Q1 2021 ConocoPhillips Earnings Call

[music].

Welcome to the first quarter 2021, Conocophillips earnings Conference call My.

My name is channel, Don and I will be your operator for today.

At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.

During the question and answer session. If you have a question. Please press star and then one you're seeing your Touchtone phone.

Please note that this conference is being recorded.

I will now turn the call over to Ellen Desanctis, Ellen you may begin.

Thank you Hilda and Hello, and welcome this morning to our listeners I will first introduce the members of our Conocophillips executive team who are on today's call. We are Ryan Lance our chairman and CEO, Don Bullock, our executive Vice President and Chief Financial Officer.

Tim Leach, our executive Vice President to the lower 48, Dominic Macklin RSVP of strategy and technology are Nicholls, our SVP of global operations.

Today several of our executives will make prepared remarks, and then the team will take your questions.

Before I turn the call over to Ryan a few quick reminders in conjunction with this morning's press release, we posted a short deck of supplemental material that includes first quarter highlights earnings and cash flow summaries operational highlights and updated sensitivities.

We also announced this morning that Conocophillips will close to virtual market update on June 30th So save that date, we will be providing details on that meeting shortly.

In today's call, we will make some forward looking statements based on current expectations actual results could differ due to the factors described in today's press release and in our periodic SEC filings and finally, we will also refer to some non-GAAP financial measures today reconciliations to the nearest core.

Responding GAAP measure can be found in this morning's press release and on our website and with that I'll turn the call over to Ryan.

Thank you Alan and welcome to all our coal produced products.

It's a very busy but exciting time at Conoco Phillips will be gone through transaction now closed.

Our workforce is on a mission to emerge for last year's extreme sector volatility.

On the transaction the integration activities of the strongest competitor in our business.

We're really in 2020, one as a catalyst moment like we did in 2016 to improve every aspect of our business then again step out from our back by taking our disciplined shareholder friendly value proposition to the next level.

We're taking actions across every aspect of the company to improve our underlying drivers in our first quarter results represent an early indication of our progress.

Some of the actions, we're taking are transformational such as capturing synergies.

Others are chipping away at all the drivers to improve efficiency and returns such as the debt reduction plans, we announced this morning.

Just sort of everyone in our organization is focused on.

We believe a safe company is a successful one with the Concho transaction.

Buying two industry recognized safety leaders, which has aided our overall integration.

Again, I want to recognize our workforce for their exceptional handling of the many challenges presented by the winter storm you already last quarter.

We're continually continuously driving to lower the cost of supply of our diverse resource base, we have a deep inventory of the very best rocks, which was a clear source of sustained competitive advantage.

We're always working to further high grade the portfolio through asset sales.

But our low cost inventory alone isn't enough, we're focused on applying our rigorous capital allocation process to optimize investments based on the metrics investors demand free cash flow and returns.

We're driving improvements in free cash flow and returns by driving down our sustaining capital through well cost and supply chain efficiencies as well as margin improvement.

Driving down our cost structure through synergies and balance sheet improvements driving down our sustaining price through the combination of lower sustaining capital at a lower cost structure and finally, we don't cap could benefit from higher prices, which means upside in free cash flow above our sustaining price.

We're only a short time into the gone through integration, but we're already seeing the previously announced synergies materialize and we expect to yield additional benefits as our integration progresses.

We remain committed to returning a significant portion of capital to our shareholders with a five year track record of exceeding our target of greater than 30% of CFO. In fact, our return to shareholders since implementing our returns focused strategy. In 2016 has been 43 per cent of cumulative CFO.

<unk>.

So our capital return approach represents a floor from a level of capital returns not a ceiling, we don't tie our returns to free cash flow like others are doing so.

So in other words investors directly benefit from CFO expansion, including and from higher prices when they occur.

And as you saw in today's release, we're taking actions to further increase our returns of capital in 2021.

In addition to our ordinary dividend and our previously announced one 5 billion of buybacks, we intend to begin reducing our synovus ownership stake using proceeds to purchase incremental conocophillips stock.

We're taking action to further strengthen our balance sheet. This morning, we also announced that we're planning to reduce gross debt by $5 billion over the next five years.

It will reduce our annual interest expense costs and help lower our sustaining price.

And finally, we are focused on leading in ESG, especially in emissions reductions.

All of this is underpinned by our talented motivated workforce. They are the driving force in our progress.

You can tell from my comments that we're encouraged by the improvements we're seeing across the company.

Why we announced in today's press release, our intention to accelerate our 2021 market update from November to a virtual event on June 30th.

Now here's what you can expect that update.

We will reiterate our disappointment philosophy for the business and how we expect to enhance our through cycle performance for a volatile price world.

But also for a more stable price rolled should that transpire.

We will reaffirm the allocation priorities that have been foundational to our company for years.

Compared to our plan two years ago. We believe every part of the business has improved.

And our goal is to put conocophillips and an even better position to deliver multiple years of free cash flow and returns to shareholders post concho.

We will provide an update on our outlook for 2021 and beyond including our synergy capture progress in our business driver improvements will also provide updates on our asset base and our ESG efforts and plans.

As I said earlier, it's a busy time for the company.

We're going to take advantage of our momentum to reengage the market sooner rather than later on our compelling future.

Now, let me turn the call over to Bill who will address high level quarterly results as well as our announced the debt reduction and Synovus C O P share plans.

Thanks Ryan.

Well, we're certainly off to a good start in 2021.

And today's person materials, there's a summary highlights from the first quarter and I'll cover just a few of those items.

As we foreshadowed on our March 31 market update and financial results reflected some onetime concho related items.

Adjusted for these known items underlying financial performance was very strong.

Adjusted earnings were 69 cents per share versus <unk> 45 per cent per share in the first quarter last year <unk>.

Production came in at the high end of the range and all producing segments generated positive earnings in the quarter.

As shown in the cash waterfall in the supplemental materials posted on our website first quarter cash from operations was $2 1 billion.

And free cash flow was $9 billion.

These figures include the cash flow impacts related to previously announced concho related items, which reduced both CFO and free cash flow by about $1 billion.

But even with the roughly $1 billion in one time transaction related impacts our CFO of $2 1 billion very nearly covered capital dividends and buybacks.

We returned 46% of CFO to shareholders in the quarter in the form of our ordinary dividend and share repurchases and we ended the quarter was $7 3 billion of cash and short term investments.

Yeah.

As a reminder, we issued updated first quarter and full year 2021 guidance per key business drivers on March 31.

And today, we provided updated cash and earnings sensitivities.

I call your attention to these because our cash flow towards that side has improved significantly as a result of the concho transaction.

And in a more constructive price world, we're going to differentially captured the benefit of higher prices, because we're unhedged, where liquids weighted and we have exposure to diverse markets globally.

Turning to today's announcements, we view our balance sheet as a strategic asset just like we do our portfolio of low cost of supply resource.

And our balance sheet is very strong with top tier leverage due to our low net debt.

Now of course, our cash balances are a component of our net debt and given better borrowing costs exceed the returns on our cash we plan to put some of that incremental cash to work along with free future free cash flow to reduce gross debt by $5 billion over the next five years.

This will reduce our ongoing interest expense.

Our our ongoing free cash flow breakeven price improve returns and create greater flexibility on our overall debt structure, all while maintaining a strong leverage position.

As part of our program, we may refinance some of our high coupon debt to take advantage of historically low interest rates and facilitate the total quantum of our debt reduction over time.

Next I'll address the synovus share monetization plan were announced.

As a reminder, we own approximately 10% of synovus, which is valued at about $1 6 billion today.

The shares were received as part of the consideration for our sale of Canadian assets to Synovus in 2017, and we've always stated that we did not intend to be a long term strategic owner of synovus shares.

Over the years, we've looked at several strategies for reducing our position when.

And we believe the market has responded to the positive steps and Novus has taken including its recent commitments to balance sheets strength and operational efficiencies.

We intend to begin selling our synovus shares in the open market in the second quarter, while simultaneously tending to proceeds and Conocophillips shares.

We will be thoughtful and measured with our sales program as you would expect with an intention to fully dispose of our synovus position by the end of 'twenty 'twenty two.

We believe this plan to swaps and Novus shares for Conocophillips share its aligns well with both our commitment to returning capital to shareholders and to monetize your synovus position.

Taken together, our planned debt reduction and our planned swap of synovus shares for Conocophillips shares further strengthened both our balance sheet and our ongoing ability to consistently deliver differential returns of capital to our shareholders all while lowering our sustaining price.

Now I will turn the call over to Tim for an update on the lower 48 business. Thanks Neal.

We're just a few months into the Conocophillips concho integration process and like Ryan and our other leaders I'm more excited now than ever to tell you about our vision for the company.

<unk> progress we've already made.

I'll do a quick recap of the lower 48 from the first quarter, which was nothing short of historic not.

Not only because of the fast paced integration activity.

Because of winter storm here.

Overall, the storm impacted lower 48 production by about 50000 barrels a day for the quarter. However facility damage from the storm was negligible and we quickly resumed production in March.

There's a heck of a test for our expanded lower 48 region, they passed with flying colors.

Total lower 48 production for the quarter was 715000 Boe's per day, which includes 405000 in the Permian 187000 in the Eagle Ford and 86000 in the Bakken.

We exited the first quarter with 15 drilling rigs 11 in the Permian and four in the Eagle Ford.

And we had seven frac spreads five in the Permian and two in the Eagle Ford.

It doesn't get a lot of attention, but I also wanted to mention that during the quarter. We executed several innovative pilots across the lower 48 include.

Including more than 40 twin Frac wells.

Electrification of our Frac spreads and additional V five completions the.

The point is while we're executing the base business. We're also combining the experience of both companies by conducting numerous tests should yield future efficiency gains.

My entire lower 40% organization is excited about the role we can play in making Conocophillips a company that can supply the cheapest cleanest barrels to the market successfully navigate the price cycles achieved the highest level of execution efficiency and continue to lead the industry on the innovation front.

From a size and scale perspective, our lower 48 is clearly differentiated in the industry with.

With the acquisition of Concho, the lower 48 grew to be about half of Conocophillips production and among the largest domestic producers.

We have a high quality set of assets with a low cost of supply resource base made up of core positions in the three premier title patients in the world.

Our lower 48 team is focused on capturing the strategic advantages of both Concho and Conoco Phillips to make our operations more efficient and drive down sustaining capital with the primary goal of maximizing our cash generating capacity.

We're creating a massive free cash flow machine from a combined business that will contribute towards the company's ability to deliver on its priorities through cycles.

