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Low Breakeven Price Flexibility Low Cost of Supply low breakeven price transformation SPIRIT Values smart growth differentiation low cost of supply acceleration superior returns flexibility 2160 Annual Report Letter to Dear Fellow Shareholders: This year’s letter to shareholders picks up where last year’s left off. At that time, Brent oil Shareholders prices had fallen below $30 per barrel, and the impacts of the significant price downturn that began in 2014 were intensifying across the industry. Our company was continuing to take actions to reset our business based on our view that prices are likely to be lower and more volatile in the future. This was a fundamental mindset shift — from one that set plans based on expected oil and natural gas prices to one that embraced uncertainty. Not long ago, oil prices were high and relatively stable. But we believe that world has changed. The strength of a company won’t necessarily lie in its ability to survive this change, but in its ability to adapt. We must position our company to deliver predictable performance through the cycles by maintaining a strong balance sheet, a low cost structure and a low cost of supply resource base, while preserving strategic flexibility. And that’s exactly what we’ve done. Since 2014, we’ve lowered our capital expenditures by more than 70 percent and significantly reduced our operating costs. We exited higher-cost areas of business, shifted our capital to shorter-cycle investments and reduced our dividend. These changes were difficult, but allowed us to sustainably lower the Brent price at which we can fund our capital program and dividend with cash from operating activities. We also continued streamlining our portfolio, generating more than $3 billion of proceeds from non-core asset sales during the past two years. With these actions behind us, we announced an updated value proposition at our Analyst and Investor Meeting in November 2016. I started that meeting with a question: can an E&P company deliver value through price cycles with a disciplined, returns-based value proposition? Our answer? Yes. We then laid out a strategy and plan that reflect the breadth of our transformation, while offering a bold alternative to many E&P company business models that still focus on absolute growth. We’ll manage the business for cash flow generation with five clear cash flow allocation priorities. In order, these priorities are: invest enough cash to maintain flat production and pay our existing dividend; grow our dividend; reduce our debt levels to target an ‘A’ credit rating; pay out roughly 20 to 30 percent of our cash from operating activities to shareholders through a combination of the dividend and share buybacks; and grow production. It’s early days since we launched our updated value proposition, but so far, the reception has been positive. Importantly, by early 2017, all five priorities had been activated. We delivered against all of them, including growing production by 3 percent in 2016, when adjusted for the impact of dispositions and downtime. Clearly, 2016 was a year of intense change. However, through it all, our operational performance didn’t falter. This is a credit to our workforce. They delivered strong safety performance, while exceeding operational targets across the business. We achieved first LNG at our APLNG Train 2 megaproject in Australia, as well as project startups in Canada, China, Europe and Malaysia. The past two years tested the organization, but our workforce showed resilience and commitment every step of the way. We can never declare victory in this business. There is always work to do. But we have a viable strategy, with a sound operating plan in place. Our workforce is focused on safely executing that plan. We’re excited about our future because we believe we’re leading the industry in offering a compelling approach to a cyclical business that is ripe for sustainable change. I would like to thank our shareholders, workforce and board of directors for their support. We’ll continue working hard every day to maintain that support. Ryan M. Lance Chairman and Chief Executive Officer Feb. 21, 2017 2016 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) [x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2016 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-32395 ConocoPhillips (Exact name of registrant as specified in its charter) Delaware 01-0562944 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 600 North Dairy Ashford Houston, TX 77079 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 281-293-1000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, $.01 Par Value New York Stock Exchange 6.65% Debentures due July 15, 2018 New York Stock Exchange 7% Debentures due 2029 New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [x] Yes [ ] No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [ ] Yes [x] No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [x] Yes [ ] No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [x] Yes [ ] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer [x] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [ ] Yes [x] No The aggregate market value of common stock held by non-affiliates of the registrant on June 30, 2016, the last business day of the registrant’s most recently completed second fiscal quarter, based on the closing price on that date of $43.60, was $54.0 billion. The registrant had 1,235,832,469 shares of common stock outstanding at January 31, 2017. Documents incorporated by reference: Portions of the Proxy Statement for the Annual Meeting of Stockholders to be held on May 16, 2017 (Part III) TABLE OF CONTENTS Item Page PART I 1 and 2. Business and Properties ...................................................................................................... 1 Corporate Structure ........................................................................................................ 1 Segment and Geographic Information ........................................................................... 2 Alaska ....................................................................................................................... 4 Lower 48 ................................................................................................................... 6 Canada ...................................................................................................................... 9 Europe and North Africa ........................................................................................... 11 Asia Pacific and Middle East .................................................................................... 13 Other International .................................................................................................... 18 Competition ................................................................................................................... 21 General ........................................................................................................................... 21 1A. Risk Factors ........................................................................................................................ 23 1B. Unresolved Staff Comments ............................................................................................... 27 3. Legal Proceedings ............................................................................................................... 28 4. Mine Safety Disclosures ..................................................................................................... 28 Executive Officers of the Registrant ..................................................................................
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