Safe, Reliable, Responsible Operations

Safety is always our first priority and the starting point of our SPIRIT values. We are committed to protecting the health and safety of everyone who has a role in our operations and the communities in which |we operate. We are focused on optimizing resource recovery and maximizing efficiency in producing fields, while maintaining the highest levels of environmental stewardship. Our reliable and responsible operations help us to capture value and maintain a strong reputation.

Returns Enhancement

We strive to improve our return on capital employed (ROCE) and other capital efficiency metrics by allocating investment funds to the highest-returning opportunities in our portfolio. We have directed the majority of our capital to higher-margin production, including North American liquids and major international developments. We continue to shift investment away from North American natural gas while maintaining our ability to increase such investment when market conditions improve.

Shareholder Distributions

Since ConocoPhillips’ inception in 2002, we have increased shareholder dividends every year. On a cumulative basis, we have repurchased 460 million common shares for $33 billion as of Dec. 31, 2011. Such actions have provided our shareholders total returns that exceed our peer group average over the past five-year period. We also announced a further share repurchase program for up to an additional $10 billion commencing in 2012, broadly tied to asset sales.

Portfolio Optimization

ConocoPhillips has built a substantial asset portfolio that extends across the globe. We are optimizing this portfolio by focusing on assets that offer the highest returns and growth potential while selling nonstrategic holdings. We have announced plans to divest up to $10 billion in nonstrategic assets from 2012 onward.

Strong Balance Sheet

A strong balance sheet provides the financial flexibility needed to capture emerging opportunities and strategically adapt to changing markets. 

Controlling Costs and Expenses

Since we cannot control the prices of the commodity products we sell, we place a high priority on controlling operating and overhead costs, within the context of our commitment to safety and environmental stewardship. We monitor these costs using various methodologies that report results to senior management monthly, on both an absolute-dollar basis and a per-unit basis. Managing operating and overhead costs is critical to maintaining a competitive advantage.

Project Investment

We operate in a capital-intensive industry. As a result, we invest significant capital to explore for new oil and gas fields, develop and maintain newly discovered and existing fields, and construct pipelines and LNG facilities. We invest in projects that are expected to provide a strong financial return on invested dollars.

Resource Addition and Conversion

Our objective is to organically replace reserves at competitive finding and development costs, converting our resource base into reserves. We primarily add to our resources and proved reserves in the following ways:

• Successful exploration and development of new fields and resource recovery from existing fields.
• Application of new technologies and processes to improve resource recovery rates.
• Acquisition of new fields and prospects.

Through a combination of these methods, we have successfully maintained or added to our resource and proved reserve base and anticipate doing so in the future. In the five years ended Dec. 31, 2011, our organic reserve replacement was 102 percent, excluding LUKOIL. 

Enhancing our Exploration Portfolio

We are continuing our efforts to deepen and high-grade our portfolio by expanding our deepwater footprint, adding high-impact conventional opportunities in both proven and frontier plays, and growing our positions in unconventional plays both in North America and internationally. By focusing on exploring and appraising only the best opportunities, we expect to continue discovering and delineating substantial resources to drive future growth.

OECD-Focused Asset Base

Access to oil and gas resources has become increasingly difficult for the industry as direct investment is restricted in some nations, while fiscal and other terms in some countries can make projects uneconomic or unattractive. Our approach is uniquely focused around politically stable OECD countries, where approximately 80 percent of our reserves are located. These countries provide a lower-risk legal and business environment that allows us to generate more predictable returns on our investments.

Developing and Retaining a Talented Workforce

We strive to attract, train, develop and retain individuals with the knowledge and skills to implement our business strategy, and who also support our values and ethics. Throughout the company, we provide continuous education, development and technical training of our employees. Newly hired employees participate in structured development programs designed to accelerate their technical and functional skills. Experienced personnel undergo career-long training in their technical fields and ongoing personal development.