Exploration and Production

WESTERN CANADA

ConocoPhillips is one of the top three natural gas producers in Canada. In 2009, production averaged 217 MBOED. Its operations are located primarily in Alberta and British Columbia, with some production in Saskatchewan. The company also owns approximately 80 natural gas processing plants in the region.

North
As of Dec. 31, 2009, the company held leasehold rights in 5.1 million gross acres (3.3 million net acres) in the North Area, which encompasses assets in the Deep Basin comprising the Elmworth and Grande Prairie assets, and in Northern Alberta and British Columbia, the Canadian foothills and Kaybob in westcentral Alberta.

ConocoPhillips is the largest operator and producer in the Deep Basin, located west of Grande Prairie in northwestern Alberta and northeastern British Columbia. The company operates about 90 percent of its activity in the area. The basin provides productive potential from 14 prospective geological formations.

The company has an active Deep Basin drilling program, which consisted of approximately 64 wells in 2009. Production in 2009 averaged 312 MMCFD of natural gas and 11 MBD of liquids. The company holds significant working interests in seven major natural gas processing facilities in this area. The primary processing facility is the ConocoPhillips-operated Elmworth Plant near Grande Prairie. ConocoPhillips holds an 87 percent interest in the Elmworth facility.

In Northern Alberta, British Columbia and the Canadian foothills, ConocoPhillips is one of the largest operators in the region. In 2009, it produced 109 MMCFD of natural gas and 3 MBD of liquids.

In Northern Alberta and British Columbia, the main producing horizons consist of shallow natural gas in the Bluesky/Gething and Montney formations in the Ring Border Area. The Canadian foothills extend from the central foothills area northwest of Calgary, Alberta, to northeast British Columbia in a 15- to 20-mile-wide band along a 250-mile expanse of the Rocky Mountains. Production is focused on two main components: deep sour gas production in the inner foothills and sweet gas production from the outer foothills.

Activity in Kaybob is split between downspacing and development drilling in the Jurassic and Lower Cretaceous formations, as well as trend extension and concentric exploration in several Mannville zones. Significant recompletion potential exists in secondary targets in shallower zones. In 2009, the area produced 253 MMCFD of natural gas and 6 MBD of liquids, and 49 wells were drilled.

South
As of Dec. 31, 2009, the company held leasehold rights in 4.8 million gross acres (3.5 million net acres). The South Area encompasses assets in the Canadian Prairies in southern Alberta and Saskatchewan and central Alberta.

The company’s holdings in the Canadian Prairies are made up primarily of shallow- and medium-depth natural gas assets, including all of the Horseshoe Canyon coalbed methane assets. With virtually year-round access and less than 7,500-foot-depth targets, this area offers lower-cost, low-risk development opportunities. In 2009, ConocoPhillips’ net production was 202 MMCFD of natural gas and 7 MBD of liquids.

ConocoPhillips’ assets in the central Alberta operating areas are characterized by multi-horizon reservoirs at medium depths ranging from 6,500 to 10,000 feet. An active capital program is under way, targeting development and moderate-risk extension drilling opportunities. Numerous new and exciting prospects have been made possible with the application of multi-fracturing technology in horizontal wells. Average net production in 2009 was 186 MMCFD of natural gas and 13 MBD of liquids.

OIL SANDS

ConocoPhillips holds nearly 1 million net acres of land in the Athabasca Region of northeastern Alberta. The significant bitumen deposits on these lands are estimated to contain more than 15 billion net barrels of resources, making ConocoPhillips the holder of one of the largest land and resource positions in the region.

The majority of ConocoPhillips’ bitumen production in Canada is extracted via steam-assisted gravity drainage (SAGD) technology. SAGD involves injection of steam into the reservoir, effectively liquefying the heavy bitumen, which then is recovered and pumped to the surface for further processing.