All of us recognize that the largest opportunity for value creation is going to come from bringing the best out of both companies and elevating the combined conocophillips to a level and achievable by either company on their own.

I'm happy to say that the new organization has embraced this challenge and we're seeing even more opportunity than we initially expected.

Couldn't be more pleased with the quality of people we have working on this starting with the lower 48 leadership team, which consist of both heritage Conocophillips and Concho leaders.

We've made it a priority to work closely together and leverage the knowledge base of both very experienced operations.

In fact, we continue to see substantial improvements in our well cost we have our eyes on additional ways to get more for less.

Beyond working together to generate the best plan of development and drive efficiencies in our operations. Our team is working hard to identify commercial opportunities to improve margins as well as supply chain opportunities to leverage our global scale and drive down cost.

I want to leave you with a strong sense of optimism about what the lower 48 can deliver.

We are fully dedicated to extracting the full value of this deal and I'm looking forward to providing more detail at our mid year market update.

And now I'll turn the call over to Nick to provide the status of our operations and the rest of the world.

Thanks, Tien, while there's clearly a lot going on in our lower 48 business. We believe Conocophillips has a significant advantage over our independent peers. Because we also have diverse global businesses that generate significant free cash flow today, our Alaska and international businesses comprised about 50% of our App our companies.

<unk>, one 5 million barrels per day production.

I'll take this opportunity to recap some of the achievements from the first quarter and bring you up to speed on activities, we have underway around the globe so starting to Alaska.

I'm pleased to report that greater music to project has made significant progress over the past several months and facility and construction costs are about 10% below budget as we finished our third and final construction season the.

The project is expect to be on line by the end of this year at approximately 10000 barrels a day with peak production of 35000 barrels a day that will leverage our existing alpine infrastructure.

We're also back to development drilling on the slope after suspending virtually all activity in 2020, we're restarting four rigs across our operated assets in Alaska in the western North slope, we restarted drilling at <unk>, five and commissioning activities on the new extended reach drilling rig the rig will play a significant role in augmenting Alaska.

As base business, allowing us to drill wells in excess of 35000 feet accessing low cost supply resources, while minimizing surface disturbance. So our base Alaska business is performing very well and we built a strong momentum coming out of 2020.

And of course, it's been an eventful quarter for Willow, Let me give you a quick update on where that project stands we continue to progress the front end engineering and design work.

At the same time, taking actions to address the legal challenges that have been recently raised 600 million barrel oil discovery remains very competitive in our portfolio.

But we won't take final investment decision or make significant long lead investments until the litigation risks have been resolved.

Now moving to Canada at Montney, we continue to optimize our development plans to incorporate the liquids rich acreage we acquired from Kelt mid last year, we're leveraging our lower 48 unconventional resource expertise and a reduced drilling costs by 25% over the first four pads.

This is part of our business doesn't get a lot of external attention yet, but its worth noting that is currently producing approximately 30000 barrels a day of which 50% is liquids. We continue to be excited about our future in this premier 300000 acre unconventional position.

At <unk>, we continue to take actions to reduce costs improve net backs and reduce emissions and we're seeing encouraging improvements on all three of these fronts. So in summary, Canada remains an important part of our business with quite a lot of upside in learning curve opportunities now moving to our Europe Middle East and North Africa segue.

<unk> in Norway, we've made good progress on several projects, which benefit from the fiscal incentives implemented by the Norwegian government last year, we're nearing completion of <unk> and are on track to make final investment decisions on both Tamil Eaton Alpha and Cobra East gecko later this year and work continues to us.

SaaS, our recent discoveries at Barca Sogou Glenn.

In Qatar or <unk>, three asset continues to deliver very strong performance and generate free cash flow and we continue to advance our evaluation of the north field expansion opportunity.

Still very interested in participating in this project if it fits our financial framework. So we'll keep you posted as this plays out.

Moving on into our Asia Pacific Region, AP LNG is running extremely well production continues to be strong, which when combined with ongoing focus on reducing capital operating and financing cost has brought the cash breakeven down to $25 per barrel Brent.

LNG distributed almost $100 million to the company in the first quarter of 2021 and is expected to distribute about $200 million in the second quarter.

Finally in Malaysia, we have several low cost to supply high margin bolt on projects at various stages of development Amalekite Phase II project achieved first oil in this year and S. N P phase III and getting the phase III are on track for first oil in late 2021, and 'twenty two respectively.

So that's a brief update of our global operations in summary, we have a lot of exciting work underway that will continue to enhance free cash flow generation.

Now I'll turn it back to Ryan for some short closing comments.

Alright, Thanks, Jim drop off and let me go back to how I started this call reviewing.

We're viewing 2021.

Paul and opportunities to further grow our refining business.

Continually effect.

Aspects of the economy to improve.

And we're looking forward to sharing more on that and what that means for our shareholders. When we get together with you again on June 30.

So now let's open it up to Q&A.

Okay.

Thank you we will now begin the question and answer session. Maybe you have a question. Please press star and then one using your Touchtone phone.

If you wish to be removed from the question queue. Please press the punch line are the hash key.

You are using a speakerphone you may need to pick up the handset first before pressing the numbers.

Once again, if you have a question. Please press star and then one you're saying your touched on Fox.

We have a question from Neil Mehta from Goldman Sachs.

Good morning team and I think matts last day, if I'm not mistaken was may one so if he's listening from the mountain somewhere I wish him well in his retirement and congratulations to everyone on their promotions backfill rest rest assured he's probably listening.

[laughter] grading ex.

[laughter] well good well here. So the first question is around you.

You could have approached this Ryan and a couple of different ways, certainly a block sale and you elected to do at this.

Through the end of 2022, so I can talk about why you thought this was the optimal way to release the shares into the market and just.

Housekeeping question here, so you've got this annualized billings actelion, a half dollar buyback program, but at your selling synovus years. This will be incremental to the baseline billionaire have dollars right. So this is this would be a supplemental to the 1 billion and a half debt you've already announced so two questions there.

Yeah. Thanks, Neil Yes, let me handle the last one first maybe turn it over to bill for a little bit of color on what.

Why.

Youre exactly correct. So we were able to dividend that we're paying we announced.

You know earlier that we were buying a billion and half of our shares back in this synovus swap for Conocophillips shares is incremental on top of the day in and a half that we're currently doing in terms of buying our shares back in.

We've looked at there's lots of lots of different ways over the course of the last number of years as we've been an owner of.

<unk> shares and let me ask bill to kind of give you a little bit of color on why now and why under this sort of planned.

Sure Good morning, Neil.

As I mentioned, we've always said that we did intend to be a long term holder of the snow the shares and as Ryan mentioned, we've looked at several methods. We did look at block sales and we've considered that we think the exchange of synovus shares for COPD shares over time in the open market makes the most sense to us and avoids the discounts associated with open.

With block type transactions, and we think that the market has responded positively to recent synovus announcements so that the exchange ratio for Synovus and C. O P has really come back to a more historic level.

So we see this as an opportunity to one trade into the COPD shares, which we like the upside on <unk>.

To monetize an asset on the balance sheet, which we don't think it's a lot of value and three give that value back to shareholders.

Yeah, that's very clear and thanks for the color Bell here is the second is if you guys can provide some big picture thoughts on on the macro recovery.

Certainly it seems like.

The supply side is responding well and prices are firmer.

But demand is still uncertain.

Ryan how are you thinking about the Brent price outlook from here and the sustainability of the recovery.

Thoughts on the natural gas side global natural gas side as well.

Thats firmed up nicely as well.

Yes, Thanks day, although we we continue to kind of execute the plan that we laid out at the beginning of the year and it's largely due to our view of the macro as you kind of describe demand is still as off to pre pandemic levels that you know pick a number 90 697 million barrels a day of demand.

Spare capacity still exists on the supply side, largely with the rollback group or OPEC plus.

So we still view kind of you know $5 6 million barrels a day of spare supply out in the world. So we still have a balancing that we need to do before we kind of see where the price falls out at that point in time and what the call is on say U S tight oil going forward. So we think it's prudent to cash.

Stay the course, right now and not not change. We also don't want a whipsaw programs. So we wanna be stably executing our programs and driving the efficiencies that Tim and Nick talked about across the across the global portfolio with a lot of emphasis on what we're doing here in the in the U S. In the lower 48, so until the market.

Gets rebalanced.

We're doing all of that.

Watching watching it before we make any difference as well.

So we're we're positioning conoco Phillips for any kind of market.

We think enters the free so if it is going to be volatile or if it's going to be sort of a sustained.

More stable kind of price, we're positioned to react to either one of those kinds of markets. It's a bit uncertain with the pandemic can be the demand how quickly that's going to recover now if you ask us we believe it's going to recover we think we probably hit me.

Or so barrels a day of demand later this year and on an annual average we expect 2022 to be at that kind of a demand level. So at that point in time, we would hope the market is balanced on a supply and demand perspective, but it's going to take really the remainder of this year to see that but our value proposition.

As a pretty firm and a day.

Delivering money back to the shareholder like like we described and hopefully you can see from today's announcements that we're enhancing that and again the 30 presents our floor.

You look over the last five years, we've delivered a 43% of our cash back to our shareholders. So disciplined matters and returns matter and that's what we're all about.

Thank you. The next question comes from Jeanine Wai from Barclays.

Hi, Good morning, good afternoon, everyone. Thanks for taking our questions.

Yeah.

So first I wanted to Janine good morning morning. Thanks.

Really on Capex and Capex.

Capex was 2 billion versus the full year guide of about five and a half.

That implies a little over $1 4 billion a quarter on average for the rest of the year and so we know that day.

Hard to do ratable capex outside of the Calhoun, we can appreciate that.

There is noise in the Q1 number based on console and whether or not southern.

Hi.

COVID-19 progressing or ramping scrap price.

And we understand the production as an outcome for conoco, but I'm, just trying to get a better sense.

Now that concert.

But yeah Jeanine, yeah. The first quarter was a little bit artificially low given exactly what you described as the weather impacts in the lower 48 that are kind of shut things down for a period of time and then people forget too that we.

We had kind of we had to react to a winter drilling season in Alaska that produce the capital a little bit. So it's not it's not a ratable you can't just take the first quarter times four but we are driving the teams to greater efficiency and trying to get as much done with the purchase precious capital dollar that we can we will provide a more.

You have an update in the June update that we've talked about.

Thirdly as we.

We designed this to run stable, we designed our programs if it can be beginning of the year and asked our teams to go execute that scope and really not interested in trying to.

Drive that on a quarterly basis and whipsaw the teams.

Around doing doing those programs, we just want them to efficiently and effectively execute the programs that we set out at the beginning of the year, but we'll provide more of an update as we see the year progressing in June.

