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ConocoPhillips Reports Second-Quarter 2018 Results and Continued Strong Execution of Disciplined 2018 Operating Plan

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ConocoPhillips (NYSE:COP) today reported second-quarter 2018 earnings
of $1.6 billion, or $1.39 per share, compared with a second-quarter 2017
loss of $3.4 billion, or ($2.78) per share. Excluding special items,
second-quarter 2018 adjusted earnings were $1.3 billion, or $1.09 per
share, compared with second-quarter 2017 adjusted earnings of $0.2
billion, or $0.14 per share. Special items for the current quarter were
primarily driven by an unrealized gain on Cenovus Energy equity and
recognition of deferred licensing revenue, partially offset by pension
settlement expense.

Second-Quarter Highlights and Recent
Announcements

  • Cash provided by operating activities was $3.34 billion. Excluding
    working capital, cash from operations of $3.16 billion exceeded
    capital expenditures, dividends and share repurchases.
  • Second-quarter production excluding Libya of 1,211 MBOED achieved the
    high end of guidance; year-over-year underlying production excluding
    the impact of closed dispositions grew 5 percent overall and 34
    percent on a production per debt-adjusted share basis.
  • Year-over-year production from the Lower 48 Big 3 unconventional plays
    grew by 37 percent; achieved Big 3 production milestone of 300 MBOED
    significantly ahead of schedule.
  • Paid down $2.1 billion of balance sheet debt and achieved debt target
    of $15.0 billion 18 months ahead of plan.
  • Ended the quarter with cash, cash equivalents and restricted cash of
    $3.5 billion and short-term investments of $0.6 billion, totaling $4.1
    billion of ending cash and short-term investments.
  • Repurchased $0.6 billion of common shares outstanding, bringing
    year-to-date repurchases to $1.1 billion.
  • Closed previously announced Alaska bolt-on acquisition on the Western
    North Slope.
  • In early July, announced several actions to accelerate the company's
    disciplined plan and increase its low cost of supply resource base:
    • Expanded 2018 planned share repurchases by 50 percent to $3
      billion and increased the total share repurchase authorization
      from $6 billion to $15 billion.
    • Agreed to acquire 39.2 percent interest in the Greater Kuparuk
      Area in Alaska and sell a subsidiary that will hold a 16.5 percent
      interest in the UK Clair Field, subject to regulatory approval.
    • Announced positive results from the 2018 six-well exploration and
      appraisal drilling program in Alaska.

"We've positioned ConocoPhillips to deliver top-tier performance through
cycles by focusing on free cash flow generation and following clear
priorities to maximize returns," said Ryan Lance, chairman and chief
executive officer. "We're benefitting from higher oil prices, but also
driving underlying cash flow expansion. In accordance with our
priorities, we've differentially allocated excess cash toward debt
reduction and distributions, while continuing to grow our diversified,
low cost of supply resource base. Since we launched our disciplined
strategy almost two years ago, we've met or exceeded all our key
strategic milestones. We achieved our debt target 18 months ahead of
plan, we've outperformed on our target payout to shareholders, we're
executing our operating plan and remain committed to our disciplined
approach to the business."

Second-Quarter Review

Production excluding Libya for the second quarter of 2018 was 1,211
thousand barrels of oil equivalent per day (MBOED), a decrease of 214
MBOED compared with the same period a year ago. The second-quarter
volume impact from closed dispositions was 272 MBOED in 2017. Excluding
the impact of closed dispositions, underlying production increased 58
MBOED, or 5 percent. The increase came primarily from growth in the Big
3 unconventional assets and other major projects, which more than offset
normal field decline. Production from Libya was 38 MBOED.

In the Lower 48, production from the company's Big 3 unconventional
assets grew 37 percent year-over-year. In Alaska, GMT-1 drilling
continued, and the project is on track to deliver first oil in the
fourth quarter of 2018. In addition, the company recently announced the
results of its 2018 exploration and appraisal program in Alaska. In the
Greater Willow Area, results to date are sufficient to justify
developing the area with a stand-alone hub. In Canada, the company is
continuing to implement its alternative diluent program at Surmont and
progressing its 14-well pad in the Montney. In Europe, Aasta Hansteen
and Clair Ridge are both on track to deliver first production by the end
of the year. Turnarounds were safely and successfully executed at Darwin
LNG and Bayu Undan in Australia, as well as in the United Kingdom and
Norway. Additional turnarounds and maintenance activity will continue in
the third quarter.

