I am pleased to report that ConocoPhillips continues working diligently to honor our nine sustainable development commitments. As these commitments state, in order to ensure true sustainability, our company must return value to shareholders and supply the energy required to drive the global economy, while reducing our impact on the environment and contributing to the wellbeing of society.

This 2010 Sustainable Development Report offers further insight into ConocoPhillips’ efforts to meet the expectations of our stakeholders. We are proud of our progress in the three major components of sustainable development: financial, environmental and social performance.

Financial performance is clearly essential to our long-term viability, and ConocoPhillips delivered excellent business results during 2010. Our earnings for the year increased significantly to $11.4 billion, while our total shareholder return of 39 percent was highest among our industry peer group. To produce these results, we conducted a disciplined capital spending program, reduced debt to a level within our target range, executed a sizable share repurchase program and raised the dividend payment on our stock. We also accomplished much of our planned portfolio optimization by selling non-core properties and focusing on assets that offer attractive opportunities for reinvestment and growth within the company. Investor response has been favorable to these strategic initiatives, which are designed specifically to enhance value creation for shareholders. 

We also continued to improve our environmental performance in key areas. For example, we applied a wide variety of energy-efficiency measures that achieved more than a million-metric-ton reduction in greenhouse gas emissions from parts of our global Upstream and Downstream businesses. Recognizing the growing importance of efficient water management, we developed a corporate water strategy that includes specific commitments to protect fresh water resources. Our progress on responsible water management included establishing best practices, deploying new technologies to reduce consumption and increase recycling, and conducting water supply risk assessments of our major assets. Additionally, we conducted an internal and external biodiversity benchmark study, and updated our Sustainable Development Standard.

Working in Canada’s vast oil sands to help meet the world’s need for energy, ConocoPhillips was a founder of the Oil Sands Leadership Initiative, a group primarily charged with reducing the impact of oil sands development on associated water, land and air. This initiative offers great potential to improve planning and production methods used to tap the Canadian oil sands, a strategic resource of abundant, secure energy. We are also pleased to mention that the Canadian Association of Petroleum Producers recently honored ConocoPhillips with an award for our Faster Forests program. As part of this innovative plan to accelerate land reclamation, we planted more than 100,000 trees in 2010 alone.

Safety and environmental stewardship, including the operating integrity of our assets, remain our highest priorities. With heightened public focus on these important issues following the Deepwater Horizon incident in the Gulf of Mexico, we formed a nonprofit organization in 2010 with three other companies to improve industry offshore spill response. The Marine Well Containment Company LLC (MWCC) now has an interim containment system available to capture and contain oil in the event of a well blowout in the deepwater Gulf of Mexico. With several more companies joining since its foundation, the MWCC is now developing an expanded system expected to be available in 2012.

Our business and environmental success would not be possible without solid social performance. We are making progress in fully utilizing the abilities of our people, and working more effectively with host communities, business and government partners, customers, suppliers, investors and other interested stakeholders. 

Most importantly, we are proud that 2010 was our safest year to date, and the seventh consecutive year of improvement in the total recordable incident rate for our work force. Rigorous training and audit programs are in place to drive ongoing improvement in both personal and process safety as we continue striving for zero incidents. We also worked with our partners to complete health-impact assessments for projects in several regions, including Canada, Nigeria and Peru.  

In order to enable employees to reach their full potential, we provide extensive personal and professional development training. As a result of this and other measures to enhance job satisfaction, 83 percent of employees now have formal developmental goals.

ConocoPhillips is dedicated to helping the communities in which we operate improve their capacity to create jobs and meet the needs of their citizens. During 2010, our community investments totaled more than $68 million. These funds generally support education, health and safety, natural resources, disaster relief and other strategic community investments. Also, each year ConocoPhillips employees volunteer thousands of hours of personal time to assist worthy charitable and civic initiatives. We believe that helping build healthy local communities that provide residents with a high quality of life and broad range of services also enhances our own ability to succeed. 

Additionally, we have taken steps to respond more effectively to input from stakeholders, including employees, investor groups and non-governmental organizations. We have strengthened our approach to evaluating and managing risks to our company associated with climate change, and are engaging successfully with communities where we operate.

These are only a few of the many financial, environmental and social initiatives and actions taken to meet our sustainable development commitments. Even with such steps, we recognize that we must continue to understand and seek to address stakeholder concerns.  We believe positive and productive engagement with stakeholders will allow us to find common ground and identify possible solutions.

This report covers the results of the forward-looking action plans that we described in our previous Sustainable Development Report as well as the steps we will take in the future to enhance our sustainable development efforts. We invite you to learn more about this work, and we welcome your comments.  

Sincerely,