Okay, great. Thank you.

And our second question is Jeff on the debt reduction target, we've got Alan scene enhancement dividend buyback capex.

Moving on.

On capital allocation.

Maybe can you talk a little bit more about how you pick.

Target over five years and I noticed that does concludes the amount that's coming through in that time, maybe something on cadence as well.

We kind of back into cash.

How much cash return.

Well now that we haven't defined gross debt.

Target out there that we need to Alan.

Thank you.

Yeah, Thats exactly let bill talk specifically about the debt I would just say go back to my opening remarks, a bit Jeanine is that we're looking at every piece of the business who are looking at the portfolio. We're looking at the balance sheets were looking at the cash sitting on the balance sheet and all those pieces of it and we haven't.

Forgotten about the shareholder and hopefully you saw that today with our announcement on the the trade with the synovus shares into Conocophillips and again, that's incremental to the day and a half that we're doing already let me ask bill. He can give you a little bit more color on Wi 5 billion why five years, yeah sure. Thanks Ryan.

Good morning Jeanine.

So first I just would start with both.

Both heritage Conoco and heritage Concho had really strong balance sheets. So does this combined company and in fact as we look at this our net debt to CFO of consensus is under one times materially less than our peer group.

But what the contract transaction, our gross debt increased from $15 billion to $20 billion.

And we have some legacy high coupon debt that's out there on our balance sheets. So we think this is a unique opportunity to reduce our ongoing interest and lower our ongoing free cash flow breakeven, we think that improves returns and I think it creates greater flexibility in our debt structure and all of this supports our ability to maintain greater than 30% of returns for our share.

Holders.

Jeff.

Do you think about Wi $5 billion that certainly over what the natural maturities of our bond ladders would be right now we've got about $3 billion of bonds retiring in the next five years. So some of that will be early retirements and you could see us do that with public tenders open market repurchases or.

Or perhaps a combination with refinancing.

All of that's going to be taking a price that favors flexibility and optionality and.

And in the case.

Of our $5 billion over five years that is our base case, we think that gives us the ability to moderate the reduction and take advantage of supportive market conditions, but you may see us accelerate that a bit if the efficiencies in the market allow us to do that earlier.

So that's a bit of context on on why we're looking at reducing our debt structure, how we got to $5 billion and bid on the pacing.

Yeah.

Thank you.

Our next question comes from Phil Gresh from Jpmorgan.

Yes, hi, good afternoon.

I suppose there's been a.

As a bit of a follow up to <unk> question.

You know theres a lot of excess cash that would be available. If you pay down the 5 billion of gross debt between free cash flow and the cash in the balance sheet and some of the shares.

Perhaps some of this you want to save for the analyst day, but any additional high level commentary you could share around capital allocation.

Well, yes, we will see what the market gives us fill over over time.

Say too that we.

We described to you back in November 2019, how we think about the cash on the balance sheet Theres. The operating cash there is some reserve cash to deal with the volatility of the market and then we we like to hold some strategic cash as well.

We still think the market is going to be quite volatile. So we'll see what the market gives us, but we want to be prepared for any kind of market that we find ourselves in and then thirdly. You know you should think about some of that cash flow, we'll make sure those shareholders fully satisfy based on.

Our past experience and what we've done as a company and then.

And then thirdly, I would say it's we.

We are thinking about some of their future calls whether that's the.

It was successful the north field expansion, what we might do at Willow, We had some limited exploration discoveries in Norway, we hope to be successful in Malaysia. So some of that cash that you might see on the balance sheet. We will go to some of those projects as well such that we can continue to reap all the benefits from the annual free cash.

Flow that we're getting and distribute that back out to the company and to our shareholders.

Got it okay.

My follow up would just be.

Ryan you you made a comment about.

Certain minimum cash levels.

How do you think about what that should be the day and then if I could glue and one question around Alaska do you still target.

Trying to sell down Alaska as a portion of Alaska as you discussed.

The 2019 analyst day would that be another source of potential cash sale.

Well I think more broadly a direct answer to your question. So yes, we're still looking at potentially.

Marketing and some of the Alaska position, but more broadly I think with the Concho acquisition.

Goldman through the portfolio to make sure that.

We're continually high grading and take the opportunity of the kind of commodity price environment, we find ourselves in so we'll have more to more to say on that in June as well from the day of various gas positions I think kind of came in the first we think about $1 billion of operating cash.

A couple of billion dollars of $2 billion to $3 billion of reserve cash, which which are you know what happens in the market. We can respond we can keep our program is running consistently and notwithstanding programs. So we wanted to have the cash there to do that and then we have strategic cash on top of that which are for other uses that I described in your first question.

Yeah.

Thank you. Our next question comes from Roger read from Wells Fargo.

Hello, Good morning.

Good morning, Roger.

I guess.

[laughter] didn't beaten pretty hard here, but I'm going to try one other thing on the on the debt structure here I mean looking back to where you were in 16 the changes you've made free the Concho acquisition.

It would appear you're aiming for a lower level of debt you mentioned lowering breakeven as a component of that it would seem you could get there by refinancing the debt and bringing the overall interest expense down. So I was just curious as you think about it as a part of your capital allocation right return to shareholders.

Reducing debt can be seen that way, but I'm just curious how it all kind of fit together.

Is the goal of reducing by $5 billion.

Sure. Roger This is bill I'll take that.

Yes, certainly.

As part of our $5 billion debt reduction over five years I mentioned, we've got about 3 billion Thats just naturally a maturing towers and we are absolutely looking at refinancing a portion of our debt our purchasing debt and we like our path to $5 billion, but I'd say you know.

With a high coupon out there.

It's possible to refinance and I think that will just depend on a couple of factors, including the cost of debt retired and reissued it and how we decided to approach our debt reduction targets.

But certainly refinancing is a component of the overall debt restructuring our portfolio and it works in combination with <unk>.

Considering public tenders or open market repurchases, but you're absolutely right.

We could make some steady progress on that just by refinancing some of our high coupon debt.

Thank you. Our next question comes from Ryan Todd from Simmons Energy.

Great. Thanks, maybe.

And.

At a higher level I mean, what are you seeing on capital efficiency and onshore portfolios. We're gonna have emerged from.

The pandemic, a little bit and with the addition of concept of the portfolio do you have an estimate for what you think that.

Maintenance Capex and then in the right way to think about long term capital spend you used to talk about kind of $6 billion to $7 billion per year, the rough range of debt.

Has there been any adjustment to kind of what you see as a kind of a normalized level.

Return capital spend.

Yes, we will.

I'll be talking about that Ryan in June and kind of provide an update relative to what you saw back in 2019. It would be premature for me to talk about that I would just tell you we're constantly trying to drive down our sustaining capital.

And lower the breakeven in the in the company and I think.

Tim and what we're doing in the lower 48 mix do it around the rest of the globe.

We're seeing a lot of progress in that goes with the synergy capture.

We can talk about if you like but all of those things that are manifesting themselves in lower capex, lower sustaining and lower breakeven.

Thank you. Our next question comes from Josh Silverstein from Wolfe Research.

Hey, Thanks, guys I'm just.

On Alaska I know last year was a a COVID-19 shorten drilling program.

About all the exploration activity, that's taking place this year and then just again with the timing or unwilling with the litigation and what needs to happen there to progress that forward.

Yeah. John This is Nick one wanted to start with.

Oh.

I apologize just let me start with Willow.

First the big focus this year is related to the front end engineering design as I've mentioned.

As well as detailed engineering, that's all in related to producing understanding our capital the schedule and the ultimate development considerations prior to taking FID.

Later this year, that's the target as a reminder for the group.

We got two lawsuits that are currently in federal Court filed by two environmental groups challenging the BLM and the Army Corps record of decision for the Willow projects.

As you recall as well we also have all the permits for the 2021 Willow construction received in early January however, due to the granting of the injunction by the ninth Circuit Court of Appeals that 2021 activity, which was a very small modest scope of gravel work has been deferred into 2012.

Two and as oil projects, we have scheduled floater scheduled contingency, Josh so that won't impact the overall timeline.

In addition to the feed that I just mentioned our primary focus now relates to the merits of those active lawsuits and we anticipate a decision by the district court in third quarter.

I also want to just mentioned we have significant stakeholder support.

As an example, we've got state of Alaska in the North slope borough at bolt intervene in the court case supporting the BLM record decision. We also have several more slope village counsels and travel organizations, who have sent strong letters of support to Congress and the secretary of interior.

But I think I'll just reiterate as part of my opening remarks, we will not take F D or make any significant long lead investments until such time as key litigation risks had been addressed and finally <unk> is a great investment opportunity and we have the flexibility to adjust the pace of the project if needed.

Thank you. Our next question comes from Stephen Richardson from Evercore ISI.

Thank you.

Ryan I was wondering if you could expand a little bit on this idea of 2021 as a catalyst moment as you contemplate.

30th in that update.

And I'm not asking you to kind of preview it but I think you.

It would seem to us that one of the big differences today Conocophillips relative to the last time you did one of these updates as just the predictability of your portfolio is it's probably better than it's ever been so I was wondering if maybe you could reflect a little bit on that.

Predictability acknowledging oil price is still big big externality, but the predictability of the business you see internally and how that's informing kind of your longer term targeting and kind of willingness to think out more than more than a couple of quarters or even a couple of years.

Yeah, Stephen I, you know you are.

Right.

We said in the opening remarks, the lower 48 as you know have the company in terms of production today and.

The shorter cycle nature of that business is a lot.

<unk> is pretty predictable.

Wouldn't I'd say, we've gotten to a place where we understand and running the base business across the whole world is.

Good too and.

So we understand the portfolio really well obviously in no no no what the products.

Prospects look like over the long haul.

You talked about the catalyst moment, it's really focused in what we wanted to keep day to day. It's every aspect of the business. So we've talked about the balance sheet, we talked about returns back to the shareholder we talked about the efficiencies that we're gaining in the system are opposed to the Concho acquisition. So we're working really on every part trying to lower the bar.

Break, even though the company and and still be a you know it was the best company in this business that can operate in a very volatile environment and you can still count on their returns back to the shareholder and you can count on us.

You know hyper focused and disciplined on returns.

Not only on capital but of capitals more so I think that's what you'll hear in June a lot more on that work on the portfolio work on what we're doing across the whole company on every every lever.

We know what investors want its free cash flow and returns and that's what we're hyper focused on.

Thank you. Our next question comes from Doug Leggate from Bank of America Merrill Lynch.

Hello, Doug Doug are you there.

Can you hear me not Ryan.