ConocoPhillips’ net bitumen production from the Foster Creek, Christina Lake and Surmont SAGD operations has grown by an average of 35 percent over the past two years to 50 MBD in 2009, second among SAGD producers in Canada. Ongoing development projects and further opportunities in these fields and other properties in its portfolio have ConocoPhillips wellpositioned to grow its SAGD production by more than 15 percent compounded annually over the next 10 years, and to continue as a leading SAGD producer in Canada well into the future.

FCCL Partnership
Operator: Cenovus Energy Inc. (50.0%)
Partner: ConocoPhillips (50.0%)
In January 2007, ConocoPhillips closed on a 50/50 upstream business venture between ConocoPhillips and Encana Corporation (now Cenovus Energy Inc.). The partnership includes the Foster Creek, Christina Lake, Narrows Lake and other properties located on the eastern flank of the Athabasca Trend. The partnership is progressing expansion plans with an ultimate goal of increasing gross production to over 500 MBD.*
*Operator's forecast

Foster Creek
Production at Foster Creek in 2009 increased by over 40 percent from 2008, with phases 1D and 1E coming on line in late Q1 2009. In mid-2009, cumulative gross production from the Foster Creek Field exceeded 100 million barrels since commercial production commenced in 2001, making it the first SAGD project in the industry to reach this milestone. In addition, a new daily gross production record of over 112 MBD for this field was achieved in February 2010. A regulatory application for three more phases of expansion (1F, 1G and 1H) was filed in 2009, which is expected to increase gross production from Foster Creek to 200 MBD* by 2017.

Christina Lake
Production at Christina Lake in 2009 increased by over 50 percent from 2008, with the ramp-up of volumes from Phase 1B, which was brought on line in 2008. A new daily gross production record of over 17 MBD was achieved for this field in October 2009. Construction of Phase 1C continued in 2009 toward a target completion date of 2011. Sanction of Phase 1D occurred in the fourth quarter of 2009 with a target completion date in 2013. A regulatory application for three more phases of expansion (E, F and G) was filed in 2009, which is expected to increase gross production from Christina Lake to more than 200 MBD* by 2019.

Narrows Lake
Narrows Lake is an emerging opportunity within the FCCL partnership. In January 2010, the partnership expanded its Narrows Lake acreage holdings by over 40 percent to 25,000 gross acres. The regulatory application for Narrows Lake is expected to be submitted in 2010 with potential development in two or three phases. Production at Narrows Lake is expected to be onstream within the next 10 years and grow to more than 100 gross MBD.*

Surmont
Operator: ConocoPhillips (50.0%)
Co-venturer: Total (50.0%)
Commercial production from Phase I of Surmont began in late 2007. In 2009, production increased by over 25 percent from 2008. Cumulative gross production at Surmont Phase I reached 10 million barrels in January 2010, and a new record for gross weekly average production of 19 MBD was achieved for this field during February 2010.

In late 2009, ConocoPhillips sanctioned the Surmont Phase II project with a targeted first production in 2015. Gross production at Surmont is expected to exceed 100 MBD by 2017. Further opportunities for expansion at Surmont are being progressed.

Thornbury, Clyden and Saleski
Operator: ConocoPhillips (100%)
ConocoPhillips holds other lands in the Athabasca Trend that contain substantial bitumen resources. These resources are being evaluated through delineation drilling, as well as 2-D and 3-D seismic surveys. The resources are expected to be developed using SAGD technology.

Syncrude
Operator: Syncrude Canada Ltd.
Co-venturers: Canadian Oil Sands Ltd. (36.7%), Imperial Oil Resources (25.0%), Suncor Energy (12.0%), ConocoPhillips (9.0%), Others (17.2%)
Syncrude is a joint venture oil sands mining and upgrading project that has operated since 1978. The project mines oil sands, extracting bitumen and upgrading it into a high-quality crude oil. The upgrading facilities have a nameplate capacity of over 350 gross MBD. ConocoPhillips’ net production of synthetic crude oil averaged 23 MBD in 2009.

In April 2010, ConocoPhillips announced an agreement to sell its 9 percent interest in Syncrude. The transaction is anticipated to close in the third quarter of 2010.

