Q1 2020 Earnings Call

[music].

Good morning, and welcome to the Q1 2020 earnings call for Conoco Phillips.

My name is a narrow and I'll be the operator for today's call. At this time all participants are not listen only mode. Later, we'll conduct a question and answer session. During the question and answer session. If you have a question. Please press Star then one on your Touchtone phone. Please note that this conference is being recorded I'll now turn the call overcome.

With L. interfacing to Alan you may begin.

Thanks, Sarah and good morning to our listeners thank.

Thank you for joining us today to discuss this mornings press release, which contained our first quarter earnings results.

Dividend declaration announcement, and an update on our curtailment actions our speakers today will be Ryan Lance, our chairman and CEO, Our Chief operating Officer, Matt Hawk, and our Chief Financial Officer, John will that.

Ryan will make some very short opening comments, but we'll reserve most of the time on today's call for the question and answer session. We don't have any slides. This morning, but we will posed a replay of this call shortly.

As you know given market volatility we have temporarily suspended guidance. However, we may make some excuse me forward looking statements in today's call. Please refer to our SEC filings for a description of the risks and uncertainties that could impact future performance and now I'll turn the call over to Ryan.

Thank you all have and welcome to todays call well there we are at the start of first quarter earnings for the sector and it's a brave new world for all those.

Ordinarily we would use this goal to discuss our recent quarter results in detail and provide guidance for future periods.

But the first quarter already feels like a long time ago, and as you know due to significant uncertainty and volatility in the markets. We will temporarily suspend guidance. So here we are.

Both while we won't provide guidance we continue to believe it's important for Conoco Phillips to provide insights are we thinking about this environment.

What actions are we taking or considering taking to respond.

Yes, I will intend to use this conference call time today.

Ill make some very brief remarks, then turn the call over to our reserves for question and answer session.

There are three themes, Iowa oversize in these remarks first our underlying business is running very well use our first quarter results. In this mornings press release, there was quite a strong quarter operationally. Despite the coven 19 vendetti.

I'm, sorry, I'm very proud of our organization.

While some activities are changing day today I assure you that our workforce is all in on safely delivering the business, including our upcoming seasonable turnarounds that our ongoing capital activity.

The second Pima want to emphasize in these prepared remarks won't surprise anybody is this.

The next few months are going to be very bumpy for the industry and for us.

A couple of weeks ago, we announced plans to begin voluntary curtailments made.

This morning, we announced that we expect to curtail about 265000 barrels per day gross in Bay from our lower 48 answer month combined.

Well, we also announced that we'll expect to curtail about 460000 barrels of oil per day gross in June from our lower 48, Surmont and Alaska combined.

On a net basis. This represents about a third of our first quarter production.

We should be seen as a clear signal that we're willing to use flexibility and balance sheet strength to protect value for our shareholders.

And that brings me to the third being movies remarks.

In our previous to market update conference calls we've emphasized that our actions in this environment are driven not only by our view of the markets, but by the fact that we entered this downturn in a relatively advantage position compared to most of industry.

You saw in today's press release do we ended the quarter with total liquidity of nearly 14 billion, including the 6 billion available under our revolver.

Our portfolio was diversified and relatively low decline.

These other factors that allow us to make rational decisions based on a reason views.

And we can continue to assess and monitor the markets that act.

We continue to manage the business in a way that preserves our strong relative position.

Allows us to take additional actions if needed and protects our ability to resume programs in the future.

So in summary here is what I want you to take from my comments.

The underlying business is running well we have a strong first quarter operationally all things considered in our workforce remains focused on safely delivering our plans.

We expect a period of significant significant volatility over the short term, we know what we need to do.

And we are relatively advantaged coming into this downturn animals were tech that relative advantage as this environment plays out.

So with that I'm going to turn the call over the operator, and we'll be in our begin our today.

Thank you you will now begin the question and answer session.

If you have a question. Please press Star then one on your Touchtone phone.

If you are using the speaker phone you may need to pick up the handset first before pressing the numbers. Once again if you have a question. Please press Star then one on your Touchtone phone.

Our first question comes from Doug Terreson from Evercore ISI. Please go ahead. Your line is open.

Hi, everybody.

Hi, good afternoon, and good morning, Doug sorry.

So Ron your production curtailments seem to have been more market response of than peers, which may have to do with your higher proportion of operated production you're working interest oil or other factors. So but my question is are these the primary drivers of your curtailment decisions are there.

Other control or economic factors the play into it and then also one of the risks to Recoverability.

For your portfolio after output starts to be restored.

If you think that they are meaningful.

Yes, Thanks, Doug I can probably take the first one in Matt maybe can provide a little bit of color on the on the second part of that.

We dug we'd be curtailing as much as we could right now and.

I think we just.

I don't think its right to be accepting these kinds of netback prices for the product that we're producing we've got a very strong balance sheet as I said in my remarks, we're taking.

Yeah.

Modeling sort of short in the longer term scenarios to guide our decisions and these curtailment decisions are guided by the way, we see the market playing out over the short term.

We certainly have more control over things that we operate.

We expect things to be coming from from governments and infrastructure curtailments, but these are the things we can proactively go to do.

Based on our reason view of the market and based on our capacity that we've got on the balance sheet to do these kinds of things.

In our view, we see this as a sign of strength and and we're deploying that and I think acting in a recent fashion. So.

Hi, glad Matt maybe talk a little bit about the what recovered would look like on the back end of these curtailments with improved markets.

Yes, Doug I think there's two aspects to the to the answered one is that how quickly can they've been production back.

And I were taking any risks associated with the curtailment reservoir them into other lines and basically we can bring the production back across and move for the kind of the Alaska within a few weeks it doesn't take months to bring it back so the and the majority of that come to bulk up very quickly and but to get to sue.

Production massive weeks.

We're making sure that will not than anything that's going to take any any risk on that from risk lateral wells or facilities perspective, that's why would someone invents at minimum rate.

So that we can still provide enough heat contain picture to the Uh huh.

Hey, steam chambers to keep them intact, and lower 48 will get very specific said protocols and how do we shutdown and.

And prepare those wells for lease that and Alaska were not shutting in completely within days.

A rate this the.

This is a minimum so recall preaching level that we can consistently all create not for the period of time.

Across all of these and there's no risk of as one damage and the so and then come back in a couple of weeks and there's no risk of any formal bonds.

Okay, Thanks, Matt and then.

Also Ron Theres been a lot of commentary surrounding.

Pro rationing of supply that would be mandated by regulators over the past several weeks. So just wanted to see where you stand on that topic in how you think it's going to play out.

Yes, we haven't been supportive of that Doug from a regulatory perspective, because we think the market is going to ration that very quickly and either through bolt.

Voluntary type cuts that were taking or infrastructure and storage related cuts that become involuntary I guess to some degree for maybe us and other operators as well so the market is reacting the markets working.

And it's going to drive a supply down to kind of match inventory levels and what the but the demand with the refineries can take take on the other end so.

We havent been supportive of efforts that.

Like the Railroad Commission recently has been analyzing and thinking about.

Thank you. Our next question comes from Roger read from Wells Fargo. Please go ahead, Sir your line is open.

Yeah. Thank you good morning.

I guess.

We've heard different things from different companies about the shut in elective showed ends in reservoir issues and I heard your answers to the first question.

Just curious can you give us any examples of what brings you confidence about reservoir maintaining reservoir integrity. As you go through the shutdowns that you are doing or will be doing it may well be doing in June and then you know if they continue beyond that.

What gives you that confidence.

And Roger that's that's the increasing the yen.

It's really because to some extent we go through this on a regular basis in the yields and then we just heard shorter duration.

For example in Alaska.

The other year week to turnaround the L. thing and we go through shutdowns of tonnage trends on a different processing facilities and capacity. So we know who take the Wilson and keep them in good condition and bring them back on the getting the same is true in Surmont mean, occasionally with some loan facility shut down because of wild fires.

Hi, Good then very quickly so we know how to the.

Hi to handle that sale and then the look for the most recent example for example in turn how it can have Eagle Ford we have to go down. So we'll get book applicant both treatment experience that could that gives us confidence that we.

We knew how to handle this was good the advantage just noted that we can planet than we can get it.

And the so there's no reason to be particularly concerned about that we also understand quoted the claim Lisa.

Also understand books flush production as the comes back after shutdowns. So that gives us that within that we need to make a sensible economic analysis as well so.

Just new Roger this is a pretty well thought through.

Oh I didn't data it wasn't thought through I'll, just mostly trying to understand.

Where do you experienced comes from because.

Our some different a different attitudes out there.

Switching gears, a little bit Don.

Obviously significant liquidity in the company I was just curious is there anything else you're looking at balance sheet wise and I'm not just thinking about you know revolvers or new debt or anything like that but also kind of how you're thinking about the working capital side of the business that we should be.

Speaking of levers you can pull here a in coming quarters.

Not really Roger you know we are working capital is pretty finally manage always has been so we don't have a lot of optionality there we don't carry.

Surplus inventories or anything like that just thinking about other items coming down the road.

That would affect liquidity I can't think of anything in a negative way other than.

The low cash from operations that we expect over the next few months as oil prices continue to be.

Low.

We do expect proceeds from the Australia West transaction, we still believe that that's going to close in the second quarter. So.

It will be coming in from a positive direction, but other than that I can't think of any big ticket items.