Yeah, No no I've got you Doug right now so it seems I've got a dodgy headset I apologize for that so Ryan I'd like to I'm afraid I'm going to be up a little bit on the free cash flow also I'd like to kind of free them up a little bit because months' notice here to defend himself.

But if.

If you think about volume.

Essentially your Unlevered free cash flow.

The decision is ultimately between the balance sheet on equity the transfer of value between those two and then a buyback can put somebody has.

Some view on the value of your company.

So I'm kind of curious.

Well you would be prepared to take that take the debt.

Paul you step up the buybacks again, because clearly you could do them a lot more if you wanted to.

One $5 billion, and where the variable dividend potential fits into that story.

Yeah.

Yeah, Hi, sorry, you were breaking up there a little bit Doug that if I understand your question right now how do we make all those balances I think we're walking and chewing gum at the same time here a little bit. So we're working on all aspects of the portfolio.

I think our focus is on trying to lower the breakeven and lower the sustaining.

Sustaining capital to work on the operating side of the business.

The breakeven, which is reducing our interest expense by taking some of those high coupon debt and bringing it forward given giving us options to.

Debt callable and reduce debt in addition to what's coming out over time. So I think we're trying to do all things that I think the basic commitment that we've made to the shareholders as we're going to return 30% of our cash or greater back to over time. So we will do that now the vehicle and I think part of your question was what's the right vehicle to do that in.

That's I guess.

And in the either the older little bit Theres not unanimity around what went the right way to do that is we like the shares given the reduction that bakes in the absolute dividend the per share metrics that it creates in the.

And the balance when they accept the way that it's done but with that said you know we've studied.

Variable dividends in Cds, or whatever you want to call them going forward and we spent a lot of time thinking about it mathematically it really doesn't matter at the end of the day. The commitment is to return more than 30% if there's a hybrid in our future that could be well, we will we keep looking at it and we're not Ryan are committed to one path to deliver.

Returns back to the shareholders.

But today, we think our shares are a great value.

And we think this conversion from C. D E to Conocophillips shares is an elegant solution to get more back to the shareholder so we're pretty pretty committed to that.

Thank you. Our next question comes from Bob Brackett from Bernstein Research.

Thanks for that most of my intelligent questions have been asked but I'd like to at least chime in and congratulate Matt as well on his retirement and maybe ask a question around the the June 30th virtual meeting should we expect something like the 2019 meeting hundred plus slides 10 year plan or should we expect more of a modest update.

Modest update Bob.

They felt there was a lot of questions in and putting a bit of burden on you all but glad for that clarification.

[laughter] yeah.

I appreciate the question, Bob we get the clarity out there.

Go ahead no. Thank you.

The next question comes from Paul Cheng from Scotia Bank.

Hey, guys good morning.

Good morning, John.

The team just curious that day when do you think that you will have the space. You believe you are fully integrated.

The concho upset.

And that's ready to take on debt that's at the.

M&A opportunity I realized that you would be in a position to say okay. The organization.

I pulled up a line to pick on Jim.

Neulasta and <unk>.

Also at that Don that things like that.

Debt.

When you're talking to your point with the commodity price is much stronger and the share performed much better.

But when comparing to a year ago how debt.

This brings them under consolidation plan.

The industry has changed do you think that the consolidations line item essentially over.

Bye now.

All of that that we will have opportunities.

The second question is that when I looked at.

Full year production guidance of one funding and day per day.

First half, yes, one roughly 1.5 things on the mid point of the second quarter, but one would think that second quarter probably have some.

Maintenance downtime, perhaps that I'm being a bit higher than the second half.

So it's been the reason why the full year or what that the second half.

Our production will not be higher than the one 5 million barrel per day pine.

Thank you Keith.

Thank you.

Yeah. Thanks, Paul I think it was.

I understand I understand your question. The first one was around consolidation and M&A.

You referred to the integration activities going on with Concho and we're we're pretty hyper focused on that right now I'm trying to deliver all those efficiencies in the synergy.

The stories story is pretty good there, we updated the synergies to $750 million.

Earlier this year.

And we still see more opportunity and most of that's focused in the.

Best practices and capital avoidance in commercial and in supply chain. So we're really focused on that and we'll get them, we'll get an update in June. So we are really focused on making sure we get the concho assets integrated in Tim is doing a great job with his team in the lower 48 and on the efficiency side I think it manifests itself in the performance of the cash.

In the first quarter and in the and the production performance despite having the.

The impacts from winter storm Yuri so.

Maybe I'll have.

Nick can comment a little bit we do for the rest of the year and profile, we do have some turnarounds coming second what they.

They prefer that I think was the second part of your question around what does that profile look like.

In the last half for last three quarters of the year. Okay. Yeah. Thanks, Ron Paul Yeah, just quickly the turnaround impacts are very consistent with the prior years, our heavy turnaround season is in <unk>, but even more so in <unk>. So if you look at <unk> you got about 15000 barrels a day in <unk>, that's mainly Norway maintenance work.

And then if you look at <unk>, it's about 25000 barrels a day, so see higher downtime and thats, mainly in our western north slope alpine assets as well as greater crude oil Bay again, this maintenance crushers, So 15020, 5000, <unk> <unk> respectively.

But I know that has been included in our guidance.

Good day and fully answer your question, Paul sorry, but I don't think M&A is done in our business I still think there is consolidation that will occur and it needs to occur there's too many players.

It's more difficult to get these kinds of price was clearly but.

Don't be surprised if you see more of it in our industry, because I think it still needs to still needs to take place.

Thank you. Our next question comes from John Freeman.

From Jami Rubin.

Good afternoon, just a follow up on Stephen's question earlier were following the Concho merger lower 48 makes up.

The company's production and again realizing that your primary focus is just on low cost supply, but just sort of how you think of kind of the long term balance sheet kind of striving for with this short cycle versus long cycle production obviously.

Benefiting tremendously with the on the uptick in a short cycle production.

So the oil price has had a big move up just maybe longer term how do you think about the balance and it does it does.

Answer change at all based on the commodity environment.

No not really I think we're hyper focused on cost of supply, we're pretty agnostic to the gas oil short long, which is why we're interested in the north field expansion in Qatar and continue to have interest in that and continuing to add to it.

And improve our lower 48 operations. So I'd say, we'd be we are really where we don't really have a ideal blend in mind that we're trying to drive to over time, we're pretty agnostic and just focus on the best rocks.

They deliver the best returns that's the competitive advantage in this business.

Okay.

Thank you. Our next question comes from Leo Mariani from Keybanc.

Yeah.

Okay.

Hey, guys.

A couple of quick questions here for you.

Certainly just noticed that your first quarter of 21 per.

Permian production was very strong I did the math right. It looks like it was up about 317000 barrels a day versus the fourth quarter of 'twenty, which looked to be well in excess of the contribution from Concho, which I think closed kind of mid January here, just trying to get a sense of.

What kind of drove that strong performance was or maybe like a larger group of wells that maybe came on.

And in such a fashion that you saw about bench a bunch of upside on the production is it stronger well performance.

What drove that here in the first quarter.

Yes.

Yes, Leo this is Tim.

We were projecting entering the first quarter.

Pretty hot right coming out of last year and.

And then with the storm.

So the capital down, but it didn't really slow to most of the production that was coming in from.

Our our carry on activity and.

So I think as Ryan said, you'll see kind of a more steady.

Approach throughout the rest of the year, but yeah. It it was an excellent quarter everybody is in all the regions are hitting on all cylinders and I'm really pleased with the performance.

Thank you. Our next question comes from Rafael <unk> from Societe Generale.

Thank you very much for taking my questions.

The first one is on the north skilled expansion with so many players ear marked.

With interest can you can you tell us a bit more about how you can get involved in this project.

It kind of just be about the price tag you're willing to to accept I guess, so what are you going to bring to cars that will make them except to work with you.

That would be my first question. Please.

Yeah, Raphael I think it goes back to our long standing commitment to Qatar and the.

We're in train six Qatar gas free project, then there for a long time and.

You know I think we've demonstrated the value of our.

Water center in Qatar.

So we've got strong relationships with the Qataris and to your point, it's a it's not only about sort of the bid level. It's about the long term relationship there in the past relationship the historic relationship that you've had so they've been a great partner.

Great Great owners deal with so.

Just like anybody in our competitors.

We rely on the history that we've got in the country and the opportunity that sits there then we'll have to be competitive in our bid and then but it has to work for us. So it has to be competitive in our financial framework. So it cuts both ways.

Great.

I have to ask an ESG question.

I understand you have this net zero emissions target by 2050, you get an intermediate target for 'twenty 30 can you without preempting too much with what you will tell us in June.

How how to bridge the gap between 2015 and twin TCT do you already have an idea of what will be another layer of absolute reductions and what would be the offsets.

The use of offsets that you would be contemplating.

Yeah.

Yeah about violence Dominic here, so I mean, I think that day.

There's really two main thrusts there the first is that we have.

Tremendous amount of work going on.

The business unit surround reducing emissions.

This year, we have about 50 projects, reducing our scope, one and two emissions by $80 million.

Some good examples across our lower 48 and around the world.

But in addition to that sort of incremental gains each year, we have launched a low carbon technologies team and that's very much in support of our Paris aligned climate risk strategy. Their primary focus is on those opportunities most relevant to our core business to support this and also to our core competency.

So areas of focus include renewable power sources to further reduce the emissions intensity of our operations that sell scope, one and two carbon capture use and storage and also carbon offsets.

Areas of initial focus so.

I think that.

These are the these are the areas that we're looking at right now and we expect to develop those very much to becoming the coming years.

Sure.

It sounds like this is Alan will take one final question, if you don't mind.

Thank you.

Question comes from Neal Dingmann from chewing Securities.

Thanks for squeezing me in maybe a question for you or Tim just given you've talked about all the debt repayment youre doing and I'm just looking obviously, you've still got a massive lower 48 per portfolio. My question is and you know certainly dad, even to that we've seen some very outstanding sales and most recently was a small smaller Bakken one just.

The last day or so my thought is pertaining to your Bakken I noticed Jim mentioned I don't think any rigs running in that area would you think about bringing forward either value from that or any other assets forward.

Given the you know the.

The large size of your entire international portfolio.

Well I mean, we are we're looking over everything feel so it globally and here in the U S. I think post close of the transaction with Concho.

We want to make sure that every assets competitive in the portfolio and were not lost on the fact that it's.

Reasonable market right now for sales so you'll hear more about that in June.

Yeah.

I think we'll go ahead and wrap up if you don't mind give us give our listeners any closing instructions I appreciate everybody's time and attention I will see you and Jim.

Thank you.

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

[music].

[music].

[music].

