Ellen DeSanctis - VP, IR and Communications Ryan Lance - Chairman and CEO Jeff Sheets - EVP, Finance and CFO Matt Fox - EVP, Exploration and Production.

Edward Westlake - Credit Suisse Doug Terreson - ISI Scott Hanold - RBC Capital Markets Doug Leggate - Bank of America Merrill Lynch John Herrlin - Societe Generale Paul Cheng - Barclays Roger Reid - Wells Fargo Paul Sankey - Wolfe Research Blake Fernandez - Howard Weil Ryan Todd - Deutsche Bank Pavel Molchanov - Raymond James.

Welcome to the Third Quarter 2014 ConocoPhillips Earnings Conference Call. My name is Christine and I will be your operator for today’s call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded.

I will now turn the call over to Ellen DeSanctis, Vice President, Investor Relations and Communications. You may begin..

Thanks Christine and thanks to all our listeners for joining us today. With me in the room are Ryan Lance, our Chairman and CEO; Jeff Sheets, our EVP of Finance and our Chief Financial Officer; and Matt Fox, our EVP of Exploration and Production. A couple of quick administrative matters.

Of course, we will make some forward-looking statements this morning. The risks in our future performance are described on page two in today’s presentation also in our periodic filings with the SEC. All this information as well as our GAAP to non-GAAP reconciliations and our supplemental data can be found on our website.

And finally, I just wanted to mention that we announced this morning that ConocoPhillips will be hosting an analyst meeting on April 8 in 2015, so hope you’ll save the date for that. We’ll of course provide some additional details very shortly. And with that, I’m going to turn the call over to Ryan. .

Thank you, Ellen. And thanks to all our listeners for your participation this morning. I’ll begin our call this morning with some remarks about the current environment.

Let me just say that while the recent oil price downturn seems sudden, we’re well positioned as a company to respond without impacting our strategic objectives of 3% to 5% volume and margin growth. This is key and it’s the result of a significant repositioning we’ve achieved as a company in the past two years.

We’ve caught up the portfolio; lowered the overall cost of supply; and significantly increased our degree of capital flexibility. And put this last point in a bit of perspective, in 2014, our committed capital for major projects and maintenance represents about 50% of our capital and this declines to approximately 30% by 2016.

I’ll come back highlight that again in a couple of minutes. Another thing we want to emphasize is that events like the recent price downturn underscore the importance of staying focused on the fundamentals. We know this is a cyclical business and we’ve been here before.

And certainly the old adages apply full cycle low cost wins, asset quality matters and financial strength as an asset. We intend to make prudent adjustments at this time, while continuing to monitor the environment. So, please turn to next slide and I’ll outline the reasons why we believe we’re in a unique position today.

This slide summarizes what we want you to take away from our comments today. The headline in the chart on the right really say it all. We have the flexibility and the resiliency to weather lower prices and we’ll exercise that flexibility as appropriate.

Importantly, at this time, we do not see any major impediment to our ability to deliver on our stated goals for the next few years, and those are 3% to 5% volume and margin growth with the competitive dividend. We still believe this is a winning formula for our shareholders and we have a plan to deliver.

We have momentum in our volume growth due to the start-up of several major projects this year in places like Europe, Malaysia the oil sands and APLNG. And we have steady growth coming from our North American unconventionals. And it goes without saying we’ll continue to stay focused on margins and returns.

On a price normalized basis, we expect to achieve our margin targets. This was driven by growing liquids production in areas with favorable fiscals. In addition, the major projects start-ups in 2015 will generate steady cash flows for years to come. Importantly, at current commodity prices, our capital investments generate attractive returns.

And in the unconventionals, we have a multiyear inventorial projects that have a cost of supply that is lower than the prices we’re seeing today. So we’re well-positioned to adjust to the current environment without affecting our overall performance targets and here is the key reasons why.

During the past few years we spent a significant amount of capital on the major projects I’d just mentioned. In fact, 2014 was the peak year of capital spending at Surmont and APLNG. So beginning in 2015, capital on our major projects begins to taper off.

As shown on the right hand chart with growing development capital spend, we have significantly more flexibility to ramp up or down our capital as circumstances dictate. This is flexibility we have not had for many years, but is what we set out to create when we established the independent ConocoPhillips over two years ago.

As we think about our capital levels going into 2015, we first consider all of our priorities for investment. As we have said consistently since this spin, our top priority is the dividend. This is an important part of our investment thesis.

The dividend provides discipline on our capital allocation process and we believe it is important in a mature business, so no change to the outlook on the dividend. The next consideration is affordability of capital and cash flow neutrality.

Since the spin we have been consistent about targeting late 2016 to 2017 for cash flow neutrality and achieving cash through that neutrality is still a priority. We are currently in the process of setting our 2015 capital budget and we’ll announce that later in December.

What you should expect is that we will exercise the flexibility we have and announce a range of capital spending that is not only lower than 2015, but lower than our stated target of $16 billion per year.

Across the lower 48 we can throttle back on our less mature unconventional plays, while continuing to invest in our highest margin short cash cycle projects in the Eagle Ford and the Bakken.

These are the best returns on our portfolio and give us the confidence that we need to meet our volume target of 3% to 5% even with a bit lower capital next year. Finally, we have a very healthy balance sheet including cash on hand. We think of our financial strength as a competitive advantage.

So in summary, we’re well positioned for the current environment. We’re coming out of a significant transformation as a company at a time when asset quality, capital flexibility and financial strength matter.

We are going to act prudently, but our plan is on track, we’re focused on executing that plan and we don’t anticipate any significant change to delivering our stated goal to our shareholders. Hopefully these openings comments provide you bit of insights and the context to our thinking about the current environment.

But, so now back to our regulatory schedule program stepping through the quarterly results. So please turn to the next slide. Here is a summary of our overall achievements for the third quarter. Of course this is our company level set chart that we share every quarter.

I won’t cover all the points here in detail, I’ll leave at for both Jeff and Matt, but the key takeaway here is the business is on track.