Thank you. Our next question comes from Neil Mehta from Goldman Sachs. Please go ahead. Your line is open.

Okay. Good morning team and thanks for her extend Q and a session year today.

First question I had is around the thank the team has the dividend and this is score for anybody who wants to take hadn't seen one of your large competitors.

Reduced their dividend today.

Konica in some ways. This medicine, a couple of years ago. So.

But it's just curious on your view about safety around the dividend and strategy around that.

Distribution.

Yeah. Thanks, Thanks deal I think you kind of half answered the question we [noise].

We declared our dividend today as you saw in our press release that kind of remains a priority and really we.

We're committed to a.

Return of cash to the shareholders of greater than 30%, we've outlined that since we see reset our value proposition a number of years ago in the dividends the fixed part of that that we expect to be able to execute through the cycles. We exercise the flexible part of that returned to shareholders with the suspension of our buyback program.

Here, you know a month or month or so ago. So you know we were pretty confident is you described I mean, we we took our in a couple of years ago.

Back in this last downturn, we wanted to set the company up because we knew the volatility was with us to stay maybe this is a three or four signal event, that's even beyond maybe what we were thinking about.

But a couple of years ago to what we outlined in November but.

Your Don's comments on the balance sheet strength, we have as a company I think we're well positioned to get through this downturn.

In pretty good shape.

Thanks, Ryan as follow up question is around consolidation.

He spoke to this a little bit on the capital spending call to want to get any updated thoughts around that.

And one could argue this is towards the back the cycle and.

There's potential to be opportunistic, but curious on your views as you've been page past.

And then had strong views on bidding mask.

Yes, no I think you're right deal our views haven't changed were patient were persistent we monitor the market.

Certainly believe there is going to be significant stress across the sector as you've described and.

You know, we're we've been willing to transact we've talked about that but it has to be accretive and can break our long term financial framework that weve described to the market. Many times, so there's a strong balance sheet and.

And we will put liquidity at risk so.

I think broadly speaking.

It makes it obvious that this this CMP industry needs structural change.

The growth model is broken theres too much DNA running around this business and I think.

It was addressed the it was an interesting article by Liam Denting and Bloomberg here yesterday, So readout I think it's reasonably accurate.

There's too many names for investors, it's getting less relevant in market cap terms. So we do believe the assets could be run more rationally for improved returns over overgrowth, but I imagine the depth of this downturn. There is some pretty tough tough discussions going on between boards management right now so it will probably take time for.

For some of those to realize but I think it needs to happen.

Thank you. Our next question comes from Jeanine Wai from Barclays. Please go ahead. Your line is open.

Hi, good afternoon, everyone.

My first question is on the June production curtailments.

Anticipated June curtailments, there I'm a bit more than what you're expecting in may and so can you talk about how you settled on the June versus the may level, because I guess, when we look at the forward curve plus the implied DNA Raul adjustment June July WCS everything looks on Monday. So is your decision based on something you're seeing a physical market.

This is the paper market or are you just being a little bit more conservative here or is it just related to something else.

Yes, I'll take that in this is not the to me essentially we continue.

As much as we could still honoring contracts that we had entered into with buyers. The a and so we had been that previous months March and April entered into contracts to sale could only and we were we were going to on those contracts with what we curtailed disease when we.

Didnt have contracted simply Sophia the buyer was happy not to take and in June we have more flexibility in the mountain state because we have and and we had much fewer bounds cleese already so that's the primary reason why the the curtailment is higher than June. There's also still this issue of a bit.

This location between the marketplace on the Netback places, they're actually and being offered not just does anyone else. So I think that not phenomenons sat in the and it's still here in June so there's an element of a booth and.

Thank you.

Potential responses I think also somewhat through.

Okay, great. Thank you that's very helpful. And then maybe my second question for Ryan that's on the 10 airplanes. So I'm wondering do you see the current or medium term environment simply pushing out the tenure and plan, meaning that you would resume pretty much stick that plan, maybe a year or do you have delayed or have the conditions change.

How much that you could see more value to shareholders. If you make more meaningful adjustments to the underlying plan.

Yes, Thanks, Jade and I'd add to the last question to Alaska is an additional 100000 barrels a day that we are doing in June that we are doing in may so.

But to your second question about the 10 year plan.

You know, there's as much a philosophy and principles that we think our leading be companies need to be taking to.

Focus on returns and.

And really bring value investors back into this is this business, we don't see that basic tenet. So that plan changing star balance sheet diverse low cost fly portfolio, returning more than 30% of our cash back to the Sheryl looking at through through return through through cycle returns.

I would say that you don't remind people we've got a 15 billion barrel resource base of less than 30 dollar cost us fly in that cost supplied embeds a 10% after tax rate of return so.

We've got something that's quite resilient and and sets up and we've been long preaching about.

You know volatility and lower but you got to be prepared for these lower prices. So we the right ones for any MP business. No you did the tactics or the 10 year plan were based on how we're going to optimize our investment choices that we had so clearly the early years of that plan has changed with the with the downturn, but the shape.

The speed of the recovery will dictate how quickly return and get back executing that previous scope and pace of work that we had outlined last last November. So when this event passes we expect to have the same philosophy and approach.

The programs might be staged in phase the different it little bit differently, but.

We intend and fully expect to emerge with an even more competitive plan when we when we get done.

Thank you. Our next question comes from Douglas <unk> from Bank of America. Please go ahead. Your line is open.

Hi, Good morning, everyone hope everyone's doing okay. There.

Brian I Wonder if you are you bought to.

Yeah, well im joined going through working my shores.

I will say enough another conversation.

The breakeven that you have with the adjustments you've made I'm just wondering if you could give us a refresh with Phil reduce production capacity with the Schutz's, where do you think you breakeven is right now just to give us a kind of roadmap for.

How do you how your cash flow capacity was coming out the other side of that that's my first question.

Yeah, Doug This is Don I think.

On a recent call we mentioned with on a go forward basis, if you're looking at our our spending for the remaining three quarters of the year, we said that our breakeven to cover Capex was under $30 diabetes.

These include the dividend on that would just the additional curtailments zone.

It does not include the dividends so to get to the dividend you'd be in the mid Thirtys BTI.

And with the Kopins.

And as far as curtailments.

It doesn't because we're not projecting them beyond June we don't know what they're going to be but I can tell you. The CFO impacts of the curtailments that we've announced is quite small because of the prices that we expect.

Of course.

Okay. Appreciate my my second question I don't know if either.

Which one do you want it wants to take us, but it goes back to the issue sustaining.

Supporting our sustaining your production capacity.

So when you think about the shutdowns you are taken then.

Obviously, you can recover those volumes as you as you discussed.

But when youre not drilling against the by the backdrop of a declining unconventional business.

What happens to the underlying production capacity because I have to believe that you're running up not down an escalator, you're basically going to come out. The other end of this with lower absolute production capacity on the on the big swing of over 48 can you walk us through the dynamics there I'll leave it there. Thanks.

Hey, Doug This is Matt I'll take that one then so based on the capital and operating cost reductions linens to couple of weeks ago and if it if we.

Don't pay any attention to production curtailments.

Rich production per train between taking the average productive capacity would be about the seamless training 19, so capacity wise, but flat that to production will be whoever ends up being November them from the including the curtailments in terms of the shape of the proof both through the year, but just well. Thank you your.

Yes, getting I mean, obviously the capital was front end mood.

And we're assuming no capital program that we don't complete anywhere else and that they see over the last eight months of the year. So that means of some of the certainly some decline in capacities. We go through the year.

But we're not giving specific guidance on that because there's so many moving parts just man, including that curtailments were concerned about giving that misleading guidance and but the overall direction. As you know there will be some the claim that capacity.

Maintained that Weve actually been building some ducs, you and probably somewhere in the region of 100, Dr. So ducks any lost some productive capacity and we can recover very quickly. So thats up trends in thing that the a and then we can manage true, but we have enough, but we're not getting any specifics.

On that because what concerns about getting and misleading guidance.

Thank you. Our next question comes from Phil Gresh from JP Morgan. Please go ahead. Your line is open.

Hi, Yes. Good morning, Thanks for taking the questions on the first question is something related to a couple other prior ones.

You've talked about this w. CCI breakeven in the low thirtys for the full year and in a high twentys for the rest of the year back at your Analyst Day Asian region, you're going to be about $40 and then over time all work its way down to $30 or as you ramp home somewhat.

Production objectives over the next few years.

How do you think about this meaning beyond 2020.

On the it do you think it makes more sense too.

Maintain a breakeven where your run rating now.

Or does it make sense to.

Spending back up again.

You see increasing model.

Yes. So this is that this is Matt the.

And that becomes a question on in the long run how do we see this and.

And then Nick implications, so demand Uh huh.

Okay and for long term demand than that so traces but generally speaking a will be could run that a little sustaining capital price on digital sustaining craig's in general the because the cost of supply the investment opportunities have rigs balloon to go lives. We don't feel listener shareholders' best interest to know team not too.

Lose a development opportunities. So I think it's unlikely that the choices to try and wasn't such a low breakeven because it would be to faring a lot of variable cost to supply investment opportunities, having said that we'll just have to see has it. Please advance to see if the if we and we sensor.

It is all day long tenure location on there and mid cycle price and but the I think there's two that'll make a decision on that.

Yes.

With that Bill that you know if you recall back in November we talked about our asset optimization model and.

