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TransCanada Keystone Pipeline GP Ltd. Keystone XL Pipeline Section 52 Application Section 4: Financing, Appendix 4-9 Page 1 of 60 APPENDIX 4-9 2007 CONOCOPHILLIPS ANNUAL REPORT ConocoPhillips 2007 Annual Report www.conocophillips.com 2007 Annual Report Delivering Energy. Building Value. FinancialFinancial Highlights Highlights . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 1. .1 CorporateCorporate Staffs Staffs . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 24. .24 WorldwideWorldwide Operations Operations . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 2. .2 FinancialFinancial and andOperating Operating Results Results . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 28. .28 LetterLetter to Shareholders to Shareholders . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 4. .4 DirectorsDirectors and andOfficers Officers . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 110. .110 FinancialFinancial Review Review . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 8. .8 GlossaryGlossary . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 112. .112 Financial Highlights OperatingOperating Review Review . .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. 10. .10 WhoWho We We Are Are OurOur Theme Theme Millions of Dollars Except as Indicated 2007 2006 % Change Financial WhoWho We Are We Are DeliveringDelivering Energy Energy Total revenues and other income $194,495 188,523 3 % ConocoPhillipsConocoPhillips is an isinternational, an international, integrated integrated energy energy company. company. ConocoPhillipsConocoPhillips is engaged is engaged in in 2007 Annual Report2007 Annual Report Net income $ 11,891 15,550 (24) It is theIt is third-largest the third-largest integrated integrated energy energy company company in the in United the United deliveringdelivering energy energy to a worldto a world DeliveringDelivering Energy. Energy. Net income per share of common stock — diluted $ 7.22 9.66 (25) StatesStates based based on market on market capitalization capitalization and oil and and oil natural and natural gas gas that isthat increasingly is increasingly dependent dependent BuildingBuilding Value. Value. Net cash provided by operating activities $ 24,550 21,516 14 provedproved reserves reserves and production; and production; and the and second-largest the second-largest refiner refiner on accesson access to abundant, to abundant, reliable reliable Capital expenditures and investments $ 11,791 15,596 (24) in thein United the United States. States. Worldwide, Worldwide, of non-government-controlled of non-government-controlled suppliessupplies of energy of energy in many in many Total assets $177,757 164,781 8 companies,companies, ConocoPhillips ConocoPhillips is the is sixth-largest the sixth-largest proved proved reserves reserves forms.forms. We are We dedicated are dedicated to to Total debt $ 21,687 27,134 (20) holderholder and the and fifth-largest the fifth-largest refiner. refiner. deliveringdelivering this energy this energy safely safely Minority interests $ 1,173 1,202 (2) The companyThe company is known is known worldwide worldwide for its for technological its technological and inand an inenvironmentally an environmentally Common stockholders’ equity $ 88,983 82,646 8 expertiseexpertise in exploration in exploration and production, and production, reservoir reservoir management management responsibleresponsible manner. manner. and exploitation,and exploitation, 3-D seismic3-D seismic technology technology and high-grade and high-grade petroleum petroleum ThroughoutThroughout most mostof our of our Percent of total debt to capital* 19% 24 (21) coke cokeupgrading. upgrading. history,history, we focused we focused on on Common stockholders’ equity per share (book value) $ 56.63 50.21 13 HeadquarteredHeadquartered in Houston, in Houston, Texas, Texas, ConocoPhillips ConocoPhillips operates operates producingproducing readily readily available available Cash dividends per common share $ 1.64 1.44 14 in nearlyin nearly 40 countries. 