We delivered our targeted volume and margin growth for the quarter; we increased our dividend to the shareholders; and we exited the quarter in a very strong financial position with almost $6 billion of cash and short-term investments on hand.

So now let me turn the call over to Jeff and Matt and they’ll go over the results of the quarter in a bit more detail. And I’ll come back at the end of the call with some concluding remarks and field your questions..

Thanks Ryan. My comment this morning will be brief, reflecting the straight forward nature of our third quarter results. Slide seven presents our adjusted earnings. Sequentially and year-over-year adjusted earnings reflect lower commodity prices.

However, we saw strong operational performance this quarter and we successfully executed several major turnarounds. Volumes reflected a dip sequentially for these planned maintenance activities. Third quarter adjusted earnings were $1.6 billion or $1.29 a share.

Segment breakdown of those earnings is shown in the lower right of this chart and further segment details can be found in the supplemental data, which is available on our website. If you turn to slide eight, I’ll quickly summarize our production results for the quarter.

As you know, our convention for production is continuing operations excluding Libya. On this basis, our third quarter volumes averaged 1.473 million BOE per day, which is slightly above the midpoint of our guidance. We anticipated a significant level of turnaround activity in the third quarter.

As you can see, we had 37,000 BOE per day of additional downtime compared to last year with 35 of that coming from our planned maintenance work. Normalizing for those impacts, we achieved a 62,000 BOE per day of underlying growth. This represents a 4% increase year-over-year and keeps us on track to deliver our 3% to 5% growth in 2014.

On the same basis, this represents a 7% liquids growth year-over-year. This high value liquids increase is really making a difference in our margin which I’ll cover on the next slide. This is our typical slide showing year-over-year sequential cash margins.

The left chart reflects margins at actual prices during the period and the right chart is price normalized. On a price normalized basis, third quarter margins improved 8% year-over-year. Of that growth, about 2% is from FX related tax items and reduced Libya volumes.

So underlying cash margin growth was about 6% and this is despite higher cost associated with the significant turnaround activity in the quarter. This metric will be volatile on a quarter by quarter basis but like our volume target, we’re on track to achieve our 3% to 5% growth target for margins for the year.

And finally, I will review our year-to-date cash flow waterfall in the next slide. Again, this is straightforward. We began the year with $6.5 billion in cash and short-term investments. Year-to-date, we’ve generated $12.5 billion of cash from operating activities and added $1.3 billion from the SCCL distribution earlier this year.

Over this period, we’ve had about a $2 million improvement in working capital and added $1 billion of net proceeds from dispositions. Year-to-date, we have funded a $12.7 billion capital program with $4.6 billion of those expenditures coming in the third quarter.

The third quarter will be the peak capital spending quarter for 2014 and we’re still on track for the $16.7 billion of capital for 2014 that we announced in December of last year. After funding our capital program and dividend, we ended the quarter with $5.8 billion in cash and short-term investments.

As a reminder, we need about a $1 billion to run our business, so the remainder will be available to fund our capital programs. This concludes the review of our financial performance. Now, I’ll turn the call over to Matt for an update on operations..

Thanks, Jeff. The key operational message is that execution is on track across our global portfolio. It was a very busy quarter for turnarounds in our base operations and we completed these activities on schedule and on budget.

We also achieved some important milestones and stack ups in our major projects, continued to deliver strong performance from our North American unconventionals and progressed our exploration activities; including the discovery of a new oil play offshore Senegal.

So let’s jump in to review of our segment performance starting with the Lower 48 in Canada on slide 12. In the Lower 48, third quarter production averaged 343,000 BOE per day, that’s a 9% overall increase from the third quarter of last year and represents a 25% increase in crude oil production over the same period.

Leading this growth were our liquids-rich Eagle Ford and Bakken assets which averaged that combined 212,000 BOE per day, a 33% increase from the third quarter last year. Sequentially Eagle Ford production is relatively flat in line with our guidance.

As you’ll recall, last quarter, we indicated growth would be flatter through the end of the year as we continue to shift to pad drilling and bring new wells on line in batches. We remain on track for continued growth into 2015 and beyond. The Eagle Ford averaged a 157,000 BOE per day in the third quarter.

This represents a 31,000 BOE per day or a 25% increase from the same quarter last year. We continue to execute and evaluate pilot tests in the Eagle Ford including single horizontal well test in the upper Eagle Ford.

These tests have been encouraging and we’ll soon begin testing a three layer development concept by placing a layer of wells in the upper Eagle Ford and two layers of wells in the lower Eagle Ford. The wells will be drilled 660 feet apart in each layer. We call this an 80-acre triple stack.

The Bakken averaged 55,000 BOE per day over the quarter, up 21,000 BOE per day from the third quarter last year, a 62% increase. We continued to pilot test, a 160-acre dense spacing in the Bakken. But based on the results we’ve seen to-date, it’s too early to make decision of ultimate spacing there.

We’ve also made good progress in our Permian and Niobrara appraisal activities in 2014. In the Permian, we’re currently focused on appraising the multiple stack horizons in the Delaware Basin. And then in Niobrara, we’re testing several alternative well configurations and completion techniques. In both areas we continue to see encouraging results.

Before I leave down to conventionals, I want to highlight the chart on the bottom left. This chart represents third-party data that shows ConocoPhillips has the lowest cost of supply unconventional portfolio compared to our peers. This means we are at the best position to stand lower prices.

And remember that not all unconventionals are created equal and being in the sweet spot matters now more than ever. We’ll provide a more complete update on our unconventional reservoir appraisal and pilot test activities at our Analyst Meeting next year.

In addition to our unconventional activities in the Lower 48, we continue to be active in the third quarter in Gulf of Mexico. After further evaluation at Coronado, we have decided not to continue with appraisal of that discovery and we took our initial Wildcat across [the dry hole] this quarter.

However, we continued to be very active this year appraising our three significant discoveries of Shenandoah, Tiber and Gila, so stay tuned for more information on those. In addition, we have a rig coming nearly 2015 that will allow us to start evaluating our operating portfolio. So, our Lower 48 segment continues to deliver strong performance.

