MARIA: WELCOME BACK.
STANDING ABOVE THE REST,
CONOCOPHILLIPS BUCKING AN
INDUSTRY TREND LAST YEAR, THE
STOCK RISING 13%.
A BIG REASON FOR THE WEAKNESS, A
SHARP DECLINE IN OIL PRICES.
JOINING ME RIGHT NOW IS THE CEO
OF CONOCOPHILLIPS, RYAN LANCE IS
HERE.
THANK YOU FOR JOINING US.
I THINK THAT SETS US UP FOR OUR
CONVERSATION BECAUSE YOU'VE BEEN
ABLE TO BUCK A TREND WHERE THE
ENTIRE INDUSTRY IS SAYING THE
REALITY OF THE MARKET IS OIL
PRICES HAVE DROPPED CONSIDERABLY
IN THE LAST TWO MONTHS.
HOW ARE YOU DEALING WITH THAT?
>> WELL, MARIA, WE'VE REALLY
EMBRACED THE VOLATILITY IN THED
COMMODITY PRICE CYCLE.
WE'VE TOLD OUR TEAM WE NEED TO
WORK AT $40 AS WELL AS WE NEED
TO WORK AT $80.
SO WE'VE REALLY TRANSFORMED OUR
COMPANY, REDUCED OUR COST TO
SUPPLY THE BUSINESS, IMPROVED
THE BALANCE SHEET.
WE'RE LOOKING AT MAKING
INVESTMENTS TO IMPROVE OUR
MARGIN AND GROW CASH FLOWS,
IMPORTANTLY BE ABLE TO DO THAT
AT $40.
SO WE CAN FUND OUR CAPITAL
PROGRAM AT $40.
IN THE LOW 40s WE CAN FUND OUR
PROGRAM AND PAY OUR SHAREHOLDERS
THROUGH THE DIVIDEND.
WE'VE TRANSFORMED THE COMPANY TO
BE ABLE TO EMBRACE THE CYCLES
AND TAKE ADVANTAGE OF THE EXTRA
CASH FLOWS WE GET AT THE UP END
OF THE CYCLE.
MARIA: YOU SAID YOU HAVE TO
OFFER INVESTORS RESILIENCE AS
WELL AS PARTICIPATION AND
GROWTH.
YOU'VE BEEN ABLE TO DO THAT.
YOU KEPT CAP EX FLAT.
HOW LONG CAN YOU DO THAT?
YOUR BUSINESS NEEDS THE
INVESTMENT, OBVIOUSLY.
HOW LONG CAN YOU KEEP EXPENSES
DOWN, KEEPING CAP EX LOW, BEFORE
YOU NEED TO START --
>> WE HAVE TO EMBRACE
TECHNOLOGY.
WE HAVE TO DO THE THINGS IT
TAKES TO REALLY DRIVE THE COST
OF SUPPLYING OUR BUSINESS DOWN
SO IT WORKS AT $40 A BARREL AND
BELOW.
THAT'S WHAT WE'RE DOING IN OUR
BUSINESS.
WE'RE NOT FUNDING THINGS THAT
DON'T HAVE A COST OF SUPPLY THAT
WILL WORK AT A $40 WTI PRICE.
WE'RE DOING THIS USING
TECHNOLOGY, DRIVING THE COST
DOWN.
WE CAN SUSTAIN OUR PRODUCTION AT
LESS THAN $4 BILLION OF CAPITAL
FOR A VERY LONG PERIOD OF TIME,
FOR DECADES.
AND THAT'S REALLY THAT LOW
SUSTAINING PRICE, LOW BREAKEVEN
COST FOR THE COMPANY, LOW
CAPITAL INTENSITY, THAT'S
REQUIRED IN OUR COMMODITY
BUSINESS WHERE THE SUPPLY AND
DEMAND FUNDAMENTALS ARE MOVING
CONSTANTLY.
GEOPOLITICAL FORCES ARE HAVING
AN IMPACT ON THAT.
IT CAUSES VOLATILITY IN THE
PRICE.
MARIA: WHY DO YOU THINK OIL HAS
MOVED LOWER?
IS THIS JUST A SUPPLY SITUATION
IN TERMS OF THE GLOBAL MARKET?
GASOLINE PRICES REMAIN STEADY IN
THE LOW $2 RANGE FOR SEVERAL
MONTHS NOW.
AND YET OIL PRICES HAVE COME ALL
THE WAY DOWN FROM THE HIGHS.
WHAT WAS BEHIND THAT?
>> I THINK WE LOOK BACK AND IT'S
A WELL-SUPPLIED WORLD.
THE U.S. IS GROWING DRAMATICALLY
IN TERMS OF THE TECHNOLOGY
THAT'S COMING TO THE
UNCONVENTIONAL PLAYS IN NORTH
AMERICA.
THAT'S DRIVEN A LOT OF SUPPLY
BACK INTO THE MARKET.
OPEC DID CUT BACK P AND THEN
THEY OPENED BACK UP A LITTLE BIT
WHEN THE IRANIAN SANCTIONS WERE
PUT IN PLACE BUT THEN SOME
EXCEPTIONS WERE PUT INTO THE
EXCEPTIONS SO THE OIL THAT CAME
OUT OF IRAN STAYED IN THE
MARKETPLACE LONGER THAN
EXPECTED.
INVENTORY STARTED TO RICE AND
PRICES STARTED TO FALL TO
ACCOMMODATE THAT.
