Winter Fundamentals

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Dr. Jim Duncan October 4, 2007
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CAUTIONARY STATEMENT FOR THE PURPOSES OF THE
SAFE HARBOR PROVISIONSOF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
The following presentation includes
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as
amended and Section 21E of the Securities
Exchange Act of 1934, as amended, which are
intended to be covered by the safe harbors
created thereby. You can identify our
forward-looking statements by words such as
anticipates, expects, intends, plans,
projects, believes, estimates, and similar
expressions. Forward-looking statements relating
to ConocoPhillips operations are based on
managements expectations, estimates and
projections about ConocoPhillips and the
petroleum industry in general on the date these
presentations were given. These statements are
not guarantees of future performance and involve
certain risks, uncertainties and assumptions that
are difficult to predict. Further, certain
forward-looking statements are based upon
assumptions as to future events that may not
prove to be accurate. Therefore, actual outcomes
and results may differ materially from what is
expressed or forecast in such forward-looking
statements. Factors that could cause actual
results or events to differ materially include,
but are not limited to, crude oil and natural gas
prices refining and marketing margins potential
failure to achieve, and potential delays in
achieving expected reserves or production levels
from existing and future oil and gas development
projects due to operating hazards, drilling
risks, and the inherent uncertainties in
interpreting engineering data relating to
underground accumulations of oil and gas
unsuccessful exploratory drilling activities
lack of exploration success potential disruption
or unexpected technical difficulties in
developing new products and manufacturing
processes potential failure of new products to
achieve acceptance in the market unexpected cost
increases or technical difficulties in
constructing or modifying company manufacturing
or refining facilities unexpected difficulties
in manufacturing, transporting or refining
synthetic crude oil international monetary
conditions and exchange controls potential
liability for remedial actions under existing or
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liability resulting from pending or future
litigation general domestic and international
economic and political conditions, as well as
changes in tax and other laws applicable to
ConocoPhillips business. Other factors that
could cause actual results to differ materially
from those described in the forward-looking
statements include 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), including our Form
10-K for the year ending December 31, 2006, as
updated by our quarterly and periodic filings
with the SEC. ConocoPhillips is under no
obligation (and expressly disclaims any such
obligation) to update or alter its
forward-looking statements, whether as a result
of new information, future events or otherwise.
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Humanitys Top Ten Problemsfor next 50 years

• ENERGY
• WATER
• FOOD
• ENVIRONMENT
• POVERTY
• TERRORISM WAR
• DISEASE
• EDUCATION
• DEMOCRACY
• POPULATION

2003 6.3 Billion People 2050 8-10
Billion People
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Consumers Are Worried About

• HIGH ENERGY PRICES!!!!!!
• Geopolitical Instability
• Dwindling Personal Resources

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Signs Of Long-Term Economic Stress
Personal Expenditures Since 1987
Source Bloomberg
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Signs Of Long-Term Economic Stress
Interest Paid Since 1987
Source Bloomberg
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Signs Of Long-Term Economic Stress
Disposable Income Vs. Personal Savings Since 1987
Source Bloomberg
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The primary short-term drivers of energy prices
and volatility continue to be
WEATHER!

• Weather
• Storage Inventories
• Speculative Trading
• PERCEPTION!

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Prices Seem
Volatile
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Lets See
Volatility!!!

• Weather
• Volatility
• Weather

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Its Been A Wild Eight Years
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Cattle
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Crude Oil
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Copper
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Gold
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Just In The Past Year

• 2006 hurricane season uneventful
• October contract hit near 4 low
• Winter weather uncertainprices increase
• December contract hits 9 high
• January cold slow to materialize
• Prices hover from 6 to 8 through May
• Prices fall from 8 to near 5

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Lets See
Volatility!!!

• Weather
• Volatility
• Weather

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Pressure!
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Price Pressures
New Supplies No Hurricanes No Winter
Winter Summer Hurricanes Blizzards
Geopolitics Iran Iraq Molecularphobes
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Expectational Analysis
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Expectational Analysis
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Fundamental Hard Points

• Seasonal prices in Europe made U.S. the
  attractive port in the spring

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In the spring, LNG import levels jumped from 40
to 60 Bcf per month to summer imports of almost
100 Bcf.
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EARTHQUAKE!!!
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Fundamental Hard Points

• Seasonal prices in Europe made U.S. the
  attractive port in the spring
• Imports have fallen off from summer peak
• Largest nuclear plant in the world went offline
  due to an earthquake in Japan
• Korean storage limitations make them net buyers
  in preparation for winter
• In the future, prices will remain high to attract
  arb
• Arb will be tough to gain

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Truths About The Global Natural Gas Market

• Political delays and contractor bottlenecks
  continue to delay addition of LNG capacity
  worldwide
• LNG regasification construction in Europe
  proceeds similar to U.S.
• Result is regasification capacity continues
  faster than liquefaction capacity
• Result will be competition for limited LNG
  supplies
• Weve already seen early signs of this competition

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European Natural Gas Demand Is Increasing
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Pacific Rim Natural Gas Demand Is Increasing
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U.S. Natural Gas Storage vs The World

• U.S. underground storage capacity represents
  about 18 of U.S. demand
• Spanish storage capacity represents only 9 of
  demand
• UK storage capacity represents only 4 of demand
• U.S. storage levels converge on 2006 value

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Storage levels have converged with last year,
which was previous historic high level.
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Rig Count
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Expectational Analysis
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Price DynamicsThe Econ
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The Last Eight Years
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Behind The Technicals
Weather Volatility

• There are many groups who are looking for ROI
• Roughly 17 trillion in U.S. equity funds
• People expect 30 returns after 1990s or they
  move their money
• If just 1 of the equity money moves to energy
  commodities
• 170,000,000,000

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Expectational Analysis
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Geopolitics
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IRAN
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China
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Add to that
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The Short-Term Outlook
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Two Scenarios
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Crude Oil Price Outlook - Bullish 68.00 ?
85.00

• Signposts
• Economy?
• Demand induced refinery runs
• Useful life maintenance outages
• Steeper decline curves
• Continuing volatility due to implied terrorist
  attacks
• Worldwide demand growth
• China
• India
• IRAQ IRAN

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Natural Gas Price Outlook - Bearish 7.00 ?
10.00

• Signposts
• Hurricane Season Continues
• Cold Weather
• Steeper decline curves
• Price Induced Demand Side Conservation
• Surprise economicsup..

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Future Price Moves

• Highly dependent upon global events
• Recent decline in prices due to increased LNG
  importsthe arb is in!
• Prices will have to increase to attract future
  supplies away from global markets
• Any future ecological impacts will only make
  natural gas more attractive

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Hitches in the Giddy-Up

• Hurricanes
• End of Winter
• Before it Starts
• US Terror Attacks
• Peace?

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Thanks!