We've looked at and obviously, if we come back to a different mid cycle or different sort of long term price. We would we do that but the we have a pretty strong idea of of what what that optimum kind of ex exploitation rate across our lower 40, unconventionals isn't of apply that to our broader portfolio as well so well.

We see relook at that that but it is a higher level than what is what you might call. The sustaining capital level because there is a sweet spot of of investments that we would make.

It would that will generate what we believe is the better better returns in the business and.

We're going through this downturn today and we've retained all of our capability. So we have not we've not eliminated any that organizational capacity.

Because again were that were informed by our short and medium term view of the market. What we think the recovery might look like and have chosen to retain that capabilities. So we can come back strongly if we if and when we choose to.

Sure Okay.

Appreciate that it's that's related to be asking those types of questions. Yeah. I know I guess piece of this is there is a very lumpy part in the development plan over time, which is well on Alaska.

And I'm, just curious how you're now thinking about low and.

On how the timing I guess just based on your.

Base case macro beer viewed from here I know they're.

Lump potential outcomes, but what would it be your base case on how you think about rolling leaning toward in the timing.

So this is not again and weve been working through illusion that were in the concept selection stage design.

We have and timeline that would get us to the into this year with the opportunity.

Opportunity to select a bit cone sent them, but I mean have been biggest facility to rebuild them into drilled Sandra So we haven't sue on so we're continuing to work towards that and that to and decision.

Yeah point towards the end of year for will and well make a decision you're not paying them then that will dictate the piece beyond so and we have not made a decision and did a favorable and that we have.

That decision is ahead of us.

So we're continuing to look through that.

And we expect permits.

Here here this summer supporting the development at Willow, both at the federal and state levels.

Thank you. Our next question comes from Scott Hanold from RBC Capital markets. Please go ahead. Your line is open.

Yeah. Thanks, you forget span Alaska little bit obviously, you completed some of your a winner program with.

From a appraisals and test felt there could you give a sense of.

What a what you've learned from that and you know how that help you form your decision to the next year. So.

Yes, Scott Foodies weekend, we we did some the exploration.

Actually in an appraisal at will and it will be drilled two wells and having a plan for and how can we drilled one upon fleet and the reason that we we've drilled to put the Haskell program as we were concerned they happening and these exploration counts we waste.

On the north slope, and if we had to cool, but I agree and that thankfully, we didnt have a cooper those great on the bundles of caution for people in a contractors we decided to.

Shut down the explanation program area, so we drilled to four wells well and the those wells it where it had the results that we would expect thing and we're still on track for a concept select decision and we'll just have to.

Decided to free if we want in those additional wells before we make that decision then, but we're still evaluating the data just.

On the Huck Finn well, which is the exploration complex that says original plan was to drill three wells. They are the only drilled one.

The and that rail appears to quit the edge of a talk set based on this a load response and we wouldn't go that for sure till we get a chance to drill a second well. Okay. So we're still evaluating those results and and but I think they the bottom line. This will be Judy is going to remain on track and until we get back near to complete the.

And the exploration program.

Okay. Appreciate it good color your color and this one might be for Don you know the LNG outlook in your Kim provide any kind of color on expectations for distributions maybe over the next quarter year or if you have a you know information it could be good enough.

At this time.

Oh sure Scott.

Yeah actually LNG realizations have held up pretty well so far I think our.

LNG Netbacks were only down about 4% from the fourth quarter.

But that's because of the lagged nature, so that's going to roll over and we're going to start seeing the impacts as we.

Go through the rest of the year.

But we do have an advantage in that most of our LNG I'm talking about all of our projects.

Globally.

The vast majority of our LNG is under term long term contracts and so they're holding the.

Relatively well compared to the the very weak current spot a spot market.

In fact, I think 90% of our.

Total LNG sales are our term and less than 10% spot.

So back to your question as far as distributions you know we reported I think about 100 million dollar distribution.

In the first quarter from LNG.

We're still expecting somewhere between.

500 to maybe 550.

For the year.

Thank you. Our next question comes from Alastair stemming from Citi. Please go ahead. Your line is open.

Thank you I had a related question for dawn on the cash flow I'm, just wondering if you'd give some sort of guidance on.

How are you thinking of on cash tax in this environment I think if I remember back in 2016, you had substantial.

Tax loss carry forwards, particularly in the U.S. I was wondering to what extent the still exist.

Yeah, we're still a alister in a.

Non cash taxpaying position in the U.S. and I think coming into this year when markers for still stable or relatively stable. We were thinking that we could come out of that position.

Maybe as early as 21, but probably more likely 22.

So now this is going to obviously set that timeframe back because we're going to have some large losses this year.

So I don't have an estimate of when we might come out of it now, but it's going to.

Certainly be beyond what we thought before.

So does that mean, the U.S. isn't a.

Minimally zero taxpaying position in Twoq in effect.

Yeah. We're in we're in a zero taxpaying position in the U.S. and expect to remain there for quite sometime.

Okay. Thank you very much.

<unk>.

Thank you. Our next question comes from Paul Cheng from Scotia Bank. Please go ahead. Your line is open.

Hey, guys Oh, good morning, all good afternoon depends on when you are.

Why and I think your own fall business model, you're not changing you have a good business model all that bombings girlfriend.

And Kashmir continue my stuff.

This is Ben.

Thank you in any single funds that have changed some of the palm the past what they just didnt take rate so that what kind of see that had a acceptable or comfortable range Oh, what that watches that could send off day when investment.

Many of those upon the tests, what youre seeing wet.

Because of 50, Ben has been changed if not why not.

Well I think times going to tell Paul I think we Gotta go through this find out where demand returns to if there's any permanent demand loss as a result of this a pandemic changes in consumer behaviors that might drive a different you know different longer term.

View of the price side I don't think we were kinda like a lot of people watching that very closely to try to understand where supply and demand rebalances out at the end of this at the end of this downturn. So it's probably a bit early but you know will continue to again rely on the fundamental.

Sales of the business that that I talked about earlier, you know the strong balance sheet executing on a low cost to supply a resource base and and we're committed to the value proposition that we laid out if you go back in November we've really been they are we reinforce back in November and what we've been operating under for quite some.

Time or at least the last few years. So I think your question around capital intensity and you know how you return money back to the shareholders. We just have to have to see what the long term our long term view of prices ends up being in where supply and demand rebalances itself as we come out of this downturn.

Hi, one does and we think the only problem yet that we probably wont know what is the real long term impact.

Yes Sandy.

Maybe for four or five yes, I mean that I think the by Dan I'll pay ceiling tomorrow or next year I'm not sure. When you can really towers that we know what is the long time.

Impact so yes, I mean, it that you guys, probably not going to do anything differently until maybe four to five Vietnam devote pointed out that to have some cop confident that phone or that you will be no wasn't a long time.

If that's the way how we should look I guess, how long have you how long have you noticed Paul to take five years to react to market environments that we're in we're free you know we've run our scenarios. We know we're doing we know what the philosophy is around the business and in will match will match, our efforts around capital and returned back to shareholders and where we.

With the balance sheet.

How much cash we need to have on the balance sheet based on the based on the environment that we find ourselves and we have confidence because the low cost to supply resource space that we have existing in the company competes in a very low commodity price environment. So we.

We know we know what wins and that's what we're going to be focused on and we're going to be flexible and do we have to do to make sure. We're putting the money into the portfolio in the right places and reacting to the current environment that we fine.

We certainly won't wait five years.

Okay.

Thank you. Our next question comes from Josh Silverstein from Wolfe Research. Please go ahead. Your line is open.

Yep, Thanks, everybody.

On the Alaska volumes, we've typically thought about an S and brand just kind of intent interchangeably. There you know that relationship is broken down over the past month, you just remind us how you sell those volumes or like how that might be different from how you're selling though the lower 48 volumes.

Josh I'll I'll take that one.

Yes, most of our ANS sales go into the West coast switches.

Why you're seeing.

The traditional relationship between paying us in Brent break down because of the very low refinery utilization rates and in PADD five.

So yeah, we would expect that relationship would.

Return once demand picks up in California, and the rest of the West Coast you know some of our cargos. We do if the opportunities is open for US we do send them to Asia as well, but generally our ANS.

Sales.

Wherever they go they're going to correlate usually very closely with Brent Ics except vendor.

Unusual circumstances were facing today.

Great. Thanks, and then it right now there's a lot of.

<unk> defense being played right now whether it's by my kind of car or everybody else in the market I'm, just wondering where we're kind of go can play offense in this environment to lower the forward breakeven price I get the M&A question was asked before but is there anything from a service cost standpoint, or anything else that comment, though can fall lever on to tend to get that right.

Even Chrysler.

Yeah, Josh I mean, obviously, we were working with their supply chain and partners on the opportunity to see some deflation in this environment, we have a strong relationship with suppliers we than than maybe some value. There. We also see value we've had a very strong.

And who focus on innovation in the company over the last night in years, and so that are opportunistic opportunities to accelerate the adoption of new technology and find ways to continue to drive across the supply Dan We've made incredible strides on that over the last few years and we're not done yet I mean that we know that part of our job is.

We continue to drive coastal supply done because what wins in the end in the commodity businesses little close to supply.

And now that mindset at school understood by everybody that looks here and we're focused on isn't every little if any sense began on the close to supply overtime.

And our workforce Josh sees the volatility in the market. So they see what what happens in the volatile markets and why.