Earnings were higher compared with the second quarter of 2017 primarily
due to the absence of non-cash impairments of APLNG, San Juan and
Barnett, and current-quarter higher realized prices, partially offset by
the absence of the gain on the Canada disposition. Adjusted earnings
were improved compared with second-quarter 2017 primarily due to higher
realized prices. The company's total realized price was $54.32 per
barrel of oil equivalent (BOE), compared with $36.08 per BOE in the
second quarter of 2017, reflecting stronger marker prices and a more
liquids-weighted portfolio.

For the quarter, cash provided by operating activities was $3.34
billion. Excluding a $0.18 billion change in working capital,
ConocoPhillips generated $3.16 billion in cash from operations,
exceeding $2.0 billion in capital expenditures and investments, $0.6
billion of repurchased shares and $0.3 billion of dividends. In
addition, the company paid $2.1 billion to reduce debt and purchased
$0.3 billion of short-term investments. The $2.0 billion in capital
expenditures and investments included $0.4 billion for the Alaska
Western North Slope bolt-on acquisition that closed in the second
quarter.

Six-Month Review

ConocoPhillips' six-month 2018 earnings were $2.5 billion, or $2.13 per
share, compared with a six-month 2017 loss of $2.9 billion, or ($2.30)
per share. Six-month 2018 adjusted earnings were $2.4 billion, or $2.05
per share, compared with six-month 2017 adjusted earnings of $1 million,
or $0.00 per share.

Production excluding Libya for the first six months of 2018 was 1,216
MBOED, compared with 1,503 MBOED for the same period in 2017. The
six-month volume impact from closed dispositions was 337 MBOED in 2017.
Excluding the impact from closed dispositions, underlying production
increased 50 MBOED, or 4 percent. The increase was largely driven by new
production from major projects, development programs and improved well
performance, more than offsetting normal field decline.

The company's total realized price during this period was $52.37 per
BOE, compared with $36.13 per BOE in the first six months of 2017. This
reflected stronger marker prices and a more liquids-weighted portfolio.

In the first half of 2018, cash provided by operating activities was
$5.74 billion. Excluding a $0.09 billion change in working capital,
ConocoPhillips generated $5.65 billion in cash from operations,
exceeding $3.5 billion in capital expenditures and investments, $1.1
billion of repurchased shares and $0.7 billion of dividends. In
addition, the company paid $5.0 billion to reduce debt and sold $1.3
billion of short-term investments. The $3.5 billion in capital
expenditures and investments included $0.4 billion for the Alaska
Western North Slope bolt-on acquisition and $0.1 billion to acquire
additional acreage in the Montney in Canada.

Outlook

The company increased full-year 2018 production guidance to 1,225 to
1,255 MBOED to reflect the higher-than-budgeted partner-operated
activity, improved performance across several operating areas and
completion of the Alaska Western North Slope bolt-on acquisition.
Third-quarter 2018 production is expected to be 1,215 to 1,255 MBOED,
which reflects typical seasonal turnarounds and maintenance activity.
All production guidance excludes Libya.

The company's 2018 operated capital scope remains unchanged, excluding
acquisition-related activity. However, the company is adjusting its
capital guidance to $6 billion from $5.5 billion, reflecting a higher
$65 WTI per barrel price environment versus the $50 WTI per barrel
initially assumed. This guidance excludes the previously announced $0.4
billion bolt-on acquisition in the Alaska Western North Slope and $0.1
billion to acquire additional acreage in the Montney in Canada.

Based on higher expected production, the company has increased its
full-year guidance for depreciation, depletion and amortization expense
to $5.9 billion from $5.8 billion.

ConocoPhillips will host a conference call today at 12:00 p.m. EDT to
discuss this announcement. To listen to the call, as well as view
related presentation materials and supplemental information, go to www.conocophillips.com/investor.

--- # # # ---

About ConocoPhillips

ConocoPhillips is the world's largest independent E&P company based on
production and proved reserves. Headquartered in Houston, Texas,
ConocoPhillips had operations and activities in 17 countries, $69
billion of total assets, and approximately 11,200 employees as of June
30, 2018. Production excluding Libya averaged 1,216 MBOED for the six
months ended June 30, 2018, and proved reserves were 5.0 billion BOE as
of Dec. 31, 2017. For more information, go to www.conocophillips.com.