Our Canadian business also performed well during the quarter. We produced 276,000 BOE per day, which includes a 9% increase in liquids production year-over-year. At Surmont 1 we completed a significant turnaround and are now back at full production as planned.

Foster Creek achieved fast production in September and is expected to ramp up over the next 12 to 18 months. Our major project the Surmont 2 is making good progress and remains on schedule for first steam in mid-2015. This is an important large scale oil sands project that will provide steady production and cash flow in the future.

The chart on the bottom right shows the steam oil ratios for several oil sands projects, [R3] project, Surmont, Christina Lake and Foster Creek had the lowest SORs compared to our competitors last year. Low SORs are the key to low cost of supply. And just like the unconventionals it really matters to be in the best geology in the oil sands.

On the exploration front, we’re continuing to explore and appraise our unconventional plays with some very encouraging results in the Montney and Duvernay. Again we expect to provide more detail at the Analyst Meeting. Next, I’ll cover Alaska and Europe segments on slide 13.

Alaska average production was 155,000 BOE per day reflecting higher plant maintenance downtime at Prudhoe Bay. At CD5, the Alpine central facility’s tie-in work is progressing on schedule. The project is more than 50% complete and on track for start-up in late 2015.

We’ve sanctioned the Drill Site 2S project and assuming acceptable federal payments, we plan to sanction the Greater Mooses Tooth project in the first quarter of 2015. We’re also progressing the 1H NEWS project. This is the third new project with initiative since the passage of the More Alaska Production Act.

And in addition to the progress on these projects, we’ve also signed a contract to build a new rotary drilling rig for Kuparuk. We’re also making progress on the Alaska LNG project. We have FERC approval to start the pre-file process for the project.

This milestone sets the stage for the environmental review required for the siting, design and construction permitting of the project. An export application has also been filed with the DOE and the federal register. So we’re making progress on the preliminary work to move this project forward.

Moving on to Europe, third quarter production averaged a 194,000 BOE per day. This is up 10% year-over-year reflecting new production from the start-ups at Jasmine, the new East Irish Sea and Ekofisk South partly offset by normal fuel decline.

The Britannia Long-Term Compression project started up in the third quarter and Eldfisk II hook up in commissioning activities continue on schedule for Eldfisk 2015 startup. Now let’s review our Asia Pacific & Middle East segments and other international segment on slide 14. In the APME segment, we produced 301,000 BOE per day in the third quarter.

This reflects major turnaround work at Bayu-Undan and Darwin LNG. At Bayu-Undan we also initiated Phase III drilling during the quarter. We were pleased to report that Gumusut achieved first production in early October.

The new floating production system is running well and we expect to ramp up production in this high margin field over the next few months. This project is one of the key drivers of production and margin growth going into 2015. The KBB project is ready for startup.

We expect first gas in November, but our rate will be significantly constrained pending repairs on the third party pipeline. We expect to be at full rate in this project by mid 2015. On a combined downstream and upstream basis the APLNG project is now about 84% complete and remains on schedule for a mid-2015 start up.

This is another project that will provide stable production and cash flow for many years to come. In exploration, we spudded Barossa 3 well in October and completed the second phase of our appraisal program in the Greater Poseidon area. These fields represent possible options for Darwin LNG backfill in the future.

In our other international segment, we announced the oil was discovered in cretaceous sandstones offshore Senegal with a FAN-1 well. We’re encouraged by the presence of a working petroleum system in this frontier basin and we are now evaluating further work to enhance and understanding of the play in this commerciality.

We’re currently drilling an additional well SNE-1 testing a different play in the area. This is a second of a two well commitment in this block. By the way if Senegal advances as a development project, ConocoPhillips has the option to takeover operatorship, so more to come in Senegal.

We continued drilling our [Kamoxi] well and block 36 in Angola and we expect to have some initial results in this well soon. In Poland, we’re continuing to test the Lublewo well after a large fracture stimulation. As you know, we were exploring for gas, but the results of the well indicate that we’re in the more liquids rich window.

We’re studying the data and evaluating next steps and we’ll update the market once our evaluation is complete. In Colombia, we recently spudded the Picoplata well in the La Lu Luna Shale trend. Finally, the Es Sider Terminal in Libya opened in late August. We completed our first lift in early September and had two additional liftings this month.

We’re currently producing at a 25,000 BOE per day net. We continue to monitor the situation in Libya, but it will remain out of our production guidance given the ongoing uncertainty. I’ll wrap up my prepared remarks with the volume outlook on slide 15. This is our typical chart of quarterly volume guidance for continuing operations excluding Libya.

The first three quarters represent actuals. We expect the significant ramp up in volumes going from third quarter to the fourth quarter. Key drivers of this production increase of the completion of our major turnaround season and ramp up at Gumusut and Britannia Long-Term Compression.

We now expect fourth quarter volumes to be in the range of 1,545 to 1,575, BOE per day which is lower than previous guidance for the quarter, but still achieves the full year targets we laid out earlier in the year. The fourth quarter adjustments reflect three main drivers.

First we don’t expect to providing ramp gas to a third party LNG project in Australia during the quarter. This was always viewed as a short-term production option. Second, as mentioned earlier, we expect a delay of full ramp up at KBB due to third party pipeline appears.

And finally at current prices, we expect to reject ethane in our San Juan Basin operations, this is strictly a value play, what we give up on rig will gain on margins. Despite these changes, the fourth quarter expectations, we’ve had a very strong year and we’re on track to go production by 4% compared to 2013.

Again this is exactly in line with the guidance we provided at the start of the year. And we’re well positioned to deliver our longer term growth target with strong momentum going into 2015. This momentum comes from a continued ramp from recent startups at FCCL Malaysia, the UK and Norway and ongoing strong production from our unconventionals.

In addition, in 2015 with growth coming from a major project, startups Eldfisk II, APLNG, Surmont 2 and Foster Creek Phase G. The bottom-line is we continue to execute safely and efficiently and we’re well positioned to deliver our strategic objectives. We look forward to providing an operational update at our Analyst Meeting in April.

Now I’ll turn the call back to Ryan for closing remarks..

