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2003 Cp Annual.Qxd buildingbuilding momentummomentum 2003 Annual Report Our Purpose Use Our Pioneering Spirit to Responsibly Deliver Energy to the World Who We Are Contents ConocoPhillips is an international, integrated energy company. It is the ConocoPhillips’ Worldwide Operations . .2 third-largest integrated energy company in the United States, based on market Letter to Shareholders . .4 capitalization, oil and gas proved Chairman Archie Dunham and President and CEO Jim Mulva reserves and production; and the largest discuss the factors behind the company’s success in 2003. refiner in the United States. Worldwide, of nongovernment-controlled companies, ConocoPhillips has the An Interview with President and CEO Jim Mulva . .8 eighth-largest total of proved reserves and is the fourth largest refiner. Operating Review . .10 ConocoPhillips is known worldwide ConocoPhillips’ operating groups are focused on controlling costs, for its technological expertise in running well and developing projects that will support the exploration and production, reservoir company’s future growth. management and exploitation, liquefied natural gas, 3-D seismic technology, Corporate Review . .28 high-grade petroleum coke upgrading, The corporate staffs played key roles in the company’s strong and sulfur removal. financial and operating performance in 2003. Headquartered in Houston, Texas, ConocoPhillips operates in more than 40 countries. The company has Financial Review . .35 approximately 39,000 employees worldwide and assets of $82.5 billion. Directors and Officers . .110 ConocoPhillips stock is listed on the New York Stock Exchange under the Glossary . .112 symbol “COP.” Our Businesses The company has four core activities worldwide: ■ Petroleum exploration and production. Our Theme: Building Momentum ■ Petroleum refining, marketing, supply A ship steaming through the open ocean and transportation. carries on its deck one of the platforms ■ Natural gas gathering, processing and for the Bayu-Undan project in the Timor marketing, including a 30.3 percent Sea. The movement through the water of interest in Duke Energy Field the ship and its cargo represents the Services, LLC. momentum ConocoPhillips is building ■ Chemicals and plastics production as it enters its second full year as a and distribution through a 50 percent combined company. The company interest in Chevron Phillips Chemical achieved excellent financial results in Company LLC. 2003 and enhanced value to its shareholders. ConocoPhillips is In addition, the company is investing in continuing to build momentum using a several emerging businesses — gas-to- disciplined financial approach to capture liquids, power generation, the synergies and improve the balance sheet, development and marketing of as well as moving forward with the environmentally friendly fuels development of legacy upstream projects technologies, and other emerging like Bayu-Undan, which began technologies — that provide current and production of natural gas liquids and potential future growth opportunities. condensate in February 2004. Highlights Millions of Dollars Except as Indicated 2003 2002 % Change Financial Total revenues $105,097 57,201 84 Income from continuing operations $ 4,593 698 558 Net income (loss) $ 4,735 (295) — Per share of common stock — diluted Income from continuing operations $ 6.70 1.44 365 Net income (loss) $ 6.91 (.61) — Net cash provided by operating activities from continuing operations $ 9,167 4,776 92 Net cash provided by operating activities $ 9,356 4,978 88 Capital expenditures and investments $ 6,169 4,388 41 Total assets $ 82,455 76,836 7 Total debt $ 17,780 19,766 (10) Mandatorily redeemable preferred securities of a trust subsidiary $— 350 — Other minority interests $ 842 651 29 Common stockholders’ equity $ 34,366 29,517 16 Percent of total debt to capital* 34% 39 (13) Common stockholders’ equity per share (book value) $ 50.33 43.56 16 Cash dividends per common share $ 1.63 1.48 10 Closing stock price per common share $ 65.57 48.39 36 Common shares outstanding at year-end (in thousands) 682,784 677,570 1 Average common shares outstanding (in thousands) Basic 680,490 482,082 41 Diluted 685,433 485,505 41 Employees at year-end (in thousands) 39.0 57.3 (32) *Capital includes total debt, mandatorily redeemable preferred securities of a trust subsidiary, other minority interests and common stockholders’ equity. 