Welcome to the first quarter 2021, Conocophillips earnings conference call.

My name is killed Don and I will be your operator for today.

At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.

During the question and answer session. If you have a question. Please press star and then one you're saying your touchtone phone.

Please note that this conference is being recorded.

I will now turn the call over to Ellen Desanctis, Ellen you may begin.

Thank you Hilda Hello, and welcome this morning to our listeners I will first introduce the members of our Conocophillips executive Jim who are on today's call. We have Ryan Lance our chairman and CEO, Don Bullock Executive Vice President and Chief Financial Officer.

Tim Leach, our executive Vice President to the lower 48, Dominic Macklin RSVP on strategy and technology and Nichols, our SVP of global operations.

Today several of our executives will make prepared remarks, and then the team will take your questions.

Before I turn the call over to Ryan a few quick reminders and.

In conjunction with this morning's press release, we posted a short deck and supplemental material that includes first quarter highlights earnings and cash flow summary, operational highlights and updated sensitivities.

We also announced this morning that Conocophillips will host a virtual market update on June 30 of so let's say that day, we will be providing details on that meeting shortly.

In today's call, we will make some forward looking statements based on current expectations actual results could differ due to the factors described in today's press release and in our periodic SEC filings.

And finally, we will also refer to some non-GAAP financial measures today reconciliations to the nearest corresponding GAAP measure can be found in this morning's press release and on our website and with that I'll turn the call over to Ryan.

Thank you Alan and welcome to all our call participants.

Very busy but exciting time at Conoco Phillips with the Concho transaction now closed our entire workforce is on a mission to emerge from last year's extreme sector volatility and the transaction integration activities with strongest competitor in our business.

We're very in 2020, one as a catalyst moment like we did in 2016 to improve every aspect of our business and again the step out from our back by taking our discipline shareholder friendly value proposition to the next level.

We're taking actions across every aspect of the company to improve our underlying drivers in our first quarter results represent an early indication of our progress.

Some of the actions, we're taking are transformational such as capturing synergies.

Others are chipping away at core drivers to improve efficiency and returns such as the debt reduction plans, we announced this morning.

Here's where to everyone in our organization is focused on first we believe a safe company is a successful one with a gunshot transaction. We've combined two industry recognized safety leaders, which has aided our overall integration.

Again, I want to recognize our workforce for their exceptional handling of the many challenges presented by the winter storm Yuri last quarter.

We're continually continuously driving to lower the cost of supply of our diverse resource base, we have a deep inventory of the very best rocks, which was a clear source of sustained competitive advantage.

We're always working to further high grade the portfolio through asset sales.

But our low cost inventory alone isn't enough, we're focused on applying a rigorous capital allocation process to optimize investments based on the metrics investors demand free cash flow and returns.

We're driving improvements in free cash flow and returns by driving down our sustaining capital through well cost and supply chain efficiencies as well as margin improvement.

Diving down our cost structure through synergies and balance sheet improvements driving down our sustaining price through the combination of lower sustaining capital at a lower cost structure and finally, we don't capture the benefit from higher prices, which means upside in free cash flow above our sustaining price.

We're only a short time into the gone through integration, but we're already seeing the previously announced synergies materialize and we expect to yield additional benefits as our integration progresses.

We remain committed to returning a significant portion of capital to our shareholders with a five year track record of exceeding our target of greater than 30% of CFO. In fact, our return to shareholders since implementing our returns focused strategy. In 2016 has been 43 per cent of accumulative CFO.

<unk>.

So our capital return approach represents a floor from a level of capital returns not feeling we don't tie our returns to free cash flow like others are doing.

So in other words investors directly benefit from CFO expansion, including in some higher price was when they occur.

And as you saw in today's release, we're taking actions to further increase our returns of capital in 2021 and.

In addition to our ordinary dividend and our previously announced one 5 billion of buybacks.

We intend to begin reducing our synovus ownership stake using proceeds to purchase incremental conocophillips stock.

We're taking action to further strengthen our balance sheet. This morning, we also announced that we're planning to reduce gross debt by $5 billion over the next five years.

This will reduce our annual interest expense cost and help lower our sustaining price.

And finally, we're focused on leading in ESG, especially in emissions reductions.

All of this is underpinned by our talented and motivated workforce. They are the driving force in our progress.

You can tell from my comments that we're encouraged by the improvements we're seeing across the company.

That's why we announced in today's press release, our intention to accelerate our 2021 market update from November to a virtual event on June 30.

Now here's what you can expect that update.

We will reiterate our disciplined philosophy for the business.

We expect to enhance our through cycle performance for a volatile price world.

But also for a more stable price world should that transpire.

We will reaffirm the allocation priorities that have been foundational to our company for years.

Compared to our plan two years ago. We believe every part of the business has improved.

And our goal is to put conocophillips and an even better position to deliver multiple years of free cash flow and returns to shareholders post concho.

We'll provide an update on our outlook for 2021 and beyond including our synergy capture progress in our business driver improvements will also provide updates on our asset base and our ESG efforts and plans.

As I said earlier, it's a busy time for the company, but we're going to take advantage of our momentum to reengage the market sooner rather than later on our compelling future.

Now, let me turn the call over to Bill who will address high level quarterly results as well as our announced a debt reduction and Synovus C O P share plans.

Thanks Ryan.

Certainly off to a good start in 2021.

And today's person materials, there's a summary highlights from the first quarter and I'll cover just a few of those items.

As we foreshadowed on our March 31 market update and our financial results reflected some onetime concho related items.

Adjusted for these known items underlying financial performance was very strong adjusted earnings were <unk> 69 per share versus <unk> 45 per cent per share in the first quarter last year.

<unk> came in at the high end of the range and all producing segments generated positive earnings in the quarter.

As shown in the cash waterfall in the supplemental materials posted on our website first quarter cash from operations was $2 1 billion and free cash flow was $9 billion.

These figures include the cash flow impacts related to previously announced concho related items, which reduced both CFO and free cash flow by about $1 billion.

But even with the roughly $1 billion in one time transaction related impacts our CFO of $2 1 billion very nearly covered capital dividends and buybacks.

We returned 46% of CFO to shareholders in the quarter in the form of our ordinary dividend and share repurchases and we ended the quarter was $7 3 billion of cash and short term investments.

As a reminder, we issued updated first quarter and full year 2021 guidance per key business drivers on March 31.

And today, we provided updated cash and earnings sensitivities.

I call your attention to these because our cash flow torque to the upside has improved significantly as a result of the concho transaction.

And in a more constructive price world, we're going to differentially captured the benefit of higher prices, because we're unhedged, where liquids weighted and we have exposure to diverse markets globally.

Turning to today's announcements, we view our balance sheet as a strategic asset just like we do our portfolio of low cost of supply resource.

And our balance sheet is very strong with top tier leverage due to our low net debt.

Now of course, our cash balances are a component of our net debt and given that our borrowing costs exceed the returns on our cash we plan to put some of that incremental cash to work along with free future free cash flow to reduce gross debt by $5 billion over the next five years.

This will reduce our ongoing interest expense lower our ongoing free cash flow breakeven price improve returns and create greater flexibility on our overall debt structure, all while maintaining a strong leverage position.

As part of our program, we may refinance some of our high coupon debt to take advantage of historically low interest rates and facilitate the total quantum of our debt reduction over time.

Next I'll address the synovus share monetization plan warehouse.

As a reminder, we own approximately 10% of synovus, which is valued at about $1 6 billion today.

The shares were received as part of the consideration for our sale of Canadian assets to Synovus in 2017, and we've always stated that we did not intend to be a long term strategic owner of synovus shares.

Over the years, we've looked at several strategies for reducing our position when.

And we believe the market has responded to the positive steps <unk> taken including its recent commitments to balance sheets strength and operational efficiencies.

We intend to begin selling our synovus shares in the open market in the second quarter, while simultaneously tenant and proceeds and Conocophillips shares.

We will be thoughtful and measured with our sales program as you would expect with an intention to fully dispose of our synovus position by the end of 'twenty 'twenty two.

We believe this plan to swaps and other shares for Conocophillips share aligns well with both our commitment to return capital to shareholders and to monetize your snow this position.

Taken together, our planned debt reduction and our planned swap of synovus shares for Conocophillips shares further strengthened both our balance sheet and our ongoing ability to consistently deliver differential returns of capital to our shareholders all while lowering our sustaining price.

Now I will turn the call over to Tim for an update on the lower 48 business. Thanks Neal.

We're just a few months into the Conocophillips concho integration process and like Ryan and our other leaders I'm more excited now than ever to tell you about our vision for the company.

Great progress we've already made.

I'll do a quick recap of the lower 48 from the first quarter, which was nothing short of historic not.

Not only because of the fast pace of integration activity.

Because of winter storm Yuri.

Overall, the storm impacted lower 48 production by about 50000 barrels a day for the quarter. However facility damage from the storm was negligible and we can quickly resume production in March.

It's a heck of a test for our expanded lower 48 region, they passed with flying colors.

Total loans 48 production for the quarter was 715000 Boe's per day, which includes 405000 in the Permian 187000 in the Eagle Ford and 86000 in the Bakken.

We exited the first quarter with 15 drilling rigs 11 in the Permian and four in the Eagle Ford.

And we had seven frac spreads five in the Permian and two in the Eagle Ford.

It doesn't get a lot of attention, but I also wanted to mention that during the quarter, we executed several innovative pilots across the lower 48 <unk>.

Including more than 40 twin Frac wells.

Electrification of our Frac spreads and additional V five completions the.

The point is while we're executing the base business. We're also combining the experience of both companies by conducting numerous tests should yield future efficiency gains.

My entire lower 40, an organization's excited about the role we can play in making Conoco Phillips a company that can supply the cheapest cleanest barrels to the market successfully navigate the price cycles achieved the highest level of execution efficiency and continue to lead the industry on the innovation front.

From a size and scale perspective, our lower 48 is clearly differentiated in the industry with.

With the acquisition of Concho, the lower 48 grew to be about half of Conocophillips production and among the largest domestic producers.

We have a high quality set of assets with a low cost of supply resource base made up of core positions in the three premier title patients in the world.

Our lower 48 team is focused on capturing the strategic advantages of both car Concho and conocophillips to make our operations more efficient and drive down sustaining capital with the primary goal of maximizing our cash generating capacity.

We're creating a massive free cash flow machine from our combined business that will contribute towards the company's ability to deliver on its priorities through cycles.

All of us recognize that the largest opportunity for value creation is going to come from bringing the best out of both companies and elevating the combined conocophillips to a level and achievable by either company on their own.