Thank you, Matt. So let me recap a bit of what you’ve heard today. First, we’re on track to deliver our goals of 3% to 5% volume and margin growth with an attractive dividend. And we’re well positioned for the current price environment. We’re laser focused on executing our plans, while using our capital flexibility to respond to short-term factors.

We have good production momentum going in 2015 and we’ll expect to announce 2015 capital program, it reflects the priority on achieving cash flow neutrality without impacting our ability to deliver on our growth targets. So we’re following the plan and the path we laid out two years ago and it’s working.

And as Matt said, we look forward to providing you in more detail company update at our Analyst Meeting in April. So with that, let me turn it over to everyone on the phone and back to the operator for some Q&A..

Thank you. We will now begin the question-and-answer session. (Operator Instructions). And our first question is from Edward Westlake of Credit Suisse. Please go ahead..

Yes. So I think if heard you correctly, obviously oil prices being lower, you’ve set sort of similar volume outlook for last CapEx.

Please correct me if I misheard that, but I was just wondering how much when you look at your overall program going forward of that sort of saving on CapEx is sort of well performance –shale are performing to enable you to hit your growth lower amounts of dollar spend.

How much is deferral you mentioned deferring some early phase shale, it will be interesting to know much you spent on that in ‘14? And then how much is perhaps the cost reduction?.

Yes. Thanks Ed. Mostly in our thinking right now is mostly I would say deferral from the less mature of the unconventional plays that we have in the portfolio.

Again, we’re focused on our low cost of supply that we have in the Eagle Ford, the core areas that we’re drilling in the Eagle Ford the Bakken those are going to remain a big part of what we’re doing going forward. But it is a deferral out of some of those less mature plays. What we don’t know going into the year is how the costs are going to develop.

Is this depending on your view or how bullish or bearish you are in commodity prices over the next couple of years.

What I don’t know is how much scope we’re going to get done for the capital that we said and that’s something that we’re going to watch pretty closely as depending on where the prices level out, how long it stays there, what that cost structure is going to look like. Things will correct if it stays at $80 and we know that..

And then a question on APLNG, obviously you’re seeing first production around the middle of next year.

When do you reckon you would get the sort of first commercial cargo in terms of us starting to sort of model the cash flow contribution from that project, obviously we still hear about delays with the main contracted out in the Queensland gas area? And then any comments on this reversion reclaim by Tristar.

Would that disrupt your ability to hit those goals?.

So Ed, we’d expect that the first cargo will be sometime late in the third quarter or early in the fourth quarter from APLNG. And we’re on track to deliver that. We don’t think that our production or our resource possessions going to be influenced by the Tri-Star measure ..

Yes.

And I’m just I am not (inaudible), but if they win and secure I guess an access to the project, would you need to buy third-party gas from others or presumably you could buy from them and I just (inaudible) cost will be treated?.

So we don’t anticipate that that’s going to be an issue, Ed. And we don’t think that that claim has merit..

Okay. Thank you..

Thanks Ed..

Thank you. Our next question is from Doug Terreson of ISI. Please go ahead..

Good morning everybody..

Good morning Doug..

Ryan it seems like based on your comments and I think what Jeff answered Ed’s question that you guys are probably going to be as focused as ever on your capital expenditure and your operating cost control in the current budgeting round at least as much as ever.

But the second part was about sustainable cost opportunities, what was your point there? It wasn’t clear how significant they were? And also whether it might be whether or not to go in the supply chain or the well service areas or what have you. And so I guess the question is, first kind of a clarification on that point.

And also are you doing anything different than the current budgeting round to try and locate some of these cost opportunities and possibly capture them?.

Yes. Thanks Doug. No, I mean we’ve sent our procurement group out to discover the world in terms to make sure that we’re getting the best deal we can for all those services that we’re providing. My comment is related to last, the last downturn we saw in this business.

The costs came down a fair amount as well; they’ve risen over the last four to five years. But if we stay at this $80ish world for year or two then we would expect some of the cost to start coming down and we’re trying to capture those as fast and as quickly as we can.

So again, a lot of our contracts whether they are drilling rig or pumping services, they are relatively short-term. So, the reductions that should come, we ought to be able to capture them very quickly and that’s our intention.

But yes, we’re focused on both the capital that we’re spending to make sure we get as much scope as we can out of it and the cost that we’re spending across the whole enterprise..

Okay. I understand. And then also on Venezuela you got file for arbitration recently.

So, just want to say if we could get an update on the next steps there, the timing and how you’re thinking about that situation?.

Yes. So we have two sets of arbitration that are going on. The recent arbitration that we have filed is a contractual arbitration relative to the joint operating agreements we had for both the Hamaca and the Petrozuata projects in the Orinoco Belt.

So that’s different and separate from the arbitration that we filed a few years back, that’s working its way through the system.

So, the phase of that arbitration is we’re both submitting our damages claim to the Tribunal, both ConocoPhillips and the Venezuelans are submitting that to the Tribunal, and the Tribunal will rule on the amount of the damages.

This contractual arbitration is something distinct and separate from that that will progress through the courts just like the other arbitration has..

Okay. Thanks a lot everybody..

Thank you, Doug..

Thank you. Our next question is from Scott Hanold of RBC Capital Markets. Please go ahead..

Great, thanks. If I may kind of go into the CapEx sort of discussion again. When you look at obviously a lower price oil environment and moderating spending a little bit to bring more of that balance.

How many, I guess years of that could you do before -- when you look at 2017 and beyond, that becomes more of a question whether or not you can support that 3% to 5% growth beyond that period?.

Yes. That’s exactly what we’re looking. We have a lot of flexibility in the portfolio. So, we can -- we’ve created that over the last couple of years as this major project has ramped down and we’re spending more on the development drilling side, so we can ramp that down or ramp that up based on the market that we see.

And to your point, I mean if we stay at lower capital levels than what we’ve described since the spin, and we do that for a prolonged period of two or three years, it starts to potentially impact some of the growth, but that occurs well beyond 2017. So that’s why we have a range of 3% to 5% production growth.