Why as Matt said, we have to continue to lower the breakeven and drive the cost to supply down.

Thank you. Our next question comes from Michael Hall Heikkinen Energy. Please go ahead. Your line is open.

Thanks.

Good morning, I guess, it's just curious as we as you think about bringing back the.

Curtailed volumes, you expect to see any sort of.

Material or notable incremental operating costs and our capital costs associated with bringing those back for.

Yeah, Thanks, Bart workovers or SP refurbishment or any other associated costs that are our stuff associated with restarting those volumes.

[laughter].

And this is Matt Michael and I know pertaining to live the we we have slowed down in ER and well work and Workover activity as part of a real Clinton close deductions. So when the prices there to cover and we want to produces better understand where they'll ramp back up with.

In a bump up for the most pop the the production and federal.

So in any incremental significant incremental but hoping not to the kids for example to bring them back one again nothing I think that's what can we get Matt.

Yep.

[laughter] and and I guess also think about the the second quarter.

Yeah. I mean are there are there anticipated turnaround that we ought to keep in mind and well that would go beyond any of these curtailments.

You know outside or 40, Encana and Alaska Im just thinking the rest of the global portfolio is that.

Yes, there is something that was already.

Baked in at least.

The only just thought to be keeping in mind as we head into the second quarter.

Yeah, we yeah, we have so send that.

Uh-huh turnarounds going on across the portfolio. This year at last year was a very hibbing get hurt September lenses last heavy this year, but but we have we're keeping because that schedule and ER and then there are no hugely notable ones that are unusual unusual as we go through the year, but they will be cutting predominately in the second quarter funded.

Turning around them.

Hello.

The majority of them will happen in the second and third quarter.

Thank you. Our next question comes from Paul Sankey from Mizuho. Please go ahead. Your line is open.

Hi, good morning, everyone.

[noise], there's a lot of disconnect between paper markets for more than physical markets, and obviously within that physical or.

Dynamic this tremendous differences across the board in a regional crude prices.

Can you just talk a bit about how that that's been affecting you and then I'm also wondering about some of your crude quality.

You know there's been a little tool that very high apiay crude as being a problem.

And then well we're going that could you will see there's a bull case, the natural gas here as people shut down production could you talk about a your exposure.

The natural gasoline please thanks.

[laughter].

Yeah, Paul I'll take that one though this is don.

Yeah, it's been two different worlds really the last month or so.

Speaking to your comments about.

What's happening in the physical markets versus whats going on in the financial markets, We've certainly seen that.

And ER and the U.S. in particular.

And that's really.

Driven our decisions around curtailment, but you know the netback prices are lower than what you might assume a reading the screen. So.

I would say, we havent had any.

We haven't faced any problems and placing the volumes that we wanted to place so.

All these voluntary curtailments and they are they are elections that we're making just because we don't.

We don't like the prices being offered but we havent faced a situation, where we've had difficulties finding the market for our crude.

Not here in the U.S. and not anywhere in the world not yet that made that may be coming.

On natural gas side.

Yeah, I mean, we are seeing some some at least.

Somewhat a bullish.

Views on all the natural gas side, you know, we just don't have the same exposure that we used to have a or exposure. It's mainly on the on the LNG side and on the European gas side, we have very very little a domestic production anymore.

Understood you do have can you spoke a little bit.

As a follow up about your infrastructure positioning.

And how that how markets.

Our around you know positions you have in North America, and I'll leave it there thanks alone.

Yeah, Paul I guess you'd be talking more about some of our marketing activities and well, maybe but both equity and marketing, but oh, we do have a long haul positions on both the oil side and the gas side, probably more on the natural gas side, because we've been such.

Our active marketers of natural gas in North America.

You know so we've been.

Marketing our own equity gas out of the Permian Basin generally moving at West.

Towards a California sends to Mexico, Arizona light up the West coast as well, but we also move a lot of third party volumes as well.

Thank you. Our next question comes from Bob Brackett from Bernstein Research. Please go ahead. Your line is open.

Great. Thank you.

Reserve release, you mentioned the coming into East field is not moving forward into development can you kind of talk to that and talk about as an example, how is your capital allocation philosophy changed at least in terms of sanctioning projects. This year if it hadn't at all.

[noise] coupled this is not the commences.

East and that was simply so financial recognition of the fact that.

Timing of when we will develop.

Kin D. It's essentially a satellite to Cabot banking KBB.

Because KBB has been slow down by this pipeline issue and third party pipeline issue on between SAP on satellite.

The license for kidney is going to expire before we can bring into an economic development. So this move just recognizing that in there.

It's treatment of the asset so that was what caused that and recognition than that best quarter.

And tenders in the second part your question I wouldn't say that there has been any significant change in a view of how we should be allocating capital we should be allocating could Louis coastal supply then we should be facing it so that we're doing that and the optimum weight and so no no no no significant change or at least not yet, but when I was thinking on that.

Okay. Thanks for that a quick follow up on anchor you or I'm, sorry, I know Harpoon you mentioned that you quit the top sets, which tells us something about missing reservoir, but you Didnt mention fluids did you encounter hydrocarbons in that.

Yeah, we did encounter hydrocarbons.

But we're still in separate thing the results there, but they then it's a yeah. It looks from us less the logical perspective, it's similar to other lift the logical signature who've seen on the edge on these.

Talk changed and but.

And then we spent two other wells to drill we would've been a lot more information that we've been able to finish the program, but the trust safety reasons, we chose not.

Thank you. Our next question comes from given the Caremark from Morgan Stanley. Please go ahead. Your line is open.

Hey, Thanks for taking the question there if you asked already on capital spending in the balance sheet, but I wanted to just follow up and a bit more detail on that you provided back at the Investor Day, Gopal analyses stress testing the balance sheet and cash the profile through a low commodity price period, and clearly overseeing right now is a bit unprecedented.

No different than than than that stress test, but the balance sheet is still a very strong competitive advantage for years wondering just give an update on how you're thinking about the required cash balance and why is it take on kind of additional lightbridge here early on the balance sheet. The extent, we see a sustained period of long of low prices over the next few quarters two years and at what point for their Capex cuts because.

Consideration.

David This is Don I'll.

Take that.

You know as far as a cash balances.

At the Analyst day, I think we said that we had an operating requirement.

Of about a billion dollars and we felt like we.

We wanted to keep a reserve balance on top of that of two to three.

Billion I think.

Generally we feel the same way about it.

Typically is probably a those numbers are probably come down a little bit operating cash is not quite.

A billion dollars because mainly because of some of the assets that we've we've sold we just don't need that much.

And the reserve capital or the reserve cash is.

That's a number that we recalculate every month based on our outlook for the next six to 12 months.

And that number's, probably come down a little bit because of our.

Our lower spending on Capex opex.

By the suspension of our buyback program.

But you know it might be a billion dollars lower.

And what we were thinking in November but that's about it. So those numbers are still pretty good. We think we'll you know as we look out.

Say to the ended the year, we think that we'll be able to maintain cash balances above those levels of operating in reserve cash.

So that would imply that we don't expect to have to access.

The debt capital markets.

Thank you. Our next question comes from Pavel now China from Raymond James. Please go ahead. Your line is open [noise].

Thanks for taking my question. How do you may have mentioned after a few minutes ago are you gonna be having any high in the voluntary shutting in Norway or Indonesia, both of which were part of the Opex plus agreement.

And yeah I'll take that that's not that we just saw it today and shoot the Norwegian I've said they would be participating.

Neil pick ups and then the 250000 barrels a day curtailment Virgin and about 100 and start to kick volume on things that make sure. It was in the second time between expanding so we are likely could be allocated some of that in Norway, but we're working that didnt have reasonably complicated we had working though.

And so there's just like to give some impact than they normally business. So estimates at the moment it'll be in terms of impacts are unhappy usually the unit will be in the low single digits barrels a day for the so the year for those but we are still working through that and they they also make some interest and changes to that.

Team over there and the most interest in one being they sent releasing that the depreciation schedule to one year for capital So that was a face smart.

Strategic response from the Norwegian government Securities, but in terms of Indonesia, We and I think you mentioned, Indonesia, we we sales gas in Indonesia, and two and the team to domestic market most of that fixed prices, let's take a peak commitments. So less so we're not gonna be affected by anyway, and then Denise.

In action to them and to support they will pay plus accrued.

I would we be may be affected in Malaysia.

And then the Malaysian government has announced that they're going to and participate to some extent, but we don't know the details yet.

Well clearly.

No. This is Alan we're getting close to the top 30 hours on going to ask that we take just one more question apologies to our participants, but I will wrap it up here with one more.

Thank you our last question comes from Phillips Johnston from capital. One. Please go ahead. Your line is open.

Hey, guys. Thanks, your oil mix and the lower 48 has been pretty consistent over the last several quarters in the 57% to 60% range as you as you mentioned you're planning on any.

Well completions in this environment. So Mike My question is if we look you know nine to 12 months out.

Would you expect your oil mix to move significantly lower from that range, just says Gee awards and existing wells naturally move higher without any new volumes to offset that mix shift.

Yeah. So they are there maybe some modest piece and the gas ratio over there as we go through the year, but it shouldn't be a shouldn't be that significant well have declining production and the bulk in eagle Ford, depending and with that they do and they'll be something Pcs and you are there shouldn't be.

You know kind of significant.

Thank you I'm not showing any further questions at this time I would like to turn the call back over to Miss Allen to thank goodness.

