Oil and Natural Gas Outlook: Impact on Alaska

Oil and Natural Gas Outlook: Implications for Alaska The Alliance – Meet Alaska

Remarks by Marianne Kah Chief Economist

January 9, 2015 Cautionary Statement

The following presentation includes forward-looking statements. These statements relate to future events, such as anticipated revenues, earnings, business strategies, competitive position or other aspects of our operations or operating results or the industries or markets in which we operate or participate in general. Actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that may prove to be incorrect and are difficult to predict such as oil and gas prices; operational hazards and drilling risks; potential failure to achieve, and potential delays in achieving expected reserves or production levels from existing and future oil and gas development projects; unsuccessful exploratory activities; unexpected cost increases or technical difficulties in constructing, maintaining or modifying company facilities; international monetary conditions and exchange controls; potential liability for remedial actions under existing or future environmental regulations or 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; general domestic and international economic and political conditions, as well as changes in tax, environmental and other laws applicable to ConocoPhillips’ business and other economic, business, competitive and/or regulatory factors affecting ConocoPhillips’ business generally as set forth in ConocoPhillips’ filings with the Securities and Exchange Commission (SEC). We caution you not to place undue reliance on our forward-looking statements, which are only as of the date of this presentation or as otherwise indicated, and we expressly disclaim any responsibility for updating such information.

Use of non-GAAP financial information – This presentation may include non-GAAP financial measures, which help facilitate comparison of company operating performance across periods and with peer companies. Any non-GAAP measures included herein will be accompanied by a reconciliation to the nearest corresponding GAAP measure in an appendix.

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 presentation 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.

2 January 9, 2015 Challenging Oil and Natural Gas Outlook

• Weak global economic and energy demand growth

• Global oil supply growth outpacing demand, causing present oil price weakness

• Need for U.S. crude exports

• Weak N.A. natural gas market • Sufficient supplies available below $5/MMBtu prices

• Loosening international natural gas market • Pipeline and LNG supply competition • Lower economic and gas demand growth • Lower oil prices reducing LNG contract prices

• Environmental, cost and tax pressures

3 January 9, 2015 Downward Revisions to Global Economic Growth Forecasts IMF’s Global GDP Growth Percent 5.0%

2012 4.5%

2013 2014 4.0% 2015

3.5%

3.0%

2.5% Apr. Sep. Apr. Oct. Apr. Oct. Apr. Oct. 2011 2011 2012 2012 2013 2013 2014 2014 ------Date of Forecast ------Downward revision has been a constant theme Source: IMF semi-annual forecasts 4 January 9, 2015 Brent Crude Market Outlook

Global Oil Demand vs. Non-OPEC Historical Brent Crude Price $140 Supply Growth Stable range until recently

$120 2.0 2 $100 1.8 1.8 $80 Non-OPEC Supply $60

1.6 1.6 Dollars per Barrel

$40 1.4 1.4 2007 2008 2009 2010 2011 2012 2013 2014 1.2 1.2 Demand Other Market Brent Price Outlook 1.0 1 $150 0.8 0.8

$130 Million Barrels per Day per MillionBarrels 0.6 0.6 $110 0.4 U.S. 0.4 $90 Expert 0.2 0.2 Range $70 0.0 Futures 0 Real 2014 Dollars per Barrel $50 2014 2015 2016 2014 2015 2016 2017 2018 2019 2020 Recent weakness in economic and oil demand growth lowered prices

Source: IEA 12/14 Monthly & Medium Term, U.S. includes NGLs Notes: 2014 Brent price is annual average; Futures from 1/5/2015 5 January 9, 2015 U.S. Oil Production is Set to Expand

U.S. Crude, Condensate, Natural Gas Liquids Forecast 18

16 EIA’s High Resource Case

10 U.S. Tight Oil

Million Barrels per Day per Barrels Million 6 Conventional Production 4 Alaska Crude 2 NGLs 0 2005 2010 2015 2020 2025 2030 Liquids production has returned to levels not seen since 1972

Source: U.S. Department of Energy, EIA Annual Energy Outlook 2014, various forecasts Source: Rystad Energy Upstream Database 6 January 9, 2015 Oil & Gas Has Spurred Growth in the Broader U.S. Economy

Oil and Gas Sector Expanded While Other Sectors Lagged Manufacturing Employment Reversed a 12-year Decline (Annual % change) Index of Job Growth: Jan. 2007 = 1.0 2% 1.7 0% Oil and Gas Sector Jobs -2% 1.6 +67% -4% -6% 1.5 -8% -10% 1.4 -12% 1998 2000 2002 2004 2006 2008 2010 2012 2014 1.3 U.S. Unemployment Rate 10% 1.2 9%

1.1 8% Total Private Sector +2% 7% 1.0 6%

0.9 5% 2007 2008 2009 2010 2011 2012 2013 2014 4% 2007 2008 2009 2010 2011 2012 2013 2014 Energy production prevented U.S. downturn from being worse, and spurred recovery Source: U.S. Bureau of Labor Statistics (Total Private Sector Jobs, NAICS 211000 and 213112). Source: U.S. Bureau of Labor Statistics. 7 January 9, 2015 In-Migration of Manufacturing: U.S. Industrial “Re-shoring”

U.S. Manufacturing PMI Consistently U.S. Manufacturing Employment: Ahead vs. China Since Early 2011 Gained about 750,000 Jobs Since 2010

Index 60 Millions Above 50 = Expansion 13.8 U.S. 55 13.4

50 13.0

China 45 12.6

40 12.2

35 11.8

Below 50 = Contraction 30 11.4 2008 2009 2010 2011 2012 2013 2014 2008 2009 2010 2011 2012 2013 2014