We’ll monitor the market; we’ll watch it and make sure we do the right thing for the company and the shareholders, but the impact would be longer term.

So, what we’re doing now with the major projects rolling off the production that we’re delivering is why we’ve got confidence between now and 2017, and the plans that we’ve laid out will deliver on the 3% to 5% volume growth..

So, you made a comment on some of the more, I guess, new venture type of unconventionals could take a bit of a backseat for now.

Where does exploration sort of rank on that sort of pecking order list?.

Well, it’s in a similar bucket as the less mature unconventionals, because that’s investments we’re making today for the long-term growth and development of the company. So yes, we look at our commitments that we have on the exploration side and some of the new opportunities that might present themselves.

We’re taking a bit of a pause and slowing some of that down as well..

Okay, thanks. And if I could quickly ask on Coronado, could you give us a little bit of color on your thoughts on -- I guess it doesn’t look like you’ve got (technical difficulty) any activity there anymore.

Can you give a little color on that?.

Yes, I mean the original discovery well was very encouraging, but the first appraisal well that we drilled was intended to establish what the overall size was, and that was disappointing. So rather than continue to appraise that, we feel that it would be better to direct our exploration and appraisal dollars elsewhere.

So that’s why we’ve decided not to continue and pursue in Coronado. But it doesn’t have any implications for our overall (inaudible) Gulf of Mexico exploration program. We’ve got a very strong position there over 2 million net acres that we like a lot. (Inaudible) discoveries already that we are appraising.

And so, it doesn’t have any long-term implications for our Gulf of Mexico exploration program..

Okay, thank you..

Thanks..

Thank you. Our next question is from Guy Baber of Simmons. Please go ahead..

Thanks for taking my question. The overall production this year you expect to basically come in line with your expectations, and we can see the growth projects expected to come on in the next few years, which is significant, as well as the uplift you will get from the U.S. unconventional piece.

But my question is around your underlying and more mature base of production.

Have you felt about that base this year, how it’s performed? Are there any trends you would highlight or areas where you have seen improvement or you see potential for improvement going forward? Just trying to get a better sense of how base production might evolve over the next couple of years, and what you’re seeing on that front..

Our base performance is virtually identical to what we thought it would be. I mean, we’ve got good predictive capability on all of our major legacy assets, and we understand the decline on our base projects. So, no surprises at all across the portfolio in our base production..

Okay, great. And then upstream results in Canada have been especially impressive this year, especially in light of where some of that profitability has been last couple of years despite relatively consistent pricing and production.

So, just hoping you could comment a bit more on -- in a little bit more detail on the evolving profitability of that business unit.

Have you made significant strides there in improving the underlying cost structure and the profitability of that business? Just wanting to better understand that strength and then the sustainability of that going forward?.

I think that’s probably more of a factor of just market conditions that we’ve seen in different quarters. The third quarter was a pretty strong quarter for us for bitumen realizations, kind of seasonal blending requirements, kind of diluent prices. All those things worked pretty well in the third quarter. So, we had strong bitumen realizations.

I think you saw market prices go down by $6 or so quarter-to-quarter, but you saw bitumen prices only go down by maybe half of that. And a lot of that has to do with all the things that go into bitumen realizations. And the other thing that’s helping the business is (inaudible) extremely well.

I mean the operating efficiency in our oil sands asset is tremendous. I mean San Juan for example is producing consistently well above the designed capacity. Our Western Canada business unit has had a tremendous focus on cost management and capital efficiency for the development programs.

So, we’re executing well as well as seeing some benefit from the [WCAS] sort of differentials..

Thanks for the comments..

Thanks Guy..

Thanks Guy..

Thank you. Our next question is from Doug Leggate of Bank of America Merrill Lynch. Please go ahead..

Thank you everybody..

Hi. Good afternoon..

Hi Doug..

Hey Ryan, I wonder if I could try one to you and one for Matt. And to you, I’m really just curious on your perspective on what has happened to the commodity here, I know it’s a big picture question. But I guess one of the hangovers of being a big oil company is longer term planning.

So, I’m not expecting Conoco to have any kind of knee jerk reactions, but I just wonder if you could give us your perspectives and specifically around Libya given that you are I guess an operating company there. How sustainable do you think Libya is? And then, I’ve got a follow-up more specifically on the assets. Thanks..

Yes. Thanks Doug. Yes, on the macro picture, probably a lot of what you hear is surprising how quickly the Libyans came back from zero to what we’re seeing today, 600,000, 700,000 barrels a day gross production.

But we sell out, we don’t have any people on the ground in Libya, but we do have some national employees that are part of our company that are there in Tripoli, and the situation is very tenuous. The one faction that took over the NOC offices, in fact bombed the NOC offices in Tripoli.

So, I think that the whole Libya thing is just kind of hanging on right now. So, there is tenuous supply out there that I think is a bit at risk, which we’ll have to just see over the course of next few months.

I think the demand side has been a little bit surprising out of some of the non-OECD countries in the Far East, and obviously China trying to figure out how much -- where their demand is going to come out, how much the growth is happening in the country.

So, definitely well supplied market right now, and we can all speculate what the Saudis are going to go do, but I think they’re a little upset with some of their customer base being taken away by some of the other country. So, it is a bit of mix bag of things that are out there, but I think for us, it’s global diversified company.

That’s what we’re trying to do. We run scenarios, we think about -- we don’t think about point estimates in oil price around run different scenarios. And we try to anticipate what we would do in capital investment, what the company the portfolio would look like under these various scenarios.

So, I think we’re well positioned for where we find the market today..

I appreciate it. I guess my other question is to Matt. It kind of really bridges between the discretionary spending in the portfolio, Matt, relative to obviously a very competitive economics you guys have had.

So, I guess what I’m kind of looking at is 15% of your spending budget was laid out as exploration or defined as exploration, which I guess would have no impact on the short-term production.

So, as you look at overall pricing environment and you think about the plan not to go into too many specifics because you haven’t given us the number yet, obviously, but how do you think about where you would capital first and what if there was an area in your Lower 48 portfolio that may be challenged in the current environment where -- how would you kind of rank worst through best, if you like --?.

