2017 Analyst & Investor Meeting: ‘No waiting necessary’

Photo: Chairman & CEO Ryan Lance appears on Bloomberg TV with host Alix Steel.

by ray scippa

One of the company’s most important public events is the annual Analyst & Investor Meeting (AIM). On Nov. 8, Ryan Lance, Matt Fox, Al Hirshberg and Don Wallette took the stage in New York City to deliver a confident message of transformation and long-term strategy. Having overseen the implementation of steps outlined at last year’s AIM, the executives arrived with a compelling story that set ConocoPhillips apart from its competitors.

Chairman & CEO Ryan Lance kicked things off with a reminder of the company’s value proposition unveiled at the 2016 meeting.

“When we rolled this plan out we were met with some skepticism. Certainly, production growth was all the rage,” Lance said. “But it was time for an E&P company like ours to step up with a plan for creating value, and our conviction about this plan is even stronger today.”

Matt Fox at podium
Strategy, Exploration & Technology Executive Vice President Matt Fox provides details on the company’s strategic goal to deliver superior returns to shareholders.

Lance described how the company’s value proposition principles and priorities combine with the unique characteristics necessary to execute and to win.

“Many companies have some of these characteristics but not all. We have them all.”

Lance demonstrated how ConocoPhillips moved from aspiration to action in 2017 by strengthening its portfolio, accelerating returns to shareholders, developing a differentiated strategy and continuing to lead in environmental, social and governance performance.

Noting that ConocoPhillips’ total shareholder return outperformed all industry benchmarks, Lance said, “We transformed the company in 2017, and we think the market has taken notice.”

Don Wallette at podium
CFO Don Wallette describes the company’s focus on four financial areas: free cash flow generation, leverage, shareholder distributions and returns on capital employed.

Turning to the future, Lance described a plan that targets 2 to 3 percentage points in annual growth of cash return on capital employed. “At that rate, our cash return on capital employed will exceed 20 percent by 2020,” Lance said.

Following Lance’s introductory remarks, Matt Fox, executive vice president, Strategy, Exploration & Technology, focused in on the details of the company’s differentiated strategy; Al Hirshberg, executive vice president, Production, Drilling & Projects, described how the company’s portfolio is aligned and integrated with the strategy; and Don Wallette, executive vice president, Finance, Commercial & CFO, defined the company’s step improvement in four financial areas: free cash flow generation, leverage, shareholder distributions and returns on capital employed.

Al Hirshberg at podium
Production, Drilling & Projects Executive Vice President Al Hirshberg describes the company’s strategic portfolio.

During his presentation, Hirshberg unveiled a compelling bottom line: while many other companies aspire to a sustaining price below $40, ConocoPhillips had achieved it now — “no waiting necessary.” Today ConocoPhillips has 15 billion barrels of resource with a cost of supply of less than $50. Even more remarkable, the average cost of supply of those resources has dropped below $35 per barrel over the past year.

“In a nutshell, our resource base keeps getting better and better as we work on every aspect of high grading, cost improvement, technology-driven efficiencies and execution,” Hirshberg said.

During an hour-long question-and-answer session following the presentation, analyst Paul Sankey of Wolfe Research aptly summed up the unique nature of ConocoPhillips’ 2017 AIM: “The phrase was ‘you’ve doubled down,’ but I think in many ways you’ve tripled down because you’ve extended the timeframe through ’18, ’19, ’20. And you’ve really shown here on a line-by-line basis how you’re going to get there, in more detail than we’ve seen in any recent analyst meeting from any company.”