Thanks in our excuse me thanks to our listeners if they left anyone in the queue excuse me will come back to thanks for your participation in stay safe.

Yeah.

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

[noise].

[music].

[music].

[music].

Good morning, and welcome to the Q1 2020 earnings calls for Conoco Phillips My name is in there and I'll be the operator for today's call.

Hi, all participants are not listen only mode.

Later, we'll conduct a question and answer session. During the question and answer session. If you have a question. Please press Star then one on your Touchtone phone. Please note that this conference is being recorded.

Now I'll turn the call over to much Elena good thing to Alan you may begin.

Thanks.

Good morning to our listeners thank.

Thank you for joining us today to discuss this mornings press release, which contained our first quarter earnings results.

Dividend declaration announcement, and an update on our curtailment action.

Our speakers today will be Ryan Lance, our chairman and CEO, our chief operating officer about fog.

Our Chief Financial Officer, John lot.

I will make some very short opening comments, but no reserve most of the time on todays call for the question and answer session.

We don't have any slides this morning, but we will pose a replay of this call shortly.

Given market volatility we have temporarily suspended guidance. However, we may make some excuse me forward looking statements in today's call. Please refer to our FTC filings for a description of the risks and uncertainties that could impact future performance.

Now I'll turn the call over to Ryan.

Thank you everyone and welcome to today's call well, we are at the start first quarter earnings for the sector.

The brave new World Fleet.

Ordinarily we would use this call to discuss our recent quarter results in detail and provide guidance for future periods.

The first quarter already feels like a long time ago and as you know.

Significant uncertainty and volatility in the markets, we will temporarily suspending guidance. So here we are.

Well, we provide guidance we continue to believe it's important for conoco Phillips to provide insight.

We thinking about this environment.

What actions are we taking or considering taking to respond.

And that's all will intend to use this conference call time today.

I'll make some very brief remarks, then turn the call over to our listeners for question and answer session.

There are three things I want to emphasize in these remarks first our underlying business is running very well.

Our first quarter results in this mornings press release, it was quite a strong quarter operationally despite the cold in 19 condemning.

That's very very proud of organization.

Some activities are changing day today I assure you that our workforce is all in on safely delivering business, including our upcoming seasonal turnaround at our ongoing capital activity.

The second theme I want to emphasize amazed prepared remarks won't surprise anybody it's this.

The next few months are going to be very bumpy for the industry and for US. The couple of weeks ago, We announced plans to begin voluntary curtailments may.

This morning, we announced that we expect to curtail about 265000 barrels per day gross in May for more lower 48 and Surmont combined.

Well, we also announced that we'll expect to curtail about 460000 barrels of oil per day grows in June from our lower 48, Surmont and Alaska combined.

On a net basis. This represents about a third of our first quarter production.

You should be seen as a clear signal there were willing to use flexibility and balance sheet strength to protect value for our shareholders.

And that brings me to the third theme of these remarks.

In our previous to market update conference calls we've emphasized that our actions in this environment are driven not only bar view the markets, but by the fact that we entered this downturn in a relatively advantaged position compared to most of industry.

You saw in today's press release do we ended the quarter with total liquidity of nearly 14 billion, including the 6 billion available under our revolver.

Our portfolio was diversified and relatively low decline.

These other factors that allows to make rational decisions based on a reason views.

And we can continue to assess and monitor the markets that act.

We continue to manage the business in a way that preserves our strong relative position.

Allows us to take additional actions if needed and protect our ability to resume programs in the future.

So in summary, here's what I want you to take from my comments.

The underlying business is running well we had a strong first quarter operationally all things considered at our workforce remains focused on safely delivering our plans.

We expect a period of significant significant volatility over the short term, we know what we need to do.

And we are relatively advantaged coming into this downturn and we'll check that relative advantage as this environment plays out.

So with that I'm going to turn the call over the operator, and we'll be in our begin our DNA.

Thank you we will now begin the question answer session.

If you have a question. Please press Star then one on your Touchtone phone.

If you're using a speaker phone you may need to pick up the handset first before passing the numbers. Once again if you have a question. Please press Star then one on your Touchtone phone.

Our first question comes from Doug Terreson from Evercore ISI. Please go ahead. Your line is open.

Hi, everybody.

Hi, good afternoon, and good morning, Doug sorry.

Yeah. So Ron your production curtailments seem to have been more market response of than peers, which may have to do with your higher proportion of operated production you're working interest oil or other factors. So but my question is are these the primary drivers of your curtailment decisions are there.

Other control or economic factors.

Play into it and then also one of the risks to Recoverability for your portfolio. After output starts to be was restored Tom if you think that they're meaningful.

Yes, Thanks, Doug I can probably take the first one and Matt maybe can provide a little bit of color on the on the second part of that.

We dug we'd be curtailing as much as we could right now and I.

I think we just.

I don't think its right to be accepting these kinds of netback prices for the product that we're producing we've got a very strong balance sheet as I said in my remarks, we're taking a.

Modeling sort of the short in the longer term scenarios to guide our decisions and these from Taleban decisions are guided by the way, we see the market playing out over the short term.

We certainly have more control over things that we operate.

We expect things to be coming from a from governments and infrastructure curtailments, but these are the things we can proactively go to do.

Based on our reason view of the market and based on our capacity that we've got on the balance sheets do these kinds of things.

In our view, we see this as a sign of strength and.

We're deploying Matt and I think acting in a reason fashion so.

Hi, glad Matt maybe talk a little bit about.

What were covered would look like on the back end of these curtailments with improved markets.

Yes, Doug I think this to the aspects to the to the answer one is how quickly can the during production but.

And we're taking in risks associated with the curtailment.

Reservoir damage or otherwise and basically we can bring that production back across the.

The kind of the Alaska within a few weeks doesn't take months to bring it back so the a and then that the majority of it can be bought back very quickly and but to get to steel production that matches weeks.

We're making sure that will not than estimate is going to take any any risk either from risk while in Wales facilities perspective, that's why would someone invents at minimum rate.

So that we can Stoke amazing feat and temperature to the Uh huh.

Hey, steam chambers to keep them.

Correct.

Lower 48 will very specific except protocols and as to how we shut down and.

And prepare those wells for lease that and Alaskan were not shutting in completely we're doing that.

Rick This the this amendment or preaching level that we can consistently all create for a period of time.

All of these that there's no risk of as one damage and so.

Then come back a couple of weeks and there's no risk of independent.

Okay. Thanks, Matt and then also Ryan there's been a lot of commentary surrounding.

Our pro rationing of supply that would be mandated by regulators over the past several weeks. So just wanted to say where you stand on that topic and how you think it's going to play out.

Yeah, we haven't been supportive of that Doug from a regulatory perspective, because we think the market is going to ration that very quickly and either through bolt.

Voluntary type cuts that were taking or infrastructure and storage.

Related cuts that become involuntary I guess to some degree for maybe us and other operators as well. So the market is reacting the market's working and it's going to drive a supply down to kind of match inventory levels and what the what the demand with the refineries can take take on the other ends so.

We havent been supportive of of efforts that.

Like the Railroad Commission recently has been analyzing and thinking about.

Thank you. Our next question comes from Roger read from Wells Fargo. Please go ahead. Your line is open.

Yeah. Thank you good morning.

I guess.

We've heard definitely thanks from different companies about the shut in elective showed ends in reservoir issues and I heard your answers to the first question.

Just curious can you give us any examples of what brings you confidence about reservoir maintaining reservoir integrity. As you go through shutdowns that you are doing or will be doing in may well be doing in June and then you know if they continue beyond that.

What gives you that confidence.

And then Roger that's that's your question.

It's really because to some extent we go through this on a regular basis in the fields and that leads us for shorter duration.

For example in Alaska.

The other year week.

Turning around the L. thing and we go through shutdowns of tonnage trends on different processing facilities and capacity. So we know how to take the wells than and people in good condition and bring them back on again. The same is true in some of you can occasionally but thats put some loan facility shut down because of wild fires. We've had good then very quickly so when we know how to.

Yeah.

Hi to handle that as well and then the look for <unk>. Most recent example for example in turn Hurricane Harvey Eagle Ford has to go down So we'll get broken Clinton and will create an experience that good that gives us confidence that we that we knew how to handle this was good. The advantage just noted that we can planets and you can get it.

And the so there's no reason to be particularly concerned about that we also understand quote the claim they saw.

We also understand books flush production as that comes back Dr. Scholls. So that gives us that within what we need to make a sensible economic analysis as well so.

Justin you Roger this is a pretty well thought through.

Oh I didn't doubt it wasn't thought through I was just mostly trying to understand.

Well the experienced comes from because.

Our some different a different attitudes out there.

Switching gears, a little bit dawn.

We see significant liquidity in the company I was just curious is there anything else you're looking at balance sheet wise and I'm, not just thinking about revolvers or new debt or anything like that but also kind of how you're thinking about the working capital side of the business that we should be.

Looking at levers you can pull here a in coming quarters.

Not really Roger you know we are working capital is pretty finally manage always has been so we don't have a lot of optionality there we don't carry.

Surplus inventories or anything like that just thinking about other items coming down the road.

That would affect of liquidity I can't think of anything in a negative way other than.

The low cash from operations that we expect over the next few months as oil prices continue to be.

Low.

We do expect the proceeds from the Australia West transaction, we still believe that that's going to close in the second quarter. So.