So, this is really an opportunity to exercise the flexibility. And we would anticipate, we would ramp more slowly than the previous plans would be in our less mature plays.

So we don’t need to ramp as quickly in the Permian as we previously thought, so we could take some scope there, and the same applies in the Niobrara and to some of our plays in Western Canada. So those are the primary areas where we could take some flexibility without having any significant impact on the rate between now and 2017.

So those are the main areas. But it will also choke back a little bit in exploration, but we’re still committed to exploration as an engine for organic growth of the company in the long-term. So we need to be balancing a long-term view of the company’s growth potential with these short-term conditions that we find ourselves in..

Is it fair to describe, Matt, $2 billion of exploration, I mean that’s a big cushion. Would that be the first place if things got worse, let’s assume, is that the first place you would look to cut while maintaining rate? I’m just trying to understand, because it just seems you’ve gotten a lot of more flexibility than some of your peers.

And I’ll leave it there..

Yes, Doug, I mean that’s one of the areas that we’d look, but as I said I mean it’s a balancing act for the short-term and the long-term. We’ve got a lot of flexibility in the Lower 48 and Canada portfolio and to manage our capital over this period without having a big impact on growth. So we’re certainly not going to gut our exploration program.

We need to maintain the exploration for the long-term organic growth of the company, and we’re going to do that..

Very clear. Thanks..

Thank you..

Thank you. Our next question is from John Herrlin of Societe Generale. Please go ahead..

Yes, thanks. I’ve got some quick ones for Matt.

Can you say anything else about the well in Angola, the pre-salt well? Were you seeing anything on the way down because you’re going to TD that soon? And then also with Poland, can you talk at all about the test results of the shale?.

It is too early to say anything about the Kamoxi well John. I mean we expect to have that done something in the next couple of weeks, and we’ll make some announcement once we’ve actually got some results to talk about. So, it is too early really to talk about that.

On the Poland well, yes we have had some tests in Poland in a more down depth location in this well, and those were gas wells, and we drilled this well in this location anticipating we would find the same fluids, and we essentially found of course really an oil well.

And so we’re scratching our head a bit to understand what’s going on, there’s some sort of thermal maturity change that we weren’t anticipating. And we’re at the stage of essentially conducting a long-term flow test, doing some pressure build ups, and then we’ll have a better understanding of what the implications of this are in the next few months..

Okay, great. Thanks Matt. And then one other one from me. Given the fact that we’ve had prices break down, ultimately there may be more properties available in the market for the companies that don’t go public.

Will you at all look to supplement your acreage positions in the unconventional plays by buying additional assets or acreage to be opportunistic?.

Yes, we are screening land all the time both in North America and internationally. So if opportunities come up that would meet with our portfolio well and at decent price early in the life cycle, then we would be ready to take advantage of that if those opportunities came up..

And I think the earlier in the lifecycle comment that Matt made is key there, because we do have a lot of organic growth opportunities in the existing portfolio that we are funding currently..

Okay. Thanks Jeff..

Thanks John..

Thanks John..

Thank you. Our next question is from Paul Cheng of Barclays. Please go ahead..

Hey guys. Good afternoon..

Hey Paul..

Hey Paul..

Maybe this is for Matt or for Ryan. First question, from a portfolio management standpoint, if we’re looking at today Bakken, Eagle Ford, and SAGD, account for 20%, 22%, 23% of your production.

So, from a portfolio management standpoint, Matt and Ryan, is there a level that you feel uncomfortable saying that okay, this is too much concentration or what the desirable optimum percentage of your asset mix should be in the North American onshore unconventional oil portfolio?.

Yes. I guess Paul, kind of thinking about it along those lines you are trying to hit an optimum sort of percentage.

I’ll take low cost of supply, which the Bakken and Eagle Ford represent, and then balance that with SAGD, which is these longer term 40 year, 50 year projects that provide an incredible base amount of cash flow with high margin production. They are a little bit different.

So, really not targeting percentage, just making sure they fit the returns profile and they are competitive with the rest of the investments we have -- the opportunities we have in the portfolio, and they do compete, and obviously Bakken and Eagle Ford are at a very low cost of supply, very high returns..

So, from that standpoint, I mean risk come also with opportunity.

And so, if indeed that commodity price, let’s say stay at this $80 or even lower for one or two years, will you be willing to use your balance sheet or perhaps stretch your balance sheet to make some acquisitions to even further beef up what you consider that maybe as an advantage position to be even bigger or that you will be too concerned about the balance sheet and that’s not something that you would like to do?.

That really just depends on the quality of the opportunity that we see out there. As we’ve talked about before, we do have balance sheet capacity. We ended up the quarter with $6 billion in cash. We’re going to use some of that as we go through just funding our program until we get to the point of cash flow neutrality.

But as Matt said, we’re always going to be out there looking for opportunities. If they make sense, we shouldn’t be afraid to use our balance sheet. But we do have a pretty strong inventory of existing opportunities in the portfolio today..

Okay. Two final quick ones. One, Matt, any rough range you can provide for 2015 production? And second for Ryan, it look like there is somewhat of a status quo for your CapEx program at today’s price.

You may trim here and there but is there a level of the commodity prices that once you reach there for an extended period of time whatever you define that and you will start revisiting your overall program and maybe consider that time had changed?.

So, on the production question, I mean the best guidance I can give Paul is we expect to deliver 3% to 5% production growth moving from 2014 into 2015 just as we have from ‘13 to ‘14, and then keep that going through ‘16 and ‘17. So, the best guidance is 3% to 5% production growth..

Yes. On the second part there, Paul, there is nothing status quo about what’s happening today in the market. So, we’ll look at that as we’ve got a lot of flexibility. We got flexibility in our capital program; we got cash on the balance sheet. We got balance sheet flexibility. We’ll monitor the system. And I’m pretty focused on cash flow neutrality.

I think we have [capital] [Ph] plan that gets us there and so that’s a stake that we’ve put in the ground.