40 countries. The companyThe company has 32,600 has 32,600 employees employees conventionalconventional oil and oil natural and natural Closing stock price per common share $ 88.30 71.95 23 worldwideworldwide and assets and assets of $178 of $178billion. billion. ConocoPhillips ConocoPhillips stock stock is is gas. Asgas. access As access to these to these supplies supplies declined, declined, we undertook we undertook a transition a transition Common shares outstanding at year end (in thousands) 1,571,430 1,646,082 (5) listedlisted on the on New the NewYork YorkStock Stock Exchange Exchange under under the symbol the symbol “COP.” “COP.” to unconventionalto unconventional sources sources — heavy — heavy oil, “tight” oil, “tight” natural natural gas and gas and Average common shares outstanding (in thousands) coalbedcoalbed methane methane — which — which now representnow represent much much of our of resource our resource base. base. Basic 1,623,994 1,585,982 2 Our BusinessesOur Businesses TodayToday we are we engaged are engaged in a furtherin a further long-term long-term transition transition as we as we Diluted 1,645,919 1,609,530 2 The companyThe company has four has corefour activitiescore activities worldwide: worldwide: developdevelop new methodsnew methods to provide to provide these these fuels fuelsin cleaner-burning in cleaner-burning Employees at year end (in thousands) 32.6 38.4 (15) • Petroleum• Petroleum exploration exploration and production. and production. formsforms while while beginning beginning the journey the journey toward toward renewable renewable fuels fuelsand and *Capital includes total debt, minority interests and common stockholders’ equity. • Petroleum• Petroleum refining, refining, marketing, marketing, supply supply and transportation. and transportation. alternativealternative energy energy sources. sources. This Thistransition, transition, which which will requirewill require decadesdecades to accomplish, to accomplish, is part is ofpart a strategyof a strategy through through which which 2007 2006 % Change • Natural• Natural gas gathering, gas gathering, processing processing and marketing, and marketing, including including ConocoPhillipsConocoPhillips intends intends to continue to continue delivering delivering energy energy responsibly responsibly Operating* a 50 percenta 50 percent interest interest in DCP in DCPMidstream, Midstream, LLC. LLC. to theto world the world well intowell theinto future. the future. U.S. crude oil production (MBD) 363 367 (1)% • Chemicals• Chemicals and plastics and plastics production production and distribution and distribution through through a a Worldwide crude oil production (MBD) 854 972 (12) 50 percent50 percent interest interest in Chevron in Chevron Phillips Phillips Chemical Chemical Company Company LLC. LLC. BuildingBuilding Value Value U.S. natural gas production (MMCFD) 2,292 2,173 5 In addition,In addition, the company the company is investing is investing in several in several emerging emerging ConocoPhillipsConocoPhillips is committed is committed to building to building the intrinsic the intrinsic value value of of Worldwide natural gas production (MMCFD) 5,087 4,970 2 businessesbusinesses — power — power generation; generation; carbon-to-liquids; carbon-to-liquids; technology technology our companyour company by capitalizing by capitalizing on the on opportunities the opportunities offered offered by our by our Worldwide natural gas liquids production (MBD) 155 136 14 solutions;solutions; and emerging and emerging technologies technologies such suchas renewable as renewable fuels fuelsand and substantialsubstantial asset assetportfolio portfolio — a portfolio— a portfolio assembled assembled through through a a Worldwide Syncrude production (MBD) 23 21 10 alternativealternative energy energy sources sources — that — providethat provide current current and potential and potential combinationcombination of organic of organic growth growth and acquisitions. and acquisitions. These These opportu- opportu- LUKOIL Investment net production (MBOED)** 444 401 11 futurefuture growth growth opportunities. opportunities. nitiesnities range range from frompromising promising exploratory exploratory prospects prospects to ongoing to ongoing Worldwide production (MBOED)*** 2,324 2,358 (1) producingproducing field fielddevelopment development programs, programs, refinery refinery upgrades, upgrades, Natural gas liquids extracted — Midstream (MBD) 211 209 1 expansionsexpansions of our of downstream our downstream businesses businesses and entry and entry into emerginginto emerging Refinery crude oil throughput (MBD) 2,560 2,616 (2) formsforms of alternative of alternative energy. energy. Refinery utilization rate 94% 92 2 Further,Further, we are we committed are committed to building to building the value the value realized realized by by U.S. automotive gasoline sales (MBD) 1,244 1,336 (7) ConocoPhillipsConocoPhillips shareholders shareholders in return in return for their for theirinvestment investment in our in our U.S. distillates sales (MBD)