CAUTIONARY STATEMENT FOR THE PURPOSES OF THE
"SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995

This news release contains forward-looking statements.
Forward-looking statements relate to future events and anticipated
results of operations, business strategies, and other aspects of our
operations or operating results. In many cases you can identify
forward-looking statements by terminology such as "anticipate,"
"estimate," "believe," "continue," "could," "intend," "may," "plan,"
"potential," "predict," "should," "will," "expect," "objective,"
"projection," "forecast," "goal," "guidance," "outlook," "effort," "on
track," "target" and other similar words. However, the absence of these
words does not mean that the statements are not forward-looking. Where,
in any forward-looking statement, the company expresses an expectation
or belief as to future results, such expectation or belief is expressed
in good faith and believed to have a reasonable basis. However, there
can be no assurance that such expectation or belief will result or be
achieved. The actual results of operations can and will be affected by a
variety of risks and other matters including, but not limited to changes
in commodity prices; changes in expected levels of oil and gas reserves
or production; operating hazards, drilling risks, unsuccessful
exploratory activities; difficulties in developing new products and
manufacturing processes; unexpected cost increases or technical
difficulties in constructing, maintaining, or modifying company
facilities; international monetary conditions and exchange rate
fluctuations; changes in international trade relationships, including
the imposition of trade restrictions or tariffs relating to crude oil,
bitumen, natural gas, LNG, natural gas liquids and any materials or
products (such as aluminum and steel) used in the operation of our
business; our ability to liquidate the common stock issued to us by
Cenovus Energy Inc. at prices we deem acceptable, or at all; our ability
to complete the sale of our announced dispositions on the timeline
currently anticipated, if at all; the possibility that regulatory
approvals for our announced dispositions will not be received on a
timely basis, if at all, or that such approvals may require modification
to the terms of our announced dispositions or our remaining business;
business disruptions during or following our announced dispositions,
including the diversion of management time and attention; the ability to
deploy net proceeds from our announced dispositions in the manner and
timeframe we currently anticipate, if at all; potential liability for
remedial actions under existing or future environmental regulations;
potential liability resulting from pending or future litigation; limited
access to capital or significantly higher cost of capital related to
illiquidity or uncertainty in the domestic or international financial
markets; and general domestic and international economic and political
conditions; as well as changes in tax, environmental and other laws
applicable to our business. Other factors that could cause actual
results to differ materially from those described in the forward-looking
statements include other economic, business, competitive and/or
regulatory factors affecting our business generally as set forth in our
filings with the Securities and Exchange Commission (SEC). Unless
legally required, ConocoPhillips undertakes no obligation to update
publicly any forward-looking statements, whether as a result of new
information, future events or otherwise.

Cautionary Note to U.S. Investors – The SEC permits oil and
gas companies, in their filings with the SEC, to disclose only proved,
probable and possible reserves. We use the term "resource" in this news
release that the SEC's guidelines prohibit us from including in filings
with the SEC. U.S. investors are urged to consider closely the oil and
gas disclosures in our Form 10-K and other reports and filings with the
SEC. Copies are available from the SEC and from the ConocoPhillips
website.

Use of Non-GAAP Financial Information – To supplement the
presentation of the company's financial results prepared in accordance
with U.S. generally accepted accounting principles (GAAP), this news
release and the accompanying supplemental financial information contain
certain financial measures that are not prepared in accordance with
GAAP, including adjusted earnings (calculated on a consolidated and on a
segment-level basis), adjusted earnings per share and cash from
operations.

The company believes that the non-GAAP measure adjusted earnings
(both on an aggregate and a per share basis) is useful to investors to
help facilitate comparisons of the company's operating performance and
controllable costs associated with the company's core business
operations across periods on a consistent basis and with the performance
and cost structures of peer companies in a manner that, when viewed in
combination with the company's results prepared in accordance with GAAP,
provide a more complete understanding of the factors and trends
affecting the company's business and performance. The company further
believes that the non-GAAP measure cash from operations is useful to
investors to help understand changes in cash provided by operating
activities excluding the impact of working capital changes across
periods on a consistent basis and with the performance of peer companies
in a manner that, when viewed in combination with the Company's results
prepared in accordance with GAAP, provides a more complete understanding
of the factors and trends affecting the Company's business and
performance. The company's Board of Directors and management also use
these non-GAAP measures to analyze the company's operating performance
across periods when overseeing and managing the company's business.