And again, you go back to the bit of guidance that I provided in the call here, which says next year I’m looking at a capital amount that’s lower than this year and in fact lower than kind of the $16 billion guidance that we threw out there when we put our plan in place for the company’s 3% to 5% growth..

Thank you..

Thanks Paul..

Thank you. Our next question is from Roger Reid of Wells Fargo. Please go ahead..

Hi. I guess good morning depending on where you are or good afternoon. Just a couple of other things kind of thinking about the whole cash flow balance sheet approach. You all went through a very large I guess the shrink part or the shrink to grow approach here over the last couple of years.

If you’re looking for ways to potentially plug an opening in the cash flow CapEx front over the next year or two if crude stays where it is. What are the other assets identified for sale, if I remember correctly you had a larger portfolio of potential sales than were actually executed.

So, presumably there are still some I guess non-core assets out there?.

The approach we have on asset sales going forward is just to point [Inaudible] to the fact that we’ve got a large portfolio of assets. When you look at a company of our size, roughly $100 million of assets out there. But you can always expect that there will be some level of asset sales that will be happening.

So there is $1 billion or so, maybe $2 billion of asset sales a year. That’s probably not an unreasonable expectation. Unlike what we’ve done in the past where we’ve kind of identified particular assets that we’re going to be marketing. We don’t anticipate we’d be doing that going forward, so you’ll just likely hear about things as they happen.

We are going to be disciplined about portfolio management going forward but there is nothing in particular that we would identify today that we want to talk about as an asset sale..

Okay, thanks. And then the other question on the OpEx side, we talked a lot about capital allocation and so forth; you mentioned earlier contracts with the service companies.

But rather than necessarily drilling a new well, what opportunities do you have on the operating side to lower cost if any or what should we think of to watch maybe as an independent factor for thinking about lower cost?.

So we’re going through our budgeting phase and we’re asking all of our operating units and the staff groups to take a very close look at operating cost for next year to look for opportunities to reduce our overall operating cost structure.

So, it’s just part of our ongoing disciplined approach to managing our cost structure but we certainly are focused on that, we’re always focused on that..

Right.

So I guess is there anything we should think about well workovers or something like that you can always, you can defer some of that work or are there ways - I am just trying to think expendable cost something like that that you can manage down?.

Yes, I mean there are opportunities and probably the last place we would go is to adjust well work and workover activity that’s very value adding operating cost. But we’re asking all of our operating units to take a hard look at their operating cost for next year. But that’s not different from what we usually do frankly..

Okay. Thank you..

Thanks Roger..

Thanks Roger..

Thank you. Our next question is from Paul Sankey of Wolfe Research. Please go ahead..

Hi, good afternoon all. And thanks for being so clear at what is fiscal difficult time here right now to talk about the stuff.

I think just to clarify a comment you made to be very clear, Ryan, I think you said that quite specifically the CapEx next year would be lower and below your $16 billion guidance, is that your opening statement?.

Yes, that’s correct..

That’s great. Thanks, that makes that clear.

And I guess if we were to think of what you thought of as an attractive dividend, we would assume that that would be rising over time otherwise it wouldn’t be attractive, right?.

Yes. We’ve said over time, we expect to be increasing the dividend. So yes that -- it will remain attractive..

And by the way, I’m not setting out here to trick you in any way; I’m just making quite sure we’re clear here. So what you’ve then said is that you kind of locked in to the major projects spending obviously and that’s a very important part of you meeting your volume guidance.

But you have an increasing amount of essentially discretionary CapEx over the coming years which would allow you, should the environment stay tough, to cut back fairly easily on your spending in order to balance your budget?.

Yes, I think that’s right Paul. That’s a place we haven’t been as a company that we set out to create more flexibility, lower cost of supply across the portfolio.

So as I mentioned in my opening remarks today and through ‘14 about 50% of our capital is what you describe the major projects that are going to deliver - help deliver the 3% to 5% growth, the discretion, the flexibility that we’re creating in the company is a lot more that capital going to the development drilling programs, both the mature low cost supply Eagle Ford, Bakken and then the less mature things that we’re doing in the Permian, the Niobrara and up in Canada, Montney, Duvernay and what we’re doing internationally.

So, that represents in the next couple of years over 70% of our capital. So that capital is flexible and we’ll manage the capital level based on the commodity price environment that we see, the opportunity set that’s in front of us and the cash flows that we have coming in as a company..

And it feels like even if you were let’s say to cut in the way that you’re describing already in fact CapEx next year, the volume impact because of the fact these are more frontier type developments, the volume impact actually is going to be fairly limited within the 2017 timeframe.

Is that correct -- I mean very limited I guess out there?.

Yes. That’s exactly right, Paul. Our volume growth target is execution of the plans that we’ve had over the last couple of years, it’s the investments we’ve made over last two years, it’s the projects that we’ve been investing in for the last five or six years, those are coming to fruition now this year and into next year.

So, what we do whether it’s ‘15 or goes beyond ‘15 has very little impact on our plans and our production growth targets through 2017 that we outlined and described to the market over the last couple of years..

Right. And then if I could just round it all off. One thing I think is very small, but I’d just highlight is that in the past you’ve talked about running with $2 billion I think of cash as a kind of working need, but you today said $1 billion.

And secondly one thing that you did - is that what you just said, sorry?.

Yes. $1 billion is - would be the current offering..

The one thing did worry me, Ryan, was that you said that, you would meet your targets in a normalized price environment.

Could you specify that because obviously that could mean awful lot of different things?.

I think what was the point we’re trying to make there Paul is when you look at cash margin those obviously are changing as commodity prices change. So as we look at the shift that’s happening within our portfolio. If you just pick one price environment, no matter what price environment it was and stuck with that you’d see increasing cash margins..

So we’re trying to be very transparent on that Paul. We’re showing you what each quarter is in terms of the actual, but we’re trying to also ground back to when we described and launched the independent company, described how we were going to grow both margins and volumes that we’re trying to report back to that basis. .

I got you. But what worries me is when you did that the oil was - and your planning assumption I think was 110 Brent if I remember rightly. I mean it was way higher than we are today..

