you please read those results.

Janet Langford Kelly

Mr. Chairman it’s a preliminary results based on the voting of shares represented by valid proxies on file and tabulated at the meeting this morning. So that each of the 10 nominees for election have been elected as directors to serve a 1 year term expiring at the next year’s annual meeting. Each director nominee received at least 96% of the votes present at today’s meeting.

The appointment of Ernst & Young as the independent registered public accounting firm for ConocoPhilips for 2013 has been ratified having received the favorable vote of more than 91% of the votes present at today’s meeting. The advisory approval of executive compensation has passed with more than 82% of the votes present at today’s meeting cast in favor of the proposal.

The stockholder proposal for the board to provide a report on payments used for lobbying and grass roots were all lobbying has not passed with more than 76% of the votes present at today’s meeting at standing or cast against the proposal the stockholder proposal for the board to set goals for reducing total green house gas emissions and company’s products and operations has not passed with more than 75% of the votes presented today’s meeting abstaining or cast against the proposal. As no representative appeared to present the stockholder proposal to have the company amended to equal employment opportunity policy to prohibit discrimination based on sexual orientation and gender identity or expression that proposal was not placed before the meeting today.

Mr. Chairman that concludes the report of preliminary voting, details of preliminary results will be available for all our stockholders in our filings with the SEC within four business days. Stockholders may also obtain the voting results by calling or writing the office of the Corporate Secretary.

Ryan Lance

Thank you, Janet. So that completes our business of today, and what we have scheduled for the day. So the meeting is now adjourned and concluded, so hopefully, thank you for attending.

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