It will be coming in from a positive direction, but other than that I can't think of any big ticket items.

Thank you. Our next question comes from Neil Mehta from Goldman Sachs. Please go ahead. Your line is open.

Good morning team and thanks for her extend una session here today.

First question I had is around the same the ti as the dividends and this is for for anybody wants to take Adams C. Wonder if your large competitors a reduced their dividend today.

Konica in some ways picked this medicine, a couple of years ago. So.

Medicare curious on your view about safety around the dividend and strategy around that distribution.

Yes. Thanks, Thanks deal I think you kind of half answered. The question, we Oh, we declared our dividend today as you saw in our press release that kind of remains a priority and really.

We're committed to a.

A return of cash to the shareholders of greater than 30%, we've outlined that since we see reset our value proposition a number of years ago on the dividends the fixed part of that that we expect to be able to execute through the cycles. We exercise the flexible part of that returned to shareholders with the suspension of our buyback program.

Here, a month or month or so ago. So we were pretty confident as you described I mean, we we took aren't in a couple of years ago.

Back in this last downturn and we wanted to set the company up because we knew the volatility was with us to stay.

Maybe this is a three or four Sigma event, that's even beyond maybe what we were thinking about.

In a couple of years ago, and what we outlined in November but.

Don's comments on the balance sheet strength, we have as a company I think we're well positioned to get through this downturn.

In pretty good shape.

Thanks, Ryan as follow up question is round to consolidation you spoke to this little bit on the capital spending call to want to get any updated thoughts around that.

One could argue this is towards the bottom of the cycle and there's potential to be opportunistic, but curious on your views as if the patient pass.

Had strong views on bidding Ross.

Yes, and I think.

You're right dealer or these have changed were patient were persistent we monitor the market.

Certainly believe there's going to be significant stress across the sector as you've described and.

We're we've been willing to transact, we've talked about that but it has to be accretive and can't break our long term financial framework that Weve described to the market. Many times so no the strong balance sheet and.

And we will put liquidity at risk so I.

I think broadly speaking.

It makes it obvious that this CMP industry needs structural change.

The growth model is broken there's too much in DNA running around this business and I think.

It was addressed it was an interesting article by embedding in Bloomberg here yesterday, so readout I think it fits.

We're reasonably accurate.

There's too many names for investors, it's getting less relevant in market cap terms. So we do believe the assets could be run more rationally for improved returns over overgrowth, but I imagine the depth of this downturn as some pretty tough tough discussions going on between boards management right now so it will probably take time for.

Some of those to realize that I think it needs to happen.

Thank you. Our next question comes from Jeanine Wai from Barclays. Please go ahead. Your line is open.

Hi, good afternoon, everyone.

My first question is on the June production curtailments.

Hesitate at June curtailments, they're a bit more than what you're expecting in may and so can you talk about how you settled on the June versus the may level, because I guess, when we look at the forward curve plus the implied DNA Raul adjustment June July WCS pricing looks stronger than May. So is your decision based on something you're seeing a physical market.

This is the paper market or are you just being a little bit more conservative here or is it just related to something else.

Yes.

Thats in this is Matt.

Yeah.

Me essentially weaker too.

As much as we could.

Still honoring contracts that we had entered into the buyers.

And so we had been that previous months March and April entered into contracts to sale could only than when we were we were going to on those contracts with what we curtailed disease when we.

Contracts. Some please sofia by almost happy not to take and in June we had more flexibility in that space, because rehab and and we have much fewer bottles cleese already so that's the primary reason why the a curtailment as high as I mentioned, there's also still this issue but at this.

Location between the marketplace on netback pricing.

Actually and being offered not just does anyone else. So I think that phenomenons sat in the and it's still here in June so there's an element of a booth and.

Thank you.

Financial responses I think also somewhat.

Okay, great. Thank you that's very helpful. And then maybe my second question for Ryan that's on the tenure plan. So I'm wondering do you see the current or medium term environment simply pushing out the tenure and plan, meaning that you would resume pretty much stick that plan, maybe a year or do you have delayed or have the conditions.

James So much that you could see more value to shareholders. If you make more money all adjustments to the underlying plan.

Yes, Thanks, Steven I'd add to the last question to Alaska as an additional 100000 barrels a day that we are doing in June that we are doing in may so.

But to your second question about the 10 year plan.

It was as much a philosophy and principles that we think our leading be companies need to be taking too.

Focus on returns and and really bring value investors back into this is this business, we don't see that basic tenets of that plan changing so our balance sheet.

Diverse low cost fly portfolio, returning more than 30% of our cash back to the Sheryl looking at through through return.

Through cycle returns.

I would say that remind people we've got to 15 billion barrel resource base of less than 30 dollar cost to supply chain that cost supplied embeds a 10% after tax rate of return. So we've got something that's quite resilient and and sets up and we've been long preaching about.

Volatility and lower but you've got to be prepared for these lower prices. So we the right ones for any business. No you did the tactics or the 10 year plan were based on how we're going to optimize our investment choices that we had so clearly the early years of that plan has changed with the with the downturn, but the shape of.

The speed of the recovery will dictate how quickly return and get back executing that previous scope and pace of work that we had outlined last last November so when this event passes.

We expect to have the same philosophy and approach.

The programs might be stage and phase the different it little bit differently, but.

We intend and fully expect to emerge with an even more competitive plan when we when we get done.

Thank you. Our next question comes from Douglas <unk> from Bank of America. Please go ahead. Your line is open.

Hi, Good morning, everyone hope everyone's doing okay. There.

Brian I Wonder if you are you bought too.

Yeah, well on joined going through working my short.

Well said enough another conversation.

The breakeven that you have with the adjustments you've made I'm just wondering if you give us a refresh with Phil reduced production capacity with the Schutz's. When you think you breakeven is right now just to give us that kind of roadmap for.

How do you how your cash flow capacity was coming out the other side of that that's my first question.

Yeah, Doug This is Don I think.

On a recent call we mentioned with on a go forward basis, if you're looking at or our spending for the remaining three quarters of the year, we said that our breakeven to cover Capex was under $30 WT.

These include the dividend on that would just the additional curtailment stone.

That does not include the dividends of.

I get to the dividend you'd be in the mid Thirtys diabetes.

And with the contents.

And as far as curtailments.

Isn't because we're not projecting them beyond June we don't know what they're going to be but I can tell you. The CFO impacts of the curtailments that we've announced is quite small because of the prices that we expect.

Of course.

Okay. Appreciate my my second question I didn't know if either.

Which one of you want it to wants to take this but it goes back to the issue sustaining.

Supporting our sustaining your production capacity.

So when you think about the shutdowns you are taken under obviously you can recover those volumes as you as you discussed.

But when you're not drilling against the by the by 12 of a declining unconventional business.

What happens to the underlying production capacity because I have to believe that.

Turning up not down escalator, you're basically going to come out the other end of this with lower absolute production capacity on the on the big three in the lower 48 can you walk us through the dynamics there I'll leave it there. Thanks.

Hey, Doug This is Matt I'll take that one then.

Based on the capital and operating cost reductions that we announced a couple of weeks ago and if it if we.

Don't pay any attention to production curtailments.

Average production per Twentytwenty.

Rich productive capacity would be about seeing this 2019, so capacity wise, but flat that to production will be whoever ends up being November them from the including the curtailments and tens of the shape of the profile through the year, which is well. Thank you you're.

Getting I mean, obviously the capital was front end.

And we're assuming no capital program that we don't complete any wells and the big see over the last eight months of the year. So that means of some percent with some decline in capacity as we go through the year.

We're not giving specific guidance on that because there's so many moving parts just man, including that curtailments were concerned about giving that misleading guidance and but the overall direction. As you know there will be some the claim that capacity no maintained that weve actually been building some ducs here and probably somewhere in the region.

Dr year, so ducks any lost some productive capacity and we can recover very quickly. So this is that sort of trends one thing that they.

And then we can manage true, but we have a but we're not getting any specifics on that because with concerns about getting and misleading guidance.

Thank you. Our next question comes from Phil Gresh from JP Morgan. Please go ahead. Your line is open.

Hi.

Good morning, Thanks for taking the questions.

The first question is somewhat related Chicago the prior ones.

You talked about this w. CCI breakeven.

Loans Thirtys for the full year in a high twentys for the rest of the year.

Back at your Analyst day was originally going to be about $40 and then over time, all work its way down to $30 or as you ramp home.

With your production objectives, all over the next few years.

How do you think about those moving beyond 2020.

Do you think it makes more sense too.

Maintain a breakeven where your run rating now.

Or does it make sense to.

Spending back up again.

You see increasingly volatile.

Yes. So this is that Mrs but the.

And that becomes a question on the long run how do we see this.

And.

Then Nick implications of demand.

Implications for loan pen demand than that so faces, but generally speaking.

We'll be could run that it goes sustaining capital price on baby sustaining Craig's in general the because the cost of supply the investment opportunities have rigs below $2, we don't feel us in our shareholders' best interest so.

Not to explore those development opportunities so I.

I think it's unlikely that the choices.

Try and London, such a little breakeven because it would be to faring a loss of variable cost to supply investment opportunities.

He said that we'll just have to see how that Lisa math and see if the if we add we sense. It was all day long tenure location on the Midcycle players and but I think is to make a decision on that.

Yes.

Okay.