No, I mean - we were quoted as saying that that’s not our planning assumption, it’s not a $110 Brent back when we threw that out we just were using current prices to demonstrate. Here is what the margin is today. And if you track our performance relative to that, you’ll see what the margin growth is doing.

So, my point is the underlying margin growth is there, but the absolute number is going to fluctuate and be a bit volatile quarter-to-quarter based on the absolute level of commodity prices. But we’re trying to show that the volume growth is coming and it’s in a higher margin than the base part of the portfolio.

So the margin growth is coming and it will return to cash flow..

That’s great. Thank you..

Thanks Paul..

Thank you. Our next question is from Blake Fernandez of Howard Weil. Please go ahead..

Thanks. I recognize it’s late in the call. So I’ll try to be fairly brief.

I’m sorry to flog the CapEx piece, but I was wondering if you could define the absolute amount of spending that’s actually rolling over on a dollar basis from the major projects year-to-year? And then secondly, I didn’t know if you can maybe define a level or price point where you would actually curtail spending on some of the more mature unconventional plays.

.

Well, I’m not sure, we’ll have to get back with you on the capital that’s rolling over from this year to next year, but the price has to go pretty low before we start impacting the mature plays that we have in our unconventionals. .

Okay, the second question for you is on some of the issues on production in 4Q. I think you’ve referenced three of them infrastructure in Malaysia, ethane rejection and APLNG.

Just trying to get a sense of how transitory those are and [Inaudible] should those be kind of behind us into 1Q, I am thinking maybe the ethane rejection piece is the only kind of wildcard?.

So, based on current prices we would expect to be continuing to reject ethane through 2016 that we think stand just now -- and that’s about a third of the variance that we talked about.

On APLNG that was -- we were prepared to take the opportunity to sell ramp gas to one of the other ventures on Curtis Island, their project hasn’t come in as quickly as they had anticipated, so we don’t -- we were unlikely to be selling ramp gas to them.

And then on the KBB project, we’re ready to start, we’re going to start something in November, but there is a pipeline that runs from - once the gas gets onshore there is the pipeline that runs from Sabah to Sarawak to take that gas to the Malaysia LNG plants. And that pipeline has had some issues that need to be repaired.

And we’re not sure how long that’s going to take. We certainly don’t expect it to be repaired before the end of the year and we’re assuming that maybe it’s as late as the middle of 2015 before we actually get that pipeline fully repaired and to full operation. So that one will linger for a while in 2015..

Okay, perfect. Thank you very much..

Thank you Blake..

Thank you. Our next question is from Ryan Todd of Deutsche Bank. Please go ahead..

Great. Thanks gentlemen. A couple quick ones, again one sort of follow-up maybe this is too specific on CapEx. But I believe that your prior targets to reach cash flow neutrality were based around kind of a $100 Brent, $90 WTI longer term.

And when we think about the amount of relative CapEx that might need to come out of the 2015 budget, is this - should we think about kind of a mark-to-market on the commodity price and then we’ll try to bridge that gap on a year-by-year basis from here?.

No, we’re not talking about trying to get to cash flow neutrality in 2015. So, as we go forth 2015, ‘14 to ‘15, you’re going to see cash flow growing as production grows from these major projects that we have starting up.

So, you’re going to see that cash flow growth even in a lower commodity price environment that we’re seeing today, the comment that Ryan was making is we still feel like we’re going to get to a cash flow neutrality number by 2016, 2017.

And before we were at the higher prices that you talked about, we’re at a point where we are actually beyond cash flow neutrality. So, we still feel like that’s a very doable thing for us to be doing.

We don’t have a number today that we can say that it’s going to be this amount of capital expenditures in 2016 or 2017 to get to that kind of cash flow neutrality..

Okay. Thanks. I wasn’t implying to cash flow neutrality in ‘15, I was implying relative to the plugging the gap relative to the prior plan to keep on pace for the 2017 time period. But….

I think you are -- if you think about our $20 change in price basically which is what we’ve had, that’s about a $3 billion change in our cash flow. Part of that is going to come from the fact that we are beyond cash flow neutrality and part of that would come from lower CapEx..

Okay. So I guess one other question on a totally different issue. In Alaska, there has obviously been -- I mean we heard a lot of on the refining side from West Coast refiners about increasing competition as you see Bakken volumes or railed volumes reaching the West Coast and the impact on Alaska in crude pricing.

I guess in terms of your outlook on Alaska and crude pricing going forward, what is the outlook, what are the opportunities that you have, I know you’ve done one cargo at least in terms of exporting that crude and what sort of price differential would you need or bottlenecks in the system are there in terms of exporting more of that crude to Asia?.

Well, I think what we’re trying to show is we got a lot of flexibility. So, right now the market on the West Coast needs the ANS crude and we hear a lot about the Bakken railing there, but we’ve got a lot of -- we’ve got flexibility. We demonstrated that by taking a cargo to Asia.

We have the ability and the capability go do that, obviously there is a bit more transportation cost associated with that. So if ANS starts trading well below where it’s historically traded relative to either WTI or Brent then we can exercise the optionality we have of exporting that crude..

Okay, great. Thanks for the help..

Hey guys, we’re past the hour. So we’ll take one final question if you don’t mind operator..

Thank you. Our last question is from Pavel Molchanov of Raymond James. Please go ahead..

Thanks for squeezing me in, just one for me.

As we wait for APLNG to start-up and obviously watching LNG prices fall along with crude, can you just remind us on what the off take arrangements are for the plant and any color on that would be helpful?.

Yes. So, all of the gas from 3 and 1 and 2 is contracted based on the Japanese crude cocktail prices. So, it’s all contracted. But we have few spot cargos as we are ramping up production, but once we get to full production, it’s fully contracted to China and Japan..

Okay, perfect. Thank you..

Thank you..

Thanks Pavel. And thanks operator. We’ll go ahead and shut it off here. And thank you so much everybody for joining us today..

Thank you. And thank you ladies and gentlemen. This concludes today’s conference. Thank you for participating. You may now disconnect..