CANADA EXPLORATION AND BUSINESS DEVELOPMENT

Atlantic Canada
In the southern Grand Banks offshore Newfoundland, ConocoPhillips operates and holds an average 55 percent interest in six contiguous exploration licenses and one French Permit in the deepwater Laurentian Basin, which totals nearly 5 million acres. During 2009, drilling began on an exploration well in the Laurentian sub-basin, located off the southern coast of Newfoundland. Drilling was completed in April 2010, and while the well was determined to be a dry hole, ConocoPhillips is evaluating its future potential in this area. ConocoPhillips also acquired an additional 900,000 gross acres in the Laurentian Basin in 2009 at a bid round in November. In addition, the company holds a non-operated 35 percent interest in four natural gas discoveries offshore Labrador. Future development of these fields depends on several factors, including continued advancement of industry infrastructure.

Canadian Arctic
Mackenzie Delta and Beaufort Sea
In the Mackenzie Delta and Beaufort Sea areas, ConocoPhillips has been one of the principal players since the late 1960s and is the operator of the Parsons Lake and Amauligak discoveries. The company holds interests in 45 significant discovery licenses, of which ConocoPhillips operates 11, and four exploration licenses, of which ConocoPhillips operates two. At year-end 2009, the total leasehold for the region exceeded 1.5 million gross acres and 1 million net acres.

• Parsons Lake
  Operator: ConocoPhillips (75.0%)
  Co-venturer: ExxonMobil (25.0%)
  Discovered in 1972, the Parsons Lake natural gas field is located in the Mackenzie Delta, 45 miles north of Inuvik and about 35 miles southwest of Tuktoyaktuk. Parsons Lake is one of the three anchor fields that would be produced into the proposed Mackenzie Gas Project.
• Umiak
  Operator: MCM (60.0%)
  Co-venturer: ConocoPhillips (40.0%)
  Discovered in 2004, the Umiak Field is located in the Mackenzie Delta, 75 miles northwest of Inuvik. Umiak is the fourth-largest discovery onshore Mackenzie Delta. Plans to commercialize this discovery will be linked to the progress of the Mackenzie Gas Project and its infrastructure development.
• Amauligak
  Operator: ConocoPhillips (52.4%)
  Co-venturers: Chevron (34.0%), Imperial/ExxonMobil (7.5%), Others (6.1%)
  Discovered in 1983, Amauligak is the largest oil and gas field in the Mackenzie Delta and Beaufort Sea areas. It lies approximately 31 miles offshore in shallow water. A range of possible development solutions is being evaluated. In December 2009, ConocoPhillips acquired an additional 1.6 percent interest in this license.

• Mackenzie Gas Project
  ConocoPhillips is working with other companies on this project to transport onshore natural gas from the Mackenzie Delta in northern Canada to established natural gas markets in North America. The planned startup capacity for the pipeline would be 1.2 BCFD, which would be expandable with additional compression to 1.8 BCFD. A separate pipeline also is planned to transport natural gas liquids to existing pipeline infrastructure for delivery to the North American market.

  ConocoPhillips holds an average 18 percent interest in the proposed pipeline and gathering system. The Joint Review Panel Report was released at the end of December 2009, triggering the restart of the National Energy Board regulatory review process. The project will continue to progress toward regulatory authorizations but will defer detailed engineering work pending resolution with the federal government on the fiscal and commercial framework.

Arctic Islands
In the Arctic Islands, ConocoPhillips holds interests in 14 significant discovery licenses. At year-end 2009, the total leasehold for the region was approximately 425,000 gross acres and 176,000 net acres.

Western Canada
In western Canada, ConocoPhillips participated in 27 exploration wells and 29 completions, resulting in 23 discoveries. In 2009, ConocoPhillips added 22,400 acres in the Horn River Area in western Canada. Combined with previously held land, the company holds in excess of 97,000 acres in the emerging Muskwa Shale gas play.

Find out more at …
ConocoPhillips Canada
Mackenzie Gas Project