So that if you recall back in November we talked about our asset optimization model and we've looked at and obviously, if we come back to a different mid cycle or different sort of long term price, we would we'd redo that but the we have a pretty strong idea of of what what that optimum kind of.

Thanks exploitation rate across our lower 40, unconventionals isn't of apply that to our broader portfolio as well. So we'll probably see relook at that that but it is a higher level than what is.

What you might call the sustaining capital level, because there is a sweet spot of of investments that we would make.

That would that would generate what we believe is the better better returns in the business and.

We're going through this downturn today and we've retained all of our capability. So we have not a we've not eliminated any that organizational capacity.

Because again were that were informed by our short and medium term view of the market. What we think the recovery might look like and have chosen to retain that capabilities. So we can come back strongly if we if and when we choose to.

Sure Okay.

Appreciate that it's that's related to Asimo steps of caution it the other I guess piece and this is there is a very lumpy part of the development plan over time, which is well on Alaska.

And I'm, just curious how you're now thinking about low and.

And how the timing I guess just based on your.

Base case macro beer viewed from here I know they're.

Lump potential outcomes, but what would it be your base case on how you think about role and moving forward and the timing.

So this is not again that weve been working through illusion that were in the concept selection staged.

We have.

Time laying that would get us to the into this year with the.

Opportunity to select a bit concepts and by that I mean.

The biggest facility to build them into jokes and lastly, we haven't sue on so we're continuing to work towards that end up to and decision.

Point towards the end of year for railroad and we'll make a decision to not paying them then that will dictate the piece beyond so and we have not made the decision to.

Due to favorable and that we have.

And with that decision is ahead of us.

So we're continuing to work through that.

We expect permits.

Here here this summer supporting the development it will both at the federal and state levels.

Thank you. Our next question comes from Scott Hanold from RBC Capital markets. Please go ahead. Your line is open.

Yeah. Thanks, if we could stand Alaska little bit obviously, you completed.

Some of your winter program with.

From a appraisals and test felt there can you give a sense of what what you've learned from that and how that help your form your decision to.

The next year so.

Yes, Scott.

Yes, we we did some exploration.

So how to an appraisal will.

It will be drilled two wells and.

Planned for and how can we drilled one the uplands fee and the reason that we we've drilled about half the program as we were concerned the.

And these exploration camps, we waste on the north slope.

We had to cool, but I agree.

And that thankfully, we didn't have a cool great on the bundle some caution for people and contractors, we decided to.

Shutdown the explanation programming.

So we go to four wells that were low and the those wells.

It had the results that we would expect thing and we're still on track concepts select decision and we'll just have to.

To say if we if we want those additional wells before we make that decision then, but we're still evaluating the data just now.

On the Huck Finn well, which is the exploration complex thing. So original plan was to drill the wells. They are the only drilled one.

The and that will appears to it but the edge of a talk set based on this a load response and we wouldn't do that for sure till we get a chance to drill a second well look good. So we're still evaluating those results and and but I think that the bottom line resolutely Judy is going to remain on track and until we get back to complete the.

The exploration program.

Okay. Appreciate it good color your color and this one might be for Don.

The LNG outlook in your game provide any kind of color on expectations for distributions maybe over the next quarter year.

You have a information I think it'd be good enough at this time.

Sure Scott.

Yeah actually LNG realizations have held up pretty well so far I think our.

LNG Netbacks were only down about 4% from the fourth quarter.

But that's because of the lagged nature, so that's going to rollover and we're going to start seeing the impacts as we.

Go through the rest of the year.

But we do have an advantage in that most of our LNG I'm talking about all of our projects.

Globally.

The vast majority of our LNG is under term long term contracts and so they are holding up.

Relatively well compared to the the very weak current spot a spot market.

In fact, I think 90% of our.

Total LNG sales are our term and less than 10% spot.

So back to your questions as far as distributions you know we reported I think about 100 million dollar distribution.

In the first quarter.

From LNG.

We're still expecting somewhere between.

500 to maybe 550.

For the year.

Thank you. Our next question comes from Alistair stemming from Citi. Please go ahead. Your line is open.

Thank you.

A related question to dawn on the cash flow I'm, just wondering if you'd give some so the guidance on.

How are you thinking around cash tax in this environment.

I think if I remember back in 2016, you had substantial.

Loss carry forwards, particularly in the U.S. I was wondering to what extent the still exist.

Yeah, we're still a alister in there.

Non cash taxpaying position in the U.S. and.

I think coming into this year when markers for still stable.

A relatively stable we were thinking that we could come out of that position.

Maybe as early as 21, but probably more likely 22.

So now this is going to obviously set that timeframe back because we're going to have some large losses this year.

So I don't have an estimate of when we might come out of it now, but it's going to.

Certainly be beyond what we thought before.

So does that mean the U.S. Susan.

Minimal zero taxpaying position in Twoq.

Okay.

Yeah. We're in we're in a zero taxpaying position in the U.S. and expect to remain there for quite sometime.

Okay. Thank you very much.

Thank you. Our next question comes from Paul Cheng from Scotia Bank. Please go ahead. Your line is open.

Hey, guys. Good morning, good afternoon depends on where you are.

Brian I think Youre only Paul business model, you have not changing you have at school business model, all that balance growth and.

And cash me time Tms stuff.

And with this we balance.

The thing in any single funds that have changed some of that part of the past what they must and will take rate so that what concede that had a acceptable or comfortable range.

Or bad watches that could send off there's been less money.

Any of those upon the test when Youre thinking wet.

Because of 50 that had been changed if not why not.

Well I think times going to tell Paul I think we Gotta go through this find out where demand returns to if theres any permanent demand loss as a result of this pandemic changes in consumer behaviors that.

Right drive a different.

Different longer term view of the price side I don't think we were kind of like a lot of people watching that very closely to try to understand where supply and demand rebalances out at the end of this at the end of this downturn. So it's probably a bit early but we'll continue to.

Again rely on the fundamentals of the business that that I talked about earlier, you know the strong balance sheet.

Executing on a low cost to supply a resource base and and we're committed to the value proposition that we laid out.

Back in November we really believe it or read reinforce back in November and what we've been operating under for for quite some time.

At least the last few years. So I think your question around capital intensity and you know.

How you return money back to the shareholders. We just have to have to see what the long term our long term view of prices ends up being in where supply and demand rebalances itself as we come out of this downturn.

Right. That's pad, we think the only problem yet that we probably wont know what is the real long terms impact.

Yeah, that's angle.

Maybe thought four or five yes, I mean that I think.

Hi, Dan what they see onto a mall on Lexia unless youre. When you can read out that we know what hits the long term.

Ah, Yes pack, so yes, I mean, it that you guys, probably not going to do anything differently on the tail, maybe four to five Vietnam to vote plugging that to have some cop concept than landfall that you will know, what's it's a long time.

If that's the way how we should look at how long how long have you noticed Paul to take five years to react to market environments that we're in we're pretty you know we brought our scenarios. We know we're doing we know what the philosophy as around the business and and will match will match, our efforts around capital and returned back to shareholders and where we.

With the balance sheet and how much cash we need to have on the balance sheet based on the based on the environment that we find ourselves and we have confidence because the low cost to supply resource base that we have existing in the company competes in a very low commodity price environment. So we.

We know we know what wins and that's what we're going to be focused on and we're going to be flexible and do we have to do to make sure. We're putting the money into the portfolio and the right places and reacting to the kind of environment that we fine.

We certainly will wait five years.

Thank you. Our next question comes from Josh Silverstein from Wolfe Research. Please go ahead. Your line is open.

Yeah. Thanks, everybody.

Just on the Alaska volumes, we've typically thought about in us and brand just kind of intent interchangeably there.

That relationship is broken down over the past month.

You just remind us how you sell those volumes are like have had that might be different from how you're selling though the lower 48 volumes.

Josh I'll I'll take that one.

Yes, most of our ANS sales go into the West coast switches.

Why you're seeing.

The traditional relationship between.

Yes, and breadth break down because of a very low refinery utilization rates in PADD five.

So we would expect that relationship with.

Return once demand picks up in California, and the rest of the West coast.

Some of our cargos, we do that the opportunities as opened for US we do send them to Asia as well, but generally our ANS.

Sales.

Wherever they go they're going to correlate.

Usually very closely with Brent.

Except vendor.

Unusual circumstances as we're facing today.

Great. Thanks.

And then it right now there's a lot of.

Defense being paid right now, whether it's by kind of car or everybody else in the market.

Just wondering where we're kind of go can play offense in this environment to lower the forward breakeven price and I get the M&A question was asked before but is there anything from a service cost standpoint, or anything else that conoco can fall lever on to get that aren't great even Chrysler.

Yes, Josh I mean, obviously, we have worked working with their supply chain and partners on the opportunity to see some deflation in this environment. We have a strong relationship with suppliers, we and then the maybe some value that we also see value we've had a very strong.

Focus on innovation in the company over the last night in years, and so that are opportunistic opportunities to accelerate adoption of new technology.

And find ways to continue to drive across the supply Doug we've made incredible strides on that over the last few years and we're not done yet I mean that we know that part of our job is to continue to drive cost of supply then because what wins in the end in the commodity businesses little closer supply and not much school understood.

Hi, everybody that looks here.

And we're focused on moves and Relo and recently kind on the close to supply over time.

And our workforce Josh sees the volatility in the market. So they see what what happens in the volatile markets and why.

Why as Matt said, we have to continue to lower the breakeven and drive the cost to supply down.