Each of the non-GAAP measures included in this news release and the
accompanying supplemental financial information has limitations as an
analytical tool and should not be considered in isolation or as a
substitute for an analysis of the company's results calculated in
accordance with GAAP. In addition, because not all companies use
identical calculations, the company's presentation of non-GAAP measures
in this news release and the accompanying supplemental financial
information may not be comparable to similarly titled measures disclosed
by other companies, including companies in our industry. The company may
also change the calculation of any of the non-GAAP measures included in
this news release and the accompanying supplemental financial
information from time to time in light of its then existing operations
to include other adjustments that may impact its operations.

The release also contains the non-GAAP term free cash flow. Free cash
flow is cash provided by operating activities excluding operating
working capital in excess of capital expenditures and investments. The
company believes that free cash flow is useful to investors as it
provides measures to compare cash provided by operating activities
excluding operating working capital after deduction of capital
expenditures and investments across periods on a consistent basis.

Reconciliations of each non-GAAP measure presented in this news
release to the most directly comparable financial measure calculated in
accordance with GAAP are included in the release.

Other Terms – The release also contains the terms underlying
production and production per debt-adjusted share. Underlying production
excludes Libya and closed dispositions. Production per debt-adjusted
share is calculated on an underlying production basis using ending
period debt divided by ending share price plus ending shares
outstanding. The company believes that underlying production is useful
to investors to compare production excluding Libya and the full impact
of closed dispositions on a consistent go-forward basis with peer
companies. The company believes that production per debt-adjusted share
is useful to investors as it provides a consistent view of production on
a total equity basis by converting debt to equity and allows for
comparisons across peer companies.

References in the release to earnings refer to net income/(loss)
attributable to ConocoPhillips.

                                                                   
ConocoPhillips
Table 1: Reconciliation of earnings to adjusted earnings
$ Millions, Except as Indicated
                                                                 
2Q18 2Q17 2018 YTD 2017 YTD
Pre-tax  

Income
tax

  After-tax  

Per share of
common
stock
(dollars)

Pre-tax  

Income
tax

  After-tax  

Per share of
common
stock
(dollars)

Pre-tax  

Income
tax

  After-tax  

Per share
of common
stock
(dollars)

Pre-tax  

Income
tax

  After-tax  

Per share
of common
stock
(dollars)

 
Earnings $ 1,640 1.39 (3,440 ) (2.78 ) 2,528 2.13 (2,854 ) (2.30 )
Adjustments:
Premiums on early debt retirement 2 - 2 - 234 (49 ) 185 0.15 208 (13 ) 195 0.17 234 (49 ) 185 0.15
Unrealized gain (loss) on CVE equity (387 ) 43 (344 ) (0.29 ) - - - - (271 ) 44 (227 ) (0.19 ) - - - -
Pending claims and settlements - - - - (2 ) (69 ) (71 ) (0.06 ) (135 ) 65 (70 ) (0.06 ) (2 ) (69 ) (71 ) (0.06 )
Impairments (53 ) 21 (32 ) (0.03 ) 6,284 (1,398 ) 4,886 3.95 (43 ) 19 (24 ) (0.02 ) 6,509 (1,480 ) 5,029 4.06
Pension settlement expense 147 (26 ) 121 0.10 36 (11 ) 25 0.02 147 (26 ) 121 0.10 96 (28 ) 68 0.05
Restructuring - - - - 14 (6 ) 8 0.01 - - - - 41 (14 ) 27 0.02
Net gain on asset sales (50 ) 14 (36 ) (0.03 ) (1,855 ) 477 (1,378 ) (1.12 ) (50 ) 14 (36 ) (0.03 ) (1,855 ) (519 ) (2,374 ) (1.91 )
Deferred tax adjustment - - - - - (37 ) (37 ) (0.03 ) - - - - - (37 ) (37 ) (0.03 )
Rig termination - - - - - - - - - - - - 43 (15 ) 28 0.02
Recognition of deferred licensing revenue     (60 )   -       (60 )   (0.05 ) -     -     -     -   (60 )   -     (60 )   (0.05 ) -     -     -     -  
Adjusted earnings / (loss)             $ 1,291     1.09           178     0.14           2,427     2.05           1     0.00  
 
The income tax effects of the special items are primarily calculated
based on the statutory rate of the jurisdiction in which the
discrete item resides.

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