2003 2002 % Change Operating* U.S. crude oil production (MBD) 379 371 2 Worldwide crude oil production (MBD) 934 682 37 U.S. natural gas production (MMCFD) 1,479 1,103 34 Worldwide natural gas production (MMCFD) 3,522 2,047 72 Worldwide natural gas liquids production (MBD) 69 46 50 Worldwide Syncrude production (MBD) 19 8 138 Worldwide production on a barrel-of-oil-equivalent basis, including Syncrude (MBD) 1,609 1,077 49 Natural gas liquids extracted — Midstream (MBD) 219 156 40 Refinery crude oil throughput (MBD) 2,459 1,813 36 Refinery utilization rate (%) 94 90 4 U.S. automotive gasoline sales (MBD) 1,369 1,230 11 U.S. distillates sales (MBD) 575 502 15 Worldwide petroleum products sales (MBD) 3,046 2,451 24 *Includes ConocoPhillips’ share of equity affiliates where applicable. The ConocoPhillips merger was consummated on August 30, 2002, and used purchase accounting to recognize the fair value of Conoco Inc. assets and liabilities. Consequently, results for the year 2002 include eight months of activity for Phillips Petroleum Company and four months of activity for ConocoPhillips. Periods prior to the merger reflect only Phillips’ results. Certain disclosures in this Annual Report may be considered “forward-looking” statements. These are made pursuant to “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. The “Cautionary Statement” in Management’s Discussion and Analysis on page 60 should be read in conjunction with such statements. “ConocoPhillips,” “the company,” “we,” “us” and “our” are used interchangeably in this report to refer to the businesses of ConocoPhillips and its consolidated subsidiaries. All numerical references to crude oil, natural gas or natural gas liquids production volumes refer to production from proved reserves. ConocoPhillips 2003 Annual Report 1 ConocoPhillips’ Worldwide Operations Exploration and Production (E&P) Profile: Explores for and produces crude oil, natural gas and natural gas liquids on a worldwide basis. Also mines oil sands to upgrade to Syncrude. A key strategy is the development of legacy assets — very large oil and gas developments that can provide strong financial returns over long periods of time — through exploration, exploitation, redevelopments and acquisitions. Operations: At year-end 2003, ConocoPhillips held a combined 52.6 million net developed and undeveloped acres in 25 countries and produced hydrocarbons in 13. Crude oil production in 2003 ConocoPhillips’ averaged 934,000 barrels per day (BPD), gas refined products production averaged 3.5 billion cubic feet per day, sales were and natural gas liquids production averaged 3 million BPD in 69,000 BPD. Key regional focus areas include 2003. The company Australia; the North Slope of Alaska; Southeast also participated in joint Asia; Canada; the Caspian Sea; offshore China; ventures that support the the Middle East; Nigeria; the North Sea; the Timor specialty products business. Sea; the Lower 48 United States, including the Transportation — R&M owned, or had Gulf of Mexico; and Venezuela. an interest in, about 32,800 miles of pipeline systems in the United States Refining and Marketing (R&M) at year-end 2003. Profile: Refines crude oil and markets and transports petroleum products. ConocoPhillips is Midstream the largest refiner in the United States and, of Profile: Midstream consists of ConocoPhillips’ nongovernment-controlled companies, is the 30.3 percent interest in Duke Energy Field Services, fourth-largest refiner in the world. LLC (DEFS), as well as certain ConocoPhillips assets in the United States, Canada and Trinidad. Operations: Refining — At year-end 2003, Midstream gathers natural gas, extracts and sells the ConocoPhillips owned 12 U.S. refineries, owned natural gas liquids (NGL), and sells the remaining or had an interest in five European refineries, and (residue) gas. had an interest in one refinery in Malaysia, totaling a combined net crude oil refining capacity Operations: At year-end 2003, DEFS’ gathering and of 2.6 million barrels of oil per day. Marketing — transmission systems included some 58,000 miles At year-end 2003, ConocoPhillips’ gasoline and of pipelines, mainly in six of the major U.S. gas distillates were sold through approximately regions, plus western Canada. DEFS also owned and 17,300 branded outlets in the United States, operated, or had an equity interest in, 66 NGL Europe and Southeast Asia. In the United States, extraction plants. Raw natural gas throughput products were primarily marketed under the averaged 6.7 billion cubic feet per day, and NGL Phillips 66, 76 and Conoco brands. In Europe and extraction averaged 365,000 BPD in 2003. In Southeast Asia, the company marketed primarily addition to its interest in DEFS, ConocoPhillips under the JET and ProJET brands. ConocoPhillips owned or had an interest in an additional 11 gas also marketed lubricants, commercial fuels, processing plants and six NGL fractionators at year- aviation fuels and liquid petroleum gas. end 2003. 2 ConocoPhillips 2003 Annual Report Chemicals Profile: ConocoPhillips participates in the chemicals sector through its 50 percent ownership of Chevron Phillips
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