NOW WE SEE WITH ANOTHER OPEC
AGREEMENT IN PLACE THE PRICES
HAVE STARTED TO MODERATE AND
SUPPLIES HAVE STARTED TO
MODERATE A LITTLE BIT,
INVENTORIES ARE STARTING TO BACK
OFF A LITTLE BIT, PRICES HAVE
IMPROVED.
THAT'S THE VOLATILITY WE SEE IN
THE MARKETPLACE.
IT DOESN'T TAKE MUCH IN THE
GEOPOLITICAL REALM TO CAUSE THE
SUPPLY AND DEMAND SWINGS.
MARIA: TELL ME IN TERMS OF YOUR
EXPECTATIONS FOR THE MARKET THIS
YEAR AND THE NEXT YEAR.
>> YOU KNOW --
MARIA: I KNOW YOU HATE TO
PREDICT OIL PRICES.
>> THEY'LL GO UP AND DOWN AND
NOT NECESSARILY IN THAT ORDER.
WHAT WE'RE TRYING TO DO IS RUN
THE COMPANY IN A 40 TO $50
WORLD.
WE SET OUR CAPITAL BUDGETS BASED
ON FLAT $50 KINDS OF PRICES.
WE SAY IF WE CAN WORK AT THAT
SIDE -- WE THINK IT TAKES THOSE
KINDS OF PRICES TO SATISFY THE
GROWING DEMAND IN THE WORLD
TODAY.
WHEN YOU LOOK AT OPEC, YOU LOOK
AT THE U.S., YOU LOOK AT ALL THE
OTHER REGIONS AROUND THE WORLD,
IT'S GOING TO TAKE THOSE KINDS
OF PRICES TO SATISFY THAT
DEMAND.
BUT WE'RE GOING TO SEE
FLUCTUATIONS.
WE'RE GOING TO SEE PRICES THAT
GO BACK TO 60 AND 70.
WHAT I TELL PEOPLE, IF WE SEE
THOSE KINDS OF PRICES, BE
PREPARED, WE MIGHT SWING BACK TO
$40.
MARIA: WHERE ARE THE BIG
OPPORTUNITIES RIGHT NOW FOR
CONOCOPHILLIPS.
>> THE ADVANTAGE WE HAVE, WE'RE
IN 17 COUNTRIES AROUND THE
WORLD.
WE'RE HE GLOBALLY DIVERSE.
WE SEE ADVANTAGES IN ALASKA.
WE HAD A GREAT I. MORE
WE HAD A GREAT E. MORE
WE HAD A GREAT EXPMORE
WE HAD A GREAT EXPLORE
WE HAD A GREAT EXPLORATION
SEASON.
WE'RE INVESTING MONEY IN THE
NORTH AMERICAN UNCONVENTIONALS.
WE'RE ONE OF THE FEW COMPANIES
THAT HAS AN OPPORTUNITY IN ALL
THE MAJOR UNCONVENTIONAL PLAYS
IN NORTH AMERICA.
WE'RE BIG IN EUROPE, IN BOTH THE
U.K. SECTOR AND NOR JANUARY NORE
U.K. SECTOR AND NOR JANUARY NORI
U.K. SECTOR AND NOR JANUARY NORN
U.K. SECTOR AND NOR JANUARY NORS
U.K. SECTOR AND NOR JANUARY NORC
U.K. SECTOR AND NOR JANUARY NORO
U.K. SECTOR AND NOR JANUARY NOR.
WE'RE SPENDING CAPITAL IN ALL
THOSE AREAS.
HALF OF OUR CAPITAL IS GOING
HERE TO NORTH AMERICA IN THE
UNCONVENTIONALS.
MARIA: DOES THE SHUTDOWN AFFECT
BUSINESS?
>> WE ARE STILL HAVING
CONVERSATIONS WITH THE
DEPARTMENT OF INTERIOR, EPA, BLM
ABOUT LONGER TERM PERMITTING AND
THINGS WE HAVE IN FRONT OF THEM
AS A BUSINESS.
IF THIS CARRIES ON FOR A LONGER
PERIOD OF TIME WE'LL SEE
SLOWDOWN IN THAT ACTIVITY.
HAVEN'T BEEN MATERIALLY IMPACTED
TODAY.
MARIA: THE PERMITTING, HAS THAT
LOOSENED UP SINCE THE
ADMINISTRATION HAS DECIDED TO
MAKE THIS A PRIORITY IN TERMS OF
MOVING THINGS FASTER?
>> YEAH, CERTAINLY THE
REGULATORY RELIEF IN THIS
ADMINISTRATION HAS BEEN
SIGNIFICANT IN OUR BUSINESS.
IT WAS NECESSARY.
IT WAS NEEDED.
THERE WAS A LOT OF OVERREACH IN
THE LAST ADMINISTRATION.
NOW WE'VE GOTTEN SOME RELIEF.
IT'S BEEN THE RIGHT THING TO DO
BUT I POINT OUT TO PEOPLE WE'RE
NOT ABOUT LOWER THE FLOOR IN OUR
BUSINESS, WE'RE ABOUT RAISING
THE FLOOR AND CONTINUE TO
OPERATE AS SUSTAINABLY AS WE
HAVE.
THAT IS IMPORTANT FOR OUR
COMPANY TO BE ABLE TO
DEMONSTRATE TO ALL OUR STAKE
HOLDERS, LOCAL RESIDENTS, THE
AREAS WE OPERATE IN, THAT'S
IMPORTANT TO UNDERSTAND.
THEY KNOW OUR BUSINESS, KNOW HOW