I'm happy to say that the new organization has embraced this challenge and we're seeing even more opportunity than we initially expected.

Couldn't be more pleased with the quality of people we have working on this starting with the lower 48 leadership team, which consists of both heritage Conocophillips and Concho leaders.

We've made it a priority to work closely together and leverage the knowledge base of both very experienced operations.

In fact, we continue to see substantial improvements in our well cost we have our eyes on additional ways to get more for less.

They are working together to generate the best plan of development and drive efficiencies in our operations. Our team is working hard to identify commercial opportunities to improve margins as well as supply chain opportunities to leverage our global scale and drive down cost.

I want to leave you with a strong sense of optimism about what the lower 48 can deliver.

We are fully dedicated to extracting the full value of this deal and I'm looking forward to providing more detail at our mid year market update.

Now I'll turn the call over to Nick to provide the status of our operations and the rest of the world.

Thanks, Tien, while there's clearly a lot going on in our lower 48 business. We believe Conocophillips has a significant advantage over our independent peers. Because we also have diverse global businesses that generate significant free cash flow today, our Alaska and international businesses comprised about 50% of our App our company's op.

<unk>, one 5 million barrels per day production.

I'll take this opportunity to recap some of the achievements from the first quarter and bring you up to speed on activities, we have underway around the globe. So starting to Alaska I'm pleased to report that greater <unk>. Two project has made significant progress over the past several months and facility and construction costs are about 10% below Budd.

As we finish our third and final construction season.

The project with respect to be on line by the end of this year at approximately 10000 barrels a day with peak production of 35000 barrels a day that will leverage our existing alpine infrastructure.

We're also back to development drilling on the slope after suspending virtually all activity in 2020, we're restarting four rigs across our operated assets in Alaska in the western North slope, we restarted drilling at <unk>, five and commissioning activities on the new extended reach drilling rig the <unk> rig will play a significant role in augmenting Alaska.

As base business, allowing us to drill wells in excess of 35000 feet accessing low cost supply resources, while minimizing surface disturbance. So our base Alaska business is performing very well and we built a strong momentum coming out of 2020.

And of course, it's been an eventful quarter for Willow, Let me give you a quick update on where that project stands we continue to progress the front end engineering and design work while at the same time, taking actions to address the legal challenges that have been recently race.

Had it in our portfolio.

But we won't take final investment decision or make significant long lead investments until the litigation risks have been resolved.

Now moving to Canada at Montney, we continue to optimize our development plans to incorporate the liquids rich acreage we acquired from Kelt mid last year, we're leveraging our lower 48 unconventional resource expertise and a reduced drilling costs by 25% over the first four pads.

As part of our business doesn't get a lot of external attention yet, but its worth noting that is currently producing approximately 30000 barrels a day.

50% is liquids, we continue to be excited about our future in this premier 300000 acre unconventional position at surmount, we continue to take actions to reduce costs improve net backs and reduce emissions and we're seeing encouraging improvements on all three of these fronts. So in summary, Canada.

Remains an important part of our business with quite a lot of upside in learning curve opportunities now moving to our Europe Middle East and North Africa segment in Norway. We've made good progress on several projects, which benefit from the fiscal incentives implemented by the Norwegian government last year, we're nearing completion of Tor two.

We are on track to make final investment decisions on both Tamil Eaton Alpha and Cobra East gecko later, this year and where it continues to assess our recent discoveries at barca and slow googlette.

In Qatar or <unk>, three asset continues to deliver very strong performance and generate free cash flow and we continue to advance our evaluation of the north field expansion opportunity. We're still very interested in participating in this project if it fits our financial framework. So we'll keep you posted as this plays out.

Moving on into our Asia Pacific Region, AP LNG is running extremely well production continues to be strong, which when combined with ongoing focus on reducing capital operating and financing cost has brought the cash breakeven down to $25 per barrel Brent.

AP LNG distributed almost $100 million to the company in the first quarter of 2021 and is expected to contribute about $200 million in the second quarter.

Finally in Malaysia, we have several low cost to supply high margin bolt on projects at various stages of development. The Malachi Phase two project achieved first oil in this year and S. N P phase two and getting the phase III are on track for first oil in late 2021, and 'twenty two respectively.

So that's a brief update of our global operations in summary, we have a lot of exciting work underway that will continue to enhance free cash flow generation now I'll turn it back to Ryan for some short closing comments.

Alright, Thanks, Jim wrap up let me go back to how I started this call we're.

<unk> loans.

I would call an opportunity to further hone our refining business.

Continually effect.

Aspects of the economy to improve.

And we're looking forward to sharing more on that and what that means for our shareholders. When we get together with you again on June 30.

So now with that let's open it up to Q&A.

Okay.

Thank you we will now begin the question and answer session. Maybe you have a question. Please press star and then one you're seeing your Touchtone phone.

Wish to be removed from the question queue. Please press the program time are the hash key.

If you are using a speakerphone you may need to pick up the handset first before pressing the numbers.

Once again, if you have a question. Please press star and then one you're saying your touched on Fox.

We have a question from Neil Mehta from Goldman Sachs.

Good morning team and I think matts last day, if I'm not mistaken was may one says he's listening from the mountain somewhere I wish him well in his retirement and congratulations to everyone on their promotions headaches in Fayetteville restaurants to share it he's probably listening [laughter] grading.

Well good well here. So the first question is around they know of it. So you could have approached this Ryan and a couple of different ways certainly a block sale in any elected to do at this through the end of 2022 said talk about why you thought this was the optimal way to release the shares into the market.

And just a housekeeping question here. So you've got this annualized billings actelion a half dollar buyback program, but at your selling synovus shares this will be incremental to the baseline billion a half dollars right. So this is a this would be a supplemental to the 1 billion and a half that you've already announced so two questions.

Yes.

Yeah. Thanks, Neal Yeah, let me handle the last one first maybe turn it over to bill for a little bit of color on why Youre exactly correct. So we were able to dividend that we're paying we announced you know.

Earlier that we were buying a billion and half of our shares back in this synovus swap for Conocophillips shares is incremental on top of the 1 billion and a half that we're currently doing in terms of buying our shares back in you know we've looked at there's lots of lots of different ways over the course of the last number of years as we've been an owner of that.

And all of the shares and let me ask bill to kind of give you a little bit of color on why now and why under this sort of plan.

Sure Good morning, Neil.

As I mentioned.

Always had said that we did intend to be a long term holder of the snow the shares and as Ryan mentioned, we've looked at several methods. We did look at block sales and we consider that we think the exchange of snow that shares for C. O P shares over time in the open market makes the most sense to us and avoid the discounts associated with open with block type transactions.

And we think that the market has responded positively to recent synovus announcements so that the exchange ratio for Synovus and COPD has really come back to a more historic level. So.

So we see this as an opportunity to one trade into the C. O P shares, which we liked the upside on <unk>.

To monetize an asset on the balance sheet, which we don't think it's a lot of value and three give that value back to shareholders.

Yeah, that's very clear and thanks for the color Bill here is the second is if you guys can provide some big picture thoughts on on the macro recovery.

Certainly it seems like you know that the supply side is responding well and prices are firmer.

But demand is still uncertain.

Yeah, Hi, Ryan how are you thinking about the Brent price outlook from here and the sustainability of the recovery any thoughts on the natural gas side global natural gas side as well.

And Thats firmed up nicely as well.

Yeah. Thanks day, although we continue to kind of execute the plan that we laid out at the beginning of the year and it's largely due to our view of the macro as you kind of describe demand still is off to pre pandemic levels that you know pick a number 90 697 million barrels a day of demand spare.

Spare capacity still exists on the supply side, largely with the rollback group or OPEC plus.

So we still view kind of you know five 6 million barrels a day of spare supply out in the world. So we still have a balancing that we need to do before we kind of see where the price falls out at that point in time and what the call is on say.

So U S tight oil going forward. So we think it's prudent to kind of stay the course right now and not not change. We also don't want to whipsaw programs. So you Wanna be stably executing our programs and driving the efficiencies that are Tim and Nick talked about across the across the global portfolio with a lot of emphasis on what we're doing.

Here in the in the U S. In the lower 48, So you know until the market gets rebalanced.

We're doing all that.

Watching watching it before we make any differences as well.

So we're we're positioning conoco Phillips for any kind of market that we think are enters the fray. So if it is going to be volatile or if it's going to be sort of a sustained.

More stable kind of a price, where we're positioned to react to either one of those kinds of markets. It's a bit uncertain with the the pandemic can be a bit demand how quickly that's going to recover now if you ask us we believe it's going to recover we think we probably hit.

Or so barrels a day of demand later this year and on an annual average we expect 2022 to be at that kind of a demand level. So at that point in time, we would hope the market is doing.

Balanced on a supply demand perspective, but it's going to take really the remainder of this year to see that but our value proposition is pretty firm and are delivering money back to the shareholder like like we described and hopefully you can see from today's announcements, but we're enhancing that and again the 30 presents our floor.

And you look over the last five years, we've delivered a 43% of our cash back to our shareholders. So.

Discipline matters and returns matter and that's what we're all about.

Yes.

Thank you. The next question comes from Jeanine Wai from Barclays.

Hi, Good morning, good afternoon, everyone. Thanks for taking our questions.

I first wanted to Janine good morning morning.

Thanks.

This question is really on Capex and <unk>.

Capex was 2 billion versus all your guide of about five and a half.

That implies a little over $1 4 billion a quarter on average for the rest of the year.

We know that day.

Hard to do a ratable capex outside of it we can appreciate that.

There's noise in the Q1 number based on console and weather pattern.

How do you see activity progressing more ramping throughout the rest of the year if at all and we understand the production as an outcome.

But we're just trying to get a better sense of any.

Now that content.

But yeah Jeanine, yeah. The first quarter was a little bit artificially low given exactly what you described as the weather impacts in the lower 48 debt.

Kind of shut things down for a period of time, and then people forget too that we.

We had kind of a.

We had to react to a winter drilling season in Alaska that produced the capital a little bit. So it's not it's not a ratable you can't just take the first quarter times four but we are driving the teams to greater efficiency and trying to get as much done with the purchase precious capital dollar that we can we will provide a more of an update in June.

Update that we've we've talked about.

Thirdly as you know we designed this to run stable, we redesigned our programs if it can be beginning of the year and asked our teams to go execute that scope and really not interested in trying to.

Drive that on a quarterly basis and whipsaw the teams.

So around doing doing those programs. So we just want them to efficiently and effectively execute the programs that we set out at the beginning of the year, but we'll provide more and more of an update as we see the year progressing in June.

Okay, great. Thank you.

Great.

