ConocoPhillips

Hello, and welcome to the ConocoPhillips Earnings Conference Call. My name is Zanara, and I'll be the operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-answer session. During the question-answer session, if you have a question, please press star, then 1 on your touch-tone phone. Please note that this conference is being recorded. I will now turn the call over to Ellen DeSantis, Senior Vice President, Corporate Relations. Ellen, you may begin.

Thank you, Zanara. Hello, everyone, and welcome to our second quarter earnings call. Today's prepared remarks will be delivered by Don Wallett, our EVP and Chief Financial Officer, and Matt Fox, our EVP and Chief Operating Officer. In addition, our three region presidents are on the call today. They are Bill Bullock, our President of the Asia-Pacific Middle East region, Michael Hatfield, our President of the Alaska, Canada, and European region, regions, and Dominic Macklin, President of our lower 48 region. Page 2 of today's presentation deck shows our cautionary statement. We will make some forward-looking statements on today's call that refer to estimates or plans. Actual results could differ due to the factors described on this slide and in our periodic filings with the SEC. We'll also refer to some non-GAAP financial measures this morning. and reconciliations of non-GAAP measures to the nearest corresponding GAAP measure can be found in this morning's press release and on our website. And now I'll turn the call over to Don.

Thanks, Ellen. Good morning, all. I'll cover the second quarter highlights on slide four. Starting on the left with our financial performance, we realized adjusted earnings of $1.1 billion in the quarter, or $1.01 per share. Our production outperformance in the quarter didn't fully translate to the bottom line as sales lagged production, with inventories building by roughly 25,000 barrels a day, which represents about three cents a share. We generated $3.4 billion of cash from operations, resulting in free cash flow of $1.7 billion in the quarter and $3 billion year-to-date. This quarter represents our seventh consecutive quarter of free cash flow generation across a broad range of prices, underscoring our commitment to capital discipline. And importantly, over this seven-quarter timeframe, cash from operations has more than covered all capital, dividends, and share repurchases. We ended the quarter with $6.9 billion of cash and short-term investments. And our strong financial returns continued. On a trailing 12-month basis, our return on capital employed was 12.4%. Moving to the middle column, operationally in the quarter, we produced 1.29 million barrels of oil equivalent per day, up 6% on an underlying per debt-adjusted share basis compared with the year-ago quarter. Sequentially, seasonal turnaround impacts were mitigated by growth from the lower 48 Big Three. Touching on the final bullet in the operational column, in the second quarter, we closed several small bolt-on transactions in the lower 48 Big Three for about $100 million. We consistently monitor the market for these kinds of low-cost-of-supply additions in and around our core areas. and we were able to complete a few royalty interest and acreage deals this quarter at attractive terms. Shifting to the far right strategic column, we've increased this year's planned share repurchase program by $500 million to a total of $3.5 billion. In the second quarter, we repurchased $1.25 billion of shares. We expect to purchase $1.5 billion of shares in the second half of the year. Combined with our second quarter dividend, we return 47% of cash from operations to shareholders in the quarter. So returning capital to shareholders remains a priority. In the second quarter, we realized $600 million in disposition proceeds and the UK disposition continues to progress toward closing in the second half of the year. We expect to recognize a gain of approximately $2 billion before tax and after tax when the sale closes. Also at closing, we'll see a significant balance sheet improvement with net cash proceeds expected to be about $2 billion, while liabilities associated with asset retirement obligations will decrease by about $2 billion. If you turn to slide five, I'll wrap up with a look at cash flows during the quarter. We began the second quarter with cash and short-term investments of $6.7 billion. Moving to the right, cash from operations was $3.4 billion, which included roughly $320 million in APL&G distributions and about $90 million collected through the ICC settlement agreement with Petavesa. To date, we've received $665 million related to the $2 billion settlement. I'll also mention that we continue to receive contingent value payments from Synovus during the quarter. To date, we've received or accrued a little over $180 million in contingency payments from this 2017 transaction. Moving on, working capital was a $600 million use of cash during the quarter. We recognized $600 million in proceeds from dispositions, and we had $1.7 billion of capital expenditures in the quarter, which was exactly half of cash from operations excluding working capital, leaving $1.7 billion of free cash flow. For the first half, free cash flow was $3 billion, representing a 9% free cash flow yield on an annualized basis. Looking to the last two bricks on the right, the roughly $350 million in dividends and $1.25 billion of share repurchases represented a return of capital to shareholders of $1.6 billion, or 47% of CFO. Total shareholder yield, based on planned buybacks and our current dividend, is running a little over 7%. And you see the ending cash on the far right with a slight build from the first quarter, despite choosing to increase buybacks in the quarter by $500 million compared to recent quarters. So to briefly recap, this past quarter builds on our trend of consistent, strong operational and financial performance. The quarter reemphasizes our commitment to financial returns, capital discipline, free cash flow generation, and returning cash from operations to shareholders. We believe this is a sustainable and compelling value proposition for our industry. With that, I'll turn the call over to Matt.