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ConocoPhillips: Key to Success Is Reducing Costs, Flexibility

HOUSTON -- At its annual analyst meeting Wednesday, ConocoPhillips' management team said it reduced costs and is focusing on its balance sheet strength and flexibility to weather the recession.

Outlining its strategic objectives and operating plans for 2009, the oil company's executives explained how the company will maximize the value of its asset portfolio in a challenging economic and political environment.

"While we have adjusted to the near-term environment, we have not altered our long-term view. ConocoPhillips is a self-sustaining and competitive international, integrated energy company with a high-quality asset base, strong operating expertise and substantial financial capabilities," said Jim Mulva, chairman and CEO. "We responded aggressively to the current industry operating environment by adjusting our operational plans and capital program, implementing cost reductions and enhancing our focus on maintaining our balance sheet strength and flexibility."

Over the last decade, the oil company executed a number of key strategic transactions that increased its scale and operational capabilities, and invested $73 billion in organic growth, the company said in a statement. "These steps created a company with more than 50 billion equivalent barrels of resources and 3 million barrels per day of refining capacity, including our LUKOIL investment, that is well-positioned to provide growth and significant value creation as the economy improves," Mulva said.

The CEO reaffirmed ConocoPhillips will fund a capital program of $12.5 billion in 2009, which, while lower than 2008, equals the company’s four-year average level of investment. The program is structured to continue funding projects that offer the most significant growth and development potential.

In refining and marketing (R&M), ConocoPhillips looks to maintain its strong portfolio of refining, marketing and transportation assets in the United States, Europe and Asia. The company plans to maximize the value of existing assets by increasing operational flexibility, reducing operating costs and moving forward on strategic investment projects.

Although R&M plans are focused primarily on its core refining business, the company will be researching the expansion of renewable fuel supply through industry and academic technology partnerships, adding distribution and blending capabilities, and participating in developing legislation, the company said.

ConocoPhillips expects to spend approximately $325 million on technology in 2009, primarily to improve the exploitation of existing reserves and enhance the search for new resources, as well as develop technologies for heavy oil, gas hydrates, carbon capture and conversion, biofuels and refining processes.

"We remain confident in our strategies, and intend to operate very efficiently in today’s difficult economic environment, while conserving our capital and taking full advantage of advancing technology and our experience and expertise," Mulva said. "Over the long term, we expect energy demand to resume growing in response to rising world population, an eventual global economic recovery, and a desire for improved living standards throughout the world. We are well positioned to provide the oil and natural gas that will continue serving as two of society’s primary energy sources for decades into the future, while also preparing for the increasingly important role that will be played by alternative energy sources."
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