Our second question is Jeff on the debt reduction target, we've got Alan scene enhancement dividend buyback capex.

Moving on.

On capital allocation.

Maybe could you talk a little bit more about how you pick.

Target over five years, and I noticed that does exceed the amount that's coming through in that time, maybe something on cadence as well and I guess, we're just really kind of back into cash.

How much cash return.

Now that we Havent signed gross debt.

We need to Alan.

Thank you.

Yeah. Thanks, I can let bill talk specifically about the debt I would just say go back to my opening remarks, a bit Jeanine is that we're looking at every piece of the business who are looking at the.

Portfolio, we're looking at the balance sheet, we're looking at the cash sitting on the balance sheet and all those pieces of it and we haven't forgotten about the shareholder and hopefully you saw that today with our announcement on the the trade with the the synovus shares into Conocophillips and again, that's incremental to the day and a half that we're doing already let me ask bill he.

Can I give you a little bit more color on Wi 5 billion why five years, yeah sure. Thanks, Ryan and good.

And Jeanine.

So first I just would start with you know both heritage Conoco and heritage Concho had really strong balance sheets. So does this combined company and in fact as we look at this our net debt to CFO of consensus is under one times materially less than our peer group.

But what the contract transaction, our gross debt increased from $15 billion to $20 billion.

And we have some legacy high coupon debt that's out there on our balance sheets. So we think this is a unique opportunity to reduce our ongoing interest and lower our ongoing free cash flow breakeven, we think that improves returns and I think it creates greater flexibility in our debt structure and all of this supports our ability to maintain greater than 30% of returns to our.

<unk>.

When you think about Wi $5 billion, whether that's certainly over what the natural maturities of our bond ladders would be right now we've got about $3 billion of bonds retiring in the next five years. So some of that will be early retirements and you could see us do that with public tenders open market repurchases or are.

Perhaps a combination with refinancing.

All of that's going to be taking approach that favors flexibility and optionality.

And in the case.

Of our $5 billion over five years that is our base case, we think that gives us the ability to moderate the reduction and take advantage of it supported market conditions, but you may see us accelerate debt a bit if the efficiencies in the market allow us to do that earlier.

So that's a bit of context on.

And why we're looking at reducing our debt structure, how we got to $5 billion and bid on the pacing.

Thank you.

Our next question comes from Phil Gresh from Jpmorgan.

Yes, hi, good afternoon.

I suppose it was better.

As a bit of a follow up to Jenny's question.

Theres a lot of excess cash that would be available. If you pay down the 5 billion of gross debt between free cash flow and net cash in the balance sheet and so none of those shares.

Perhaps some of this you want to save for the analyst day, but any additional high level commentary you could share around capital allocation.

Well, yes, let's see what the market gives us a fill over over time.

Moving to that.

We described to you back in November 2019, how we think about the cash on the balance sheet. There's the operating cash there is some reserve cash to deal with the volatility of the market and then we we like to hold some strategic cash as well.

We still think the market is going to be quite volatile. So we'll see what the market gives us, but we want to be prepared for any kind of market that we find ourselves in and then thirdly. You know you should think about some of that cash flow will will make sure those shareholders fully satisfy based on.

Our past experience and what we've done as a company and then.

And then thirdly, I would say, it's a we are thinking about some of their future calls whether that's the work that were successful the north field expansion, what we might do at Willow, We had some limited exploration discoveries in Norway, we hope to be successful in Malaysia. So some of that cash since you might see on the balance sheet.

We'll go to some of those projects as well such that we can continue to reap all the benefits from the annual free cash flow that we're getting and distribute that back out to the company and to our shareholders.

Got it okay.

My follow up would just be wrong.

Ryan you you made a comment about you know.

Certain minimum cash levels.

How do you think about what that should be the day and then if I could glue and one question around Alaska do you still target.

Trying to sell down Alaska as a portion of Alaska as you discussed at the 2019 analyst day would that be another source of potential cash sale.

Yeah.

Well I think more broadly a direct answer to your question. So yes, we're still looking at potentially.

Marketing some of the Alaska position, but more broadly I think with the Concho acquisition.

Goldman through the portfolio to make sure that.

We're continually high grading and take the opportunity of the kind of commodity price environment. We find ourselves in so we'll have more to say on that in June as well from the day of various gas positions I think kind of came in that first we think about $1 billion of operating cash.

A couple of billion dollars of $2 billion to $3 billion of reserve cash, which which are you know what happens in the market. We can respond we can keep our programs running consistently and non what's our program and so we wanted to have the cash there to do that and then we have a strategic cash on top of that which are for other uses that I described in your first question.

Yeah.

Thank you. Our next question comes from Roger read from Wells Fargo.

Hello, Good morning.

Good morning, Roger.

I guess [laughter].

[laughter] didn't beaten pretty hard here, but I'm going to try one other thing on that on the debt structure here I mean looking back to where you were in 16 the changes you've made free the Concho acquisition.

Here, you're aiming for a lower level of debt you mentioned lowering breakeven as a component of that it would seem you could get there by refinancing the debt and bringing the overall interest expense. So I was just curious as you think about it as a part of your capital allocation right return to shareholders granted reducing debt can be seen.

That way, but I was just curious how it all kind of fit together.

Is the goal of reducing by $5 billion.

Sure. Roger This is bill I'll take that yes.

Yes, certainly so.

As part of our $5 billion debt reduction over five years I mentioned, we've got about 3 billion Thats just naturally a maturing towers and we are absolutely looking at refinancing a portion of our debt our purchasing debt and we like our path to $5 billion, but you know.

With a high coupon out there.

It's possible to refinance and I think that will just depend on a couple of factors there, including the cost of debt retired and reissued it and how we decided to approach our debt reduction targets, but certainly refinancing is a component of the overall debt restructuring and portfolio and it works in combination with <unk>.

Considering public tenders or open market repurchases, but you're absolutely right.

We could make some steady progress on that just by refinancing some of our high coupon debt.

Thank you. Our next question comes from Ryan Todd from Simmons Energy.

Great. Thanks, maybe.

And at.

At a higher level I mean, what are you seeing on capital efficiency and the onshore portfolios. We've done have emerged from.

The pandemic, a little bit and with the addition of concept of the portfolio do you have an estimate for what you think that.

Maintenance Capex is and in the right way to think about long term capital spend you used to talk about kind of $6 million to $7 million per year. The rough range of debt has there been any adjustment to kind of what you see as the you know kind of a normalized level of longer term capital spent.

Yes, it will.

We will be talking about that Ryan in June and kind of provide an update relative to what you saw back in 2019. It would be premature for me to talk about that I would just tell you we're constantly trying to drive down our sustaining capital and lower the breakeven in the in the company and I think our Tam and what we're doing in the lower 48 mixed.

Around the rest of the globe, where we're seeing a lot of progress in that goes with the synergy capture.

We can talk about if you like but all of those things that are manifesting themselves in lower capex, lower lower sustaining and Laura breakeven.

Thank you. Our next question comes from Josh Silverstein from Wolfe Research.

Hey, Thanks, guys I'm just on Alaska, I know last year was a a COVID-19 shorten drilling program.

Can you talk about all the exploration activity, that's taking place this year and then just again with the timing around Willow with the litigation or what needs to happen there to progress that forward.

Yeah. John This is Nick one I'll start with oil.

Oh I.

I apologize just let me start with Willow.

First the big focus this year is related to the front end engineering design as I've mentioned.

As well as detailed engineering, that's all in related to reducing our understanding our capital the schedule and the ultimate development considerations prior to taking F D.

Later this year, that's the target as a reminder for the group they've got two lawsuits that are currently in federal Court filed by two environmental groups challenging the BLM and the Army Corps record of decision for the Willow projects.

As you recall as well we also have all the permits for the 2021 Willow construction received in early January however, due to the granting of the injunction by the ninth Circuit Court of Appeals that 2021 activity, which was a very small modest scope of gravel work has been deferred into 2000.

<unk> 22, and as oil projects, we have scheduled floater scheduled contingency, Josh so that won't impact the overall timeline.

In addition to the feed that I just mentioned our primary focus now relates to the merits of those active lawsuits and we anticipate a decision by the district court in third quarter.

I also want to just mentioned we have significant stakeholder support.

As an example, we've got state of Alaska in the North slope borough.

Both intervene in the court case supporting the BLM record decision. We also have several more slope village counsels and travel organizations, who have sent strong letters of support to Congress and the secretary of interior.

But I think I'll just reiterate as part of my opening remarks, we will not take F or make any significant wildly investments until such time as key litigation risks had been addressed and finally, we'll as a great investment opportunity and we have the flexibility to adjust the pace of the project if needed.

Thank you. Our next question comes from Stephen Richardson from Evercore ISI.

Hi, Thank you.

Ryan I was wondering if you could expand a little bit on this idea of 2021 as a catalyst moment.

You know as you contemplate your June 30th in that update.

And I'm not asking you to kind of preview it but I think the.

It would seem to us that one of the big differences today Conocophillips relative to last time you did one of these updates was just the predictability of your portfolio is it's probably better than it's ever been so I was wondering if maybe you could reflect a little bit on that.

Predictability acknowledging oil price is still big Big Externality, but you know the predictability of the business you see internally and how that's informing kind of your longer term targeting and kind of willingness to think out more than more than a couple of quarters or even a couple of years.

Yes, Stephen I, you know Youre right.

We said in the opening remarks, the lower 48 as you know have the company in terms of production today and.

The shorter cycle nature of that business is a lot.

It was pretty predictable.

Wouldn't I'd say, we've gotten to a place where we understand you know in running the base business across the whole world is.

Good too and so.

So we understand the portfolio really well obviously in no no no what the products.

Prospects look like over the long haul.

You talked about the catalyst moment, it's really focused on and what we wanted to convey to day every aspect of the business. So we've talked about the balance sheet, we talked about returns back to the shareholder we talked about the efficiencies that we're gaining in the system are opposed to the Concho acquisition. So we're working really on every part trying to lower the <unk>.

Like even though the company.

And still be a you know this.

This is the best company in this business that can operate in a very volatile environment and you can still count on their returns back to the shareholder and you can count on us.

Hyper focused and disciplined on returns.

Not only on capital but of capitals more so I think that's what you'll hear in June a lot more on that work on the portfolio work on what we're doing across the whole company on every every lever.

We know what investors want its free cash flow and returns and that's what we're hyper focused on.

Thank you. Our next question comes from Doug Leggate from Bank of America Merrill Lynch.

Hello, Doug Doug are you there.

Can you hear me now Ryan.

Yeah, No no I've got you Doug Yeah. So it seems I've got a dodgy headset I apologize for that so right now I'd like to I'm afraid, it's going to be up a little bit on the free cash flow also.

