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FELIX POPESCU ANDRIS ROZE ADAM BRINGARDNER

ConocoPhillips is the world's 7th largest integrated energy company, involved in petroleum exploration, production, refining, marketing, and chemicals production. Key facts, top business segments, leadership, and operations information presented.

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FELIX POPESCU ANDRIS ROZE ADAM BRINGARDNER

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  1. 68.930.04(0.06%) FELIX POPESCU ANDRIS ROZE ADAM BRINGARDNER

  2. 1--Petroleum exploration and production 2--Petroleum refining, marketing, supply and transportation. 3--Chemicals and plastics production Top Business Segments

  3. Key Facts: • World’s 7th largest integrated energy company • Symbol: COP on NYSE • Last trade: 67.37 • 52 week range:54.90 - 72.50 • P/E: 6.48 • EPS:10.39

  4. Since 1985

  5. Last 5 years

  6. Leaders in Market Capitalization EXXON MOBIL CP [XOM] $448.0 B TOTAL S.A. [TOT] $325.2 B PETROCHINA CO ADS [PTR] $229.3 B BP PLC [BP] $224.7 B CHEVRON CORP [CVX] $157.7 B CONOCOPHILLIPS [COP] $110.8 B

  7. The COP Brands

  8. Key Investments • March 2006 Acquisition of Burlington Resources Inc.

  9. Management Team James J. Mulva- Chairman and CEO Mulva served as president and chief executive officer of ConocoPhillips from 2002 to 2004. Prior to that, he served as chairman and chief executive officer of Phillips Petroleum Company from 1999 to 2002. He had served as Phillips’ president and chief operating officer since May 1994 and executive vice president since January 1994. He had been senior vice president in 1993 and chief financial officer since 1990, at which time he joined the company's management committee. John A. Carrig- CFO, Executive Vice President- Finance Carrig joined the company in London in 1978 as a tax attorney. In 1981he was associated with the corporate tax staff until 1993 when he joined the treasury group as finance manager. He was then named assistant treasurer of finance, and in 1995 he accepted the position of treasurer. He was vice president and treasurer from 1996 to 2000 when he was named senior vice president and treasurer. He was elected by the board of directors to senior vice president and chief financial officer for Phillips in 2001, a position he held until the ConocoPhillips merger in 2002. Executive Vice Presidents Gene L. Batchelder- Services (Chief Information Officer) Batchelder joined Phillips Petroleum Company in 1972. In 1978, he was promoted to manager of finance and administration for Chemicals Latin America division based in Houston. He advanced to project analysis director in 1980, returning to Bartlesville. In 1981, he was division controller in Petrochemicals, moving in 1985 to manager of operations analysis and control and management information systems for the Phillips 66 Company. In 1989, he was named manager of communications networks and computer services for Phillips. After serving as general sales manager of wholesale marketing for Phillips 66 Company in 1990, he was named president of Phillips Driscopipe, Inc., a subsidiary of Phillips. In 1994, he became finance manager of GPM Gas Co., Phillips’ Houston-based gas gathering and processing subsidiary. He served as vice president and chief information officer for Phillips from 1999 to 2002, when he was named to his current position.

  10. Philip L. Frederickson- Planning, Strategy and Corporate Affairs James L. Gallogly- Refining, Marketing, Transportation Randy L. Limbacher- Exploration and Production (Americas) John E. Lowe- Commercial William B. Berry- Europe, Asia, Africa and the Middle East Stephen F. Gates- Legal General Counsel Ryan M. Lance- Technology and Major Products Vice Presidents Carin S. Knickel-Human Resources Robert A Ridge- Health, Saftey and Environment

  11. Worldwide Operations • Exploration and Production • Refining and Marketing • Midstream • Chemicals • Emerging Businesses

  12. Exploration and Production ConocoPhillips explores for and produces crude oil, natural gas and natural gas liquids on a worldwide basis. The company also mines oil sands to produce 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. At year-end 2005, ConocoPhillips held a combined 41.2 million net developed and undeveloped acres in 23 countries and produced hydrocarbons in 13, with proved reserves in three additional countries. Crude oil production in 2005 averaged 907,000 barrels per day (BD), gas production averaged 3.3 billion cubic feet per day, and NGL production averaged 91,000 BD. Key regional focus areas include the North Slope of Alaska; the Asia Pacific region, including Australia, offshore China and the Timor Sea; Canada; the Caspian Sea; the Middle East; Nigeria; the North Sea; Russia; the Lower 48 United States, including the Gulf of Mexico; and Venezuela.

  13. Refining and Marketing R&M refines crude oil and markets and transports petroleum products. ConocoPhillips is the second-largest refiner in the United States and, of nongovernment-controlled companies, is the fourth-largest refiner in the world. ConocoPhillips owns 12 U.S. refineries, owns or has an interest in six European refineries and has an interest in one refinery in Malaysia. At year-end 2005, ConocoPhillips refineries had a combined net crude oil refining capacity of 2.61 million barrels of oil per day. ConocoPhillips’ gasoline and distillates are sold through approximately 13,600 branded outlets in the United States, Europe and the Asia Pacific region. In the United States, products are marketed primarily under the Phillips 66, Conoco and 76 brands. In Europe and the Asia Pacific region, the company markets primarily under the JET and ProJET brands. ConocoPhillips also markets lubricants, commercial fuels, aviation fuels and liquid petroleum gas. The company’s refined products sales were 3.3 million barrels per day in 2005.

