This update is intended to give an overview of market and operating conditions experienced by ConocoPhillips during the second quarter of 2004. The market indicators and company estimates may differ considerably from the company’s actual results to be reported on July 28, 2004.

Highlights - Second Quarter 2004 vs. First Quarter 2004

• Exploration and Production
  • Higher worldwide crude oil prices.
  • Worldwide natural gas prices similar to prior quarter.
  • Lower worldwide production, as anticipated.
  • Higher exploration expenses.
• Refining and Marketing
  • Significantly higher worldwide refining margins.
  • Slightly lower capacity utilization rate.
• Midstream/Chemicals
  • Lower Midstream volumes.
  • Chemicals level with prior quarter.
• Corporate
  • Debt-to-capital ratio of 29 percent.

Exploration and Production

The table below provides market price indicators for crude oil and natural gas. The company’s actual crude oil and natural gas price realizations may vary from these market indicators due to quality and location differentials, as well as the effect of pricing lags.

Market Indicators   2Q 2004 1Q 2004 2Q 2004 vs. 1Q 2004 2Q 2003 Dated Brent ($/bbl) $35.36  31.95  3.41  26.03  WTI ($/bbl) 38.31  35.23  3.08  29.02  ANS USWC ($/bbl) 37.02  34.14  2.88  27.04  Henry Hub first of month ($/mcf) 6.00  5.69  0.31 5.40

Source: Platt's

Crude oil and natural gas production for the second quarter is expected to be approximately 3 percent to 4 percent below that of the previous quarter, as anticipated. Increased output from Bayu-Undan in the Timor Sea is expected to be more than offset by the impact of scheduled maintenance, normal seasonal declines, and the impact of asset sales. Full-year production is still expected to be approximately 1.56 million barrels of oil equivalent per day, including Syncrude. Although domestic natural gas prices were higher for the quarter, international gas prices are expected to offset these increases.

Exploration expenses are expected to be higher than those of the previous quarter as a result of leasehold impairments in Brazil and Nigeria.

Refining and Marketing

The table below provides market indicators for regions where the company has significant refining operations. The Weighted U.S. 3:2:1 margin is based on the geographical location and capacity of ConocoPhillips’ U.S. refineries. Realized refining margins may differ due to the company’s specific locations, configurations, crude oil slates or operating conditions. In addition, the company's refining configuration generally yields gasoline volumes somewhat less than that implied by the market indicators shown below.

Market Indicators   2Q 2004 1Q 2004 2Q 2004 vs. 1Q 2004 2Q 2003 Refining Margins ($/bbl)   East Coast WTI 3:2:1 $9.14  6.87  2.27 3.46    Gulf Coast WTI 3:2:1 9.17  6.36  2.81 3.65    Mid-Continent WTI 3:2:1 11.65  6.91  4.74 6.96    West Coast ANS 3:2:1 24.13  16.10  8.03 11.39      Weighted U.S. 3:2:1 12.60  8.39  4.21 5.86    NW Europe Dated Brent 5.13  2.56  2.57  3.17  WTI/Maya differential (trading month) 8.71  9.36  (0.65)  7.50

Source: Platt's

The weighted U.S. refining margin for the second quarter is expected to be significantly higher than that of the first quarter, as indicated in the table above. In addition, worldwide marketing margins are expected to be slightly higher. Turnaround costs are expected to be approximately $65 million before-tax.

The company’s average crude oil refining capacity utilization rate for the second quarter is expected to be in the low 90-percent range. Utilization at U.S. refineries during the quarter is anticipated to be similar to that of the previous quarter, while increased turnaround activity at the company’s Humber refinery in the United Kingdom and an equity affiliate operation in Malaysia resulted in an overall reduction for the company.

Corporate

Corporate expenses from continuing operations during the first quarter are expected to be lower than those in the previous quarter due to lower losses attributable to the early retirement of debt and merger-related costs.

The company expects its debt-to-capital ratio to be approximately 29 percent, down from 32 percent at the end of the previous quarter.

CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This update contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are about ConocoPhillips' main business segments: exploration and production, refining and marketing, midstream and chemicals. There are also forward-looking statements about ConocoPhillips' expected crude oil, natural gas and natural gas liquids production and prices; expected exploration expenses; weighted U.S. refining margins; co-product margins; marketing margins; refinery utilization rates; corporate charges from continuing operations; balance sheet debt level; and effective tax rate. These statements are based on activity from operations for the first two months of the fourth quarter of 2003 and include estimated results for December, and as such are preliminary and are estimates. All of the forward-looking data is therefore subject to change. Actual results, which will be reported in the company's earnings release for the fourth quarter of 2003 on Jan. 28, 2004, may differ materially from the estimates given in this update.

Where in any forward-looking statement, the company expresses an expectation or belief as to future results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, there can be no assurance that such expectation or belief will result or be achieved. The actual results of operations can and will be affected by a variety of risks and other matters that could cause the stated expectation or belief to differ materially from that stated in this update.