Thank you. Our next question comes from Michael Hall Heikkinen Energy. Please go ahead. Your line is open.

Thanks.

Good morning, I guess I'm, just curious as well as you think about bringing back the.

Curtailed volumes, you expect to see any sort of.

Material or notable incremental operating costs and our capital costs associated with bringing those back for.

Thanks, Bart workovers or SP refurbishment or any other associated costs that are stepping associated with restarting those volumes.

[laughter].

And this is not make hill and and they'll particularly the we we.

Hi, slowed down or well work and workover activity as part of her all Clinton cost deductions, so when the prices better to cover and we want to produce.

Then we'll go back up again, and but for the most pop the the production.

Fair on getting result in any incremental significant incremental workover activity kits for example to bring them back on again, nothing I think thats what can we get.

Yes.

[laughter] and and I guess I'll.

Think about the second quarter.

Yeah. I mean are there are there anticipated turnaround that we ought to keep in mind as well that would go beyond any of these curtailments.

Outside all or 40, Encana and Alaska.

I'm just thinking the rest of the global portfolio is that.

Yes, there is something that was already.

Baked in that.

And we just thought to be keeping in mind as we head into the second quarter.

Yeah, we that we have so ascendant.

Uh-huh turnarounds going on across the portfolio. This year at last year was a bit hibbing get hurt September linzess less hedged this year, but but we have we're keeping to that schedule.

And then there are no hugely notable ones that are unusual unusual as we go through the year, but there will be occurring because ultimately in the sentence on quota, but did take a turnaround in Qatar.

But the majority of them will happen in the second and third quarter.

Thank you. Our next question comes from Paul Sankey from Mizuho. Please go ahead. Your line is open.

Hi, good morning, everyone.

There's a lot of disconnect between paper markets for wood, and physical markets and obviously within that physical or.

Dynamic this tremendous differences across the board in a regional crude prices.

Can you just talk a bit about how that that's being affecting you and.

I'm also wondering about some of your crude quality.

You know there's been a lot of tool that very high apiay crude as being a problem.

And then well we're going that could you will see there's a bull case, the natural gas here as people shutdown production could you talk about your exposure.

The natural gasoline please thanks.

Yes, Paul I'll take that one though this is don.

He has been two different worlds really the last month or so.

Speaking to your comments about.

What's happening in the physical markets versus whats going on in the financial markets, We've certainly seen that.

And in the us in particular.

And Thats really.

Driven our decisions around curtailment that.

The netback prices are lower than what you might assume reading the screens. So.

I would say, we havent had any.

We haven't faced any problems and placing the volumes that we wanted to place so.

Call. These voluntary curtailments and they are they are elections that we're making just because we don't.

We don't like the prices being offered but we havent faced a situation, where we've had difficulties finding the market for our crude.

Not here in the U.S. and not anywhere in the world not yet that made that may be coming.

On natural gas side.

No I mean, we are seeing some some at least.

Somewhat bullish.

Views on the natural gas side, we just don't have the same exposure that we used to have.

Our exposure mainly on the on the LNG side and on the European gas side, we have very very little a domestic production anymore.

Understood you do have can you talk a little bit.

As a follow up about your infrastructure positioning.

And how that how markets.

Our around.

Positions you have in North America, and I'll leave it there thanks alone.

Yeah, Paul I guess, you're talking more about some of our marketing activities as well.

Maybe but both equity and marketing but.

We do have long haul positions on both the oil side and the gas side, probably more on natural gas side, because we've been such are active marketers of natural gas in North America.

You know so we've been.

Marketing our own equity gas out of the Permian Basin generally moving at West.

Towards.

California sends to Mexico, Arizona, and if the west coast as well, but we also move a lot of third party volumes as well.

Thank you. Our next question comes from Bob Brackett Bernstein Research. Please go ahead. Your line is open.

Great. Thank you.

We will release you mentioned the coming into east fields is not moving forward into development can you kind of talk to that and talk about as an example, how is your capital allocation philosophy changed at least in terms of sanctioning projects. This year, if it had with all.

[noise] above this is not to commence suit.

East and that was simply a sort of financial recognition of the fact that.

Timing of when we developed the kin D. It's essentially a satellite to Cabot banking KBB and because KBB has been slow down by the pipeline this year.

Hi, Hi, languishes on between Ceiba in satellite.

The license for kidney is going to expire before we can bring into an economic development. So we were just move just recognizing that in there.

Good for treatment of the asset and so that was what caused that and recognition than that best quarter.

And tenders in the second part of your question.

I wouldn't say that the has been any significant change in our view of how we should be allocating capital we should be allocated lowest cost of supply then we should be facing it. So we're doing that and the optimum weight and so no no no significant change.

At least not yet, but when I was thinking on that.

Okay. Thanks for that a quick follow up on anchor you or sorry, I know Harpoon you mentioned that you clip the top sets, which tells us something about missing reservoir, but you Didnt mention fluids did you encounter hydrocarbons and month.

Yes, we did encounter hydrocarbons.

We're still in separating the results there but the.

That said.

It looks from a lift a logical perspective, that's similar to other less logical signature who've seen on the edge our fees and.

Talk text and but.

We spread to other wells to drill we would have got lot more information that we've been able to finish the program both pit that for safety reasons, we chose not.

Thank you. Our next question comes from Kevin Mccarran much from Morgan Stanley. Please go ahead. Your line is open.

Hey, Thanks for taking the question. There are few asked already on capital spending in the balance sheet, but I wanted to just follow up in a bit more detail on that you provided back at the Investor Day egg Alphaville analysis stress testing the balance sheet and cash the profile through a low commodity price period, and clearly what we're seeing right now is about.

And then different than than than that stress test, but the balance sheet is still very strong competitive advantage for years. So maybe just give an update on how you're thinking about the required cash balance and why is it take on kind of additional leverage here early on the balance sheet to extend we see a sustained period of long of low prices over the next few quarters two years and at what point for their Capex cuts.

Become consideration.

David This is Don I'll.

Take that.

As far as a.

Cash balances.

Back at the Analyst Day, I think we said that we had an operating requirement.

Of about a billion dollars and we felt like we.

We wanted to keep a reserve balance on top of that of two to three.

Billion I think.

Generally we feel the same way about it.

Typically is probably those numbers are probably come down a little bit operating cash is not quite.

$1 billion, because mainly because of some of the assets that we've we've sold we just don't need that much.

And the reserve capital or the reserve cash is.

That's a number that we recalculate every month based on our outlook for the next six to 12 months.

And that number's, probably come down a little bit because of our.

Our lower spending on Capex opex.

By the suspension of our buyback program.

But it might be a $1 billion lower.

And what we were thinking in November but that's about it. So those numbers are still pretty good we think we'll.

We look out say to the end of the year.

We think that we'll be able to maintain cash balances above those levels of operating in reserve cash.

So that would imply that we don't expect to have to access.

The debt capital markets.

Thank you. Our next question comes from Pavel now China from Raymond James. Please go ahead. Your line is open.

Thanks for taking my question that you May have mentioned a few minutes ago are you going to be having any.

In the voluntary shut in in Norway, or Indonesia, both of which were part of the Opex plus agreement.

And yes, I'll take that.

We just saw today shoot that doorway most of the we'd be participating and they will pick up since the 250000 barrels a day curtailment Virgin and about 100 subject volume on being thought before things that was in the second time between expanding so we are likely could be allocated some of that.

In Norway.

But we're working that didnt happen that reasonably complicated we had working.

And so the slight to give some impact sonobuoy business. So estimates at the moment. This will be in terms of impacts are unhappy usually it can be unit will be in the low single digits entitles. The date of the so the year for holes, the but we're still working through that and they they also made some interest and changes to the.

The tax regime over there and the most interest in one being makes sense, whether you're seeing that depreciation schedule two one year for capital So that was a face smart.

Strategic response from the Norwegian government.

But in terms of Indonesia, we.

Thank you mentioned in the museum, we we sailed gas in Indonesia and to the team to domestic market most of that fixed pricing, so take or pay commitments. So wed. So we're not going a bit safety by any Indonesian action to then.

To support they will pay plus.

That we'd be may be affected in Malaysia.

In the Malaysian government has announced that they're going to and participate to some extent, but we don't know the details yet.

That will play out.

No. This is Alan we're getting close to the top 30 hours. So I'm going to ask that we take just one more question apologies to our participants, but I will wrap it up here with one more.

Thank you our last question comes from Phillips Johnston from capital. One. Please go ahead. Your line is open.

Hey, guys. Thanks, your oil mix in the lower 48 has been pretty consistent over the last several quarters in that 57% to 60% range as you as you mentioned you're planning on any.

Well completions in this environment. Some Mike My question is if we look nine to 12 months out.

Would you expect your oil mix to move significantly lower from that range. Just says Gee awards in existing wells naturally move higher without any new volumes to offset that mix shift.

Yeah. So they are there maybe some modest increase in the gas ratio over there as we go through the year, but it shouldn't be shouldn't be that significant we'll have to claiming production and the bulk in eagle Ford, depending and without the and there'll be some increases and you are but it shouldn't be.

You know that significant.

Thank you I'm not showing any further questions at this time I would like to turn the call back over to Miss Allen to focus.

Thanks in our excuse me thanks to our listeners if we'd love to anyone in the queue excuse me will come back to you. Thanks for your participation in Stacy.

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