  14. Midstream Midstream consists of ConocoPhillips’ 50 percent interest in Duke Energy Field Services, as well as certain ConocoPhillips assets predominately located in North America. Midstream gathers natural gas, extracts and sells the natural gas liquids (NGL) and sells the remaining (residue) gas to electrical utilities, industrial users and gas marketing companies. Headquartered in Denver, Colorado, DEFS is one of the largest natural gas and gas liquids gathering, processing and marketing companies in the United States. At year-end 2005, DEFS’ gathering and transmission systems included nearly 56,000 miles of pipelines, mainly in six of the major U.S. gas regions. DEFS also owned and operated 54 NGL extraction plants. Raw natural gas throughput averaged 5.9 billion cubic feet per day, and NGL extraction averaged 353,000 BPD in 2005. In addition to its interest in DEFS, ConocoPhillips owned or had an interest in four gas processing plants and four NGL fractionators at year-end 2005. DEFS' customers are primarily major and independent natural gas producers, local gas distribution companies, electrical utilities, industrial users and marketing companies. Among DEFS’ customers for NGL are Chevron Phillips Chemical Company and ConocoPhillips’ Refining and Marketing business.

  15. Chemicals ConocoPhillips participates in the chemicals sector through its 50 percent ownership of Chevron Phillips Chemical Company, a joint-venture with Chevron. Headquartered in The Woodlands, Texas, its major product lines include: olefins and polyolefins, including ethylene, polyethylene, normal alpha olefins and plastic pipe; aromatics and styrenics, including styrene, polystyrene, benzene, cyclohexane, paraxylene and K-Resin styrene-butadiene copolymer; and specialty chemicals and proprietary plastics. At year-end 2005, CPChem’s 11 facilities in the United States were located in Louisiana, Mississippi, Ohio and Texas. The company also had nine polyethylene pipe, conduit and pipe fittings plants in eight states, and a petrochemical complex in Puerto Rico. Major international facilities are in Belgium, China, Saudi Arabia, Singapore, South Korea and Qatar. CPChem also has a plastic pipe plant in Mexico. CPChem's customers are primarily companies that produce industrial products and consumer goods.

  16. Emerging Businesses ConocoPhillips invests in several emerging businesses – technology solutions, gas-to-liquids, power generation and emerging technologies – that are closely tied to the company’s core operations and provide current and future growth opportunities. Technology Solutions: S Zorb is ConocoPhillips’ proprietary technology for removing sulfur from gasoline during refining. The technology is proven to reduce sulfur content in fuels to levels well below allowable limits proposed by regulators in the United States and Europe. The technology has been licensed to five refiners worldwide, and ConocoPhillips plans to install the technology at several of its U.S. refineries. Gas-to-Liquids: The GTL process refines natural gas into a wide range of high-quality fuels, lubricants and petrochemical feedstocks. GTL products can be readily sold into large existing markets with conventional ships and infrastructure. Power Generation: ConocoPhillips is using creativity and innovation to access new high-growth markets for natural gas and electricity. By integrating power generation with ConocoPhillips’ Exploration and Production (E&P) and Refining and Marketing (R&M) businesses, the company is able to structure power projects — such as cogeneration — to provide maximum value for both ConocoPhillips and its customers. Emerging Technologies: The emerging technologies portfolio includes a variety of business ventures and technical programs that are pioneering the future energy landscape, including renewable energy, advanced hydrocarbon processes, energy conversion technologies and hydrocarbon upgrading opportunities. ConocoPhillips maintains two Oklahoma-based technology centers. These centers focus on research and development, as well as engineering and project management support to improve ConocoPhillips’ businesses. This includes evaluations of emerging energy sources and the search for competitive opportunities that align with the company’s business strategy. The company licenses its proprietary technologies both internally and externally.

  17. Pros: • Beat earnings estimates by 30 cents a share. • Return on capital increased from 23.3% to 32.1%. • Lowest P/E ratio in the industry – 6.0 • Increased income in chemical and midstream businesses. • Paid 600 million in dividends past year. • Lowered debt by 1.7 billion, which in turn lowered net interest expense by 25 million. • On track to complete 1 billion share buyback by the end of 06. • Refining capacity utilization of 95%. • Higher seasonality during the 4th quarter.

  18. DCF Valuation: • Stock is selling at a discount of 26.1%

  19. Cons: • Current oil inventories are adequate; record gas volumes in storage. • Debt/Total Capital = 30% • .918 current ratio. • -1.7 billion working capital. • An unseen Industry downturn will cause difficulty in paying back current liabilities. • Limited borrowing capacity due to high debt. • Reduction of 30 million barrels per day due to contract agreements in the Timor Sea. • Decreased volumes from Alaska, UK, and Venezuela. • Natural gas highs after the hurricanes; resulting drop in natural gas and refining margins as well as increased operating expenses contributed to poor stock performance. • Undisclosed environmental contingent liabilities

  20. Stock Performance: • Shares trading 18% off 12 month highs. • Stock has gained 34, 32, and 35 percent in last 3 years respectively, but has gained only 3% year to date compared to industry group average of 12% and 10% for the S&P 500. • Deteriorating industry fundamentals lead conservative investors to seek high market cap companies with low debt ratios.

  21. Rating: BUY

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