I'd like to kind of frame up a little bit because months' noise here to defend himself, but Tom.

If you think about volume.

Essentially your Unlevered free cash flow.

The decision was ultimately between the balance sheet on equity the transfer of value between those two and then a buyback implicitly highs.

Some view on the value of your company.

So I'm kind of curious.

Well you would be prepared to take the take the debt.

Paul you step up the buybacks again, because clearly you could do a lot more if you wanted to of $1 $5 billion, and where the variable dividend potential fits into that story.

Yeah.

Yeah, Hi, Fi sorry, you were breaking up there a little bit Doug that if I understand your question right now how do we make all those balances I think we're walking and chewing gum at the same time here a little bit. So we're working on all aspects of the portfolio.

I think our focus is on trying to lower the breakeven and lower the sustaining.

Sustaining capital to work on the operating side of the business.

The breakeven, which is reducing our interest expense by taking some of those high coupon debt and bringing it forward make giving giving us options to.

Take that callable and reduce that.

To what's coming out over time, so I think we're trying to do all things that I think the basic commitment that we've made to the shareholders. As we're gonna have returned <unk> 30 per cent of our cash for greater back to you over time. So we will do that now the vehicle and I think part of your question was what's the right vehicle to do that and that's I guess.

And in the either the older little bit theres not immediate around what went the right way to do that is we like the shares given the production that bakes in the absolute dividend the per share metrics that it creates in the.

And the balancing and accept the way that it's done but with that said you know we've studied.

Variable dividends and Cvs or whatever you want to call them going forward and we've spent a lot of time thinking about it mathematically it really doesn't matter at the end of the day. The commitment is to return more than 30% if theres a hybrid in our future that could be would we keep looking at it and we're not we're not committed to one path to deliver.

Returns back to the shareholders.

Today, we think our shares are a great value so.

We think this conversion from C V to Conocophillips shares is an elegant solution to get more back to the shareholder so we're pretty pretty committed to that.

Thank you. Our next question comes from Bob Brackett from Bernstein Research.

Thanks for that most of my intelligent questions have been asked but I'd like to at least chime in and congratulate Matt as well on his retirement and maybe ask a question around the the June 30th virtual meeting should we expect something like the 2019 meeting hundred plus slides 10 year plan or should we expect more of a modest update.

Modest update Bob.

They felt there was a lot of questions in and putting a bit of burden on you all but glad for that clarification.

[laughter] yeah.

I appreciate the question Bob.

Get the clarity out there.

Mhm.

Go ahead, Helen Thank you Ryan.

Hey, guys good morning.

Uh huh.

Good morning team just curious that day when you think debt you will at the station beneath you fully integrate.

The concho assets.

And that's ready to take on debt.

The M&A.

M&A opportunity I realized that you would be in a position to say, okay. The organization yes.

I pulled up a line ready to pick on Jim.

A little off debt.

So with that Don is that things like that.

When you're talking to your peers with the commodity price is much stronger and the share performed much better.

Net income paying until a year ago.

Things are non the consolidation trend.

The industry has changed do you think that the consolidations Ryan.

Moving over.

Bye now.

All of that debt, we will have opportunities.

The second question is that when I looked at.

Full year production guidance of one funding and debt per day.

Your first half with a whopping 1.5 based on the midpoint of the second quarter.

But one would think that second quarter probably have some.

Maintenance downtime, perhaps than they have been higher than the second half.

So it's been the wisdom line there.

Full year or what that the second half.

Our production will not be higher than the one 5 million.

<unk> per day in Pi.

Thank you Keith.

Thank you.

Yeah. Thanks, Paul I think it was.

I understand I understand your questions. The first one was around consolidation and M&A.

You referred to the integration activities going on with Concho and we're we're pretty hyper focused on that right now I'm trying to deliver all those efficiencies in the synergy with <unk>.

<unk> story is pretty good there, we updated the synergies to $750 million.

Earlier this year.

And we still see more opportunity and most of that's focused in the.

Best practices and capital avoidance in commercial and in supply chain. So we're really focused on that and we'll get them, we'll get an update in June. So we are pretty focused on making sure we get the concho assets integrated in Tenda is doing.

Right job with his team in the lower 48, non the efficiency side I think it manifests itself in the performance of the company in the first quarter of in the <unk> and the production performance despite having the.

The impact from winter storm Yuri so maybe.

Maybe I'll have.

Nick can comment a little bit we do for the rest of the year and profile. We do have some turnarounds coming so I can but.

They prefer that I think which was the second part of your question around what does that profile look like.

In the last half for last three quarters of the year. Okay. Yeah. Thanks, Ron Paul Yeah, just quickly the turnaround impacts are very consistent with the prior years, our heavy turnaround season is in <unk>, but even more so in <unk>. So if you look at <unk> you got about 15000 barrels a day in <unk>, that's mainly Norway maintenance work.

And then if you look at <unk>, it's about 25000 barrels a day, so see higher downtime and thats, mainly in our western north slope alpine assets as well as greater crude oil Bay again, this maintenance crosser. So 15020, 5002, Q3 Q respectively.

But I know that has been included in our guidance.

Good day and fully answer your question, Paul sorry, but I don't think M&A is done in our business I still think there is consolidation that will occur and it needs to occur there's too many players.

It's more difficult that these kinds of price is clearly but don.

I'll be surprised if you see more of it in our industry, because I think it still needs to still needs to take place.

Thank you. Our next question comes from John Freeman from.

From James right.

Good afternoon, just a follow up on Stephen's question earlier were following the Concho merger in lower 48 makes shop.

Half the company's production and again realizing that your primary focus is just on low cost supply, but just sort of how you think of kind of the long term balance sheet kind of striving for with this short cycle versus long cycle production obviously.

Fitting tremendously with the uptick in a short cycle production.

So the oil price has had a big move up just maybe longer term, how you think about the balance and does it cause he answered changed at all based on the commodity environment.

Okay.

No not really I think we're hyper focused on costs will supply, we're pretty agnostic to gas oil short long, which is why we're interested in the north field expansion in Qatar and continue to have interest in that and continuing to add too.

To improve our lower 48 operations. So I'd say, we'd be we're really we don't really have a ideal blend in mind and we're trying to drive to over time, we're pretty agnostic and just focus on the best rocks.

They deliver the best returns Thats the competitive.

Manage in this business.

Okay.

Thank you. Our next question comes from Leo Mariani from Keybanc.

Okay.

Hey, guys.

A couple of quick questions here for you.

Certainly just noticed that your first quarter of 'twenty, one Permian production was very strong I did the math right. It looks like it was up about 317000 barrels a day versus the fourth quarter of 'twenty, which looked to be well in excess of the contributions from Concho, which I think closed kind of mid January here Jim.

Trying to get a sense of what.

What kind of drove that strong performance was there maybe like a larger group of wells that maybe came on.

And in such a fashion that you saw about bench a bunch of upside on the production is it stronger well performance.

What drove that here in the first quarter.

Yes.

Yeah Leo this is Tim.

We were projecting entering the first quarter.

Heart rate coming out of last year and.

And then with the storm.

The capital down, but didn't really slow too much of the production that was coming in from of our.

Carry on activity and.

So I think as Ryan said, you'll see kind of a more steady.

Approach throughout the rest of the year, but yeah. It it was an excellent quarter everybody is in all the regions are hitting on all cylinders. So I'm really pleased with the performance.

Thank you. Our next question comes from Rafael <unk> from Societe Generale.

Thank you very much for taking my questions.

The first one is on the north field expansion with so many players ear marked.

With interest can you can you tell us a bit more about how you can get involved in this project.

It kind of just be about the price tag you're willing to to accept I guess, so what are you going to bring to cars that will make them except to work with you.

That would be my first question. Please.

Yeah.

Yeah, Raphael I think it goes back to our long standing commitment to Qatar and the.

We are in train six Qatar gas free project been there for a long time.

I think we've demonstrated the value of our.

Water center in Qatar.

We've had strong relationships with the Qataris.

To your point, it's a it's not only about sort of the bid level it's about.

The long term relationship there in the past relationship the historic relationship that you've had so they've been a great partner.

Great Great owners deal with so.

Just like anybody in our competitors.

We rely on the history that we've got in the country and the opportunity that sits there then we'll have to be competitive in our bid and then but it has to work for us. So it has to be competitive in our financial framework. So it cuts both ways.

Great.

And I have to ask you an ESG question.

I understand you have this net zero emissions target by 2050, you get an intermediate targets for 2013 can you without preempting too much with what you will tell us in June.

How how to bridge the gap between 'twenty and.

<unk> do you already have an idea of what will be another layer of absolute reductions and what would be the offsets.

The use of offsets that you would be contemplating.

Yeah about violence Dominic here, so I mean, I think that day.

There's really two main thrusts there the first things that we have.

A tremendous amount of work going on.

Around the business unit surround reducing emissions.

This year, we have about 50 projects, reducing our scope, one and two emissions by $80 million.

Some good examples across our lower 48 and around the world.

But in addition to that sort of.

Incremental gains each year, we have launched a low carbon technologies team and that's very much in support of our Paris aligned climate risk strategy.

Their primary focus is on those opportunities most relevant to our core business to support this and also to our core competencies. So.

Areas of focus.

<unk> renewable power sources to further reduce the emissions intensity of our operations is our scope one and two.

Capturing these in store in general so carbon offsets are.

Areas of initial focus so.

I think that.

These are the areas that we're looking at right now and we expect to develop those very much to becoming in coming years.

Sure.

It sounds like this is Ellen we'll take one final question if you don't mind.

Thank you.

Question comes from Neal Dingmann from chewing Securities.

Thanks for squeezing me in maybe a question for you or Tim just given you've talked about all the debt repayment youre doing and I'm just looking obviously, you've still got a massive lower 48 per foot portfolio. My question is and you know certainly Dod even to that we've seen some very outstanding sales. Most recently was a small smaller Bakken one just.

The last day or so my thought is pertaining to your Bakken I noticed Tim mentioned I don't think any rigs running in that area would you think about bringing forward either value from that or any other assets forward.

Given the.

The large size of your entire international portfolio.

Well I mean, we are.

Looking over everything feel so it globally and here in the U S. I think post post the transaction with Concho.

We want to make sure that every asset is competitive in the portfolio and were not lost on the fact that it's.

You know a reasonable market right now for sales so you'll hear more about that in June.

Yeah.

So I think we'll go ahead and wrap up if you don't mind give us give our listeners that any closing instructions I appreciate everybody's time and attention.

We'll see when Jim.

Thank you ladies.

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