Affordable energy has given U.S. industry a competitive advantage

Source: Markit Source: U.S. Bureau of Labor Statistics 8 January 9, 2015 Changing Pattern of U.S. Crude Imports

U.S. Crude Imports/(Exports)

Million Barrels per Day 10 • Declining light, sweet crude imports, with year round exports 8 needed by 2017 Light Sweet • Condensates and super light 6 crudes are already in surplus Light Sour • Seasonal exports needed before Medium then during U.S. refinery 4 turnarounds / outages

2 Heavy • Eventual reductions in light, sour and medium crude imports 0 Light Sweet Exports and/or refinery • U.S. likely to maintain heavy crude additions required (2) imports that better matches 2010 2012 2014 2016 2018 2020 2022 domestic refinery configuration

Need for exports of surplus light, sweet crudes Source: U.S. Department of Energy, EIA; Turner, Mason & Co.

9 January 9, 2015 Case for ANS Crude Exports

Rail Unloading Capacity on West Coast ANS (Long Beach) - Brent Price Differential

0 Puget Sound 110 MBD Currently Operating +120 MBD Planned

-5 Dollars perDollars Barrel

Portland/SW WA ANS falling relative to Brent 60 MBD Currently Operating -10 +300 MBD Planned 2010 2011 2012 2013 2014 2015

San Francisco Area ANS (Long Beach) - WTI Price Differential 39 MBD Currently Operating +280 MBD Planned 30

25 ANS premium to WTI dissipating

Bakersfield Area 20 28 MBD Currently Operating +250 MBD Planned 15

10 L.A. Area 72 MBD Currently Operating 5

per Barrel Dollars 0 Current West Coast rail unloading capacity ~300 MBD -5 Could reach 1250 MBD capacity by end-2016 2010 2011 2012 2013 2014 2015 West Coast imports of ANS face stiffer competition from Lower-48, Canada & South America Source: ConocoPhillips, Various; Platts for prices 10 January 9, 2015 Ability to Export L48 Crude Would Increase U.S. Oil Production

Incremental U.S. Crude Production from Lifting Export Ban in 2015

• Lifting the ban on U.S. Lower 48 Million Barrels per Day crude exports would increase 3.5 production by 1.5 to 3.0 MMBD by 2020 3.0 • 10-20% increase 2.5

Reference • Removing domestic crude price 2.0 discounts caused by the ban would 1.5 High increase investment in new Resource production 1.0 • More wells and plays would become economic 0.5 • Increased cash flow to invest 0.0 2015 2020 Increased production comes with significant economic benefits to the U.S.

Source: NERA prepared for Brookings Institution, “Economic Benefits of Lifting the Crude Oil Export Ban,” Sept. 9, 2014. 11 January 9, 2015 Benefits of U.S. Crude Oil Exports

• Would lower consumer fuel costs at the pump by $18 billion annually

• U.S. economy could gain $135 billion and about one million jobs at its peak

• Reduce nation’s oil import bill by $67 billion annually

• Increase government revenues by $1.3 trillion between 2016-2030

• Strengthen U.S. geopolitical position

More jobs & economic development would result from continued growth in U.S. oil production

Source: IHS Global Inc., “U.S. Crude Oil Export Decision: Assessing the Impact of the Export Ban and Free Trade on the U.S. Economy,” May 29, 2014 12 January 9, 2015 Gasoline Prices Are Set Globally by International Crude Prices

Spot Gasoline Prices U.S. Gasoline Prices vs. International & Domestic Crude Prices 4.0 Dollars per Gallon 140 Dollars per Barrel U.S. Gulf U.S. Gulf

New York New York Brent N.W. Europe 120 3.0 WTI Singapore

100 2.0

1.0 60 Refined product prices around the Refined product prices more closely world track each other demonstrating track international crude prices (Brent) that US gasoline prices are set globally. than US domestic crude prices (WTI). 0.0 40 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014

U.S. crude exports should lower U.S. gasoline prices Source: Bloomberg 13 January 9, 2015 U.S. LNG Exports Wide Divergence Between Pricing Historical U.S. Department of Energy in Major Markets Projections 20 Japan 20 2005 18 LNG 15 16 Net Importer 14 2007 10 12 2008

10 5 2010 U.K. 8 Spot 0

Nominal$/MMbtu 6

Billion Cubic Feet per per Day Cubic BillionFeet 2013 Net Exporter 4 (5) 2014 2 U.S.

0 (10)

2010 2015 2020 2025

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

U.S. is poised to become an LNG exporter Source: Bloomberg; U.S. Department of Energy, EIA, AEO 2005-2014 14 January 9, 2015 Alaska Activities Announced Since Tax reform (SB21) Passed

• Added two rigs to the Kuparuk rig fleet • Investment has decreased Kuparuk Unit field decline from 7% to 1%

• Two new-build rigs are on order – deliver 2016 • Rotary rig Doyon 142 • Coil tubing drill rig Nabors CDR-3

• New Drill site at Kuparuk (DS-2S) – Approved October 2014

• Evaluating plans for additional development in NPRA (GMT-1) • In dialogue with Federal Government for acceptable terms

• Pre-engineering for viscous oil expansion in Kuparuk (1H NEWS)

*Gross dollars 15 January 9, 2015 Implications for Alaska

• Alaska North Slope oil needs to be cost competitive, especially in today’s low oil price environment

• ANS crude export option driven by increased flows of competing crude oils to the U.S. West Coast

• Relatively low natural gas prices in Lower 48 makes those LNG projects competitive and they are helping set global LNG prices

• With stiff competition, Alaska LNG needs to be competitive with regard to cost and fiscal terms

16 January 9, 2015