ConocoPhillips

Good morning, and welcome to the ConocoPhillips 4th Quarter 2019 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-and-answer session. During the question-and-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 Ms. Ellen DeSantis. Ellen, you may begin.

Thanks, Inara. Hello to our listeners, and welcome to today's call. With me in the room today are Ryan Lance, our Chairman and CEO, Don Ouellette, our EVP and Chief Financial Officer, Matt Fox, our EVP and Chief Operating Officer, Bill Bullock, our President of the Asia Pacific Middle East region, and Michael Hatfield, the President of our Alaska, Canada, and Europe region, are also with us today, Dominic Macklin, President of our lower 48 region was unable to join today's call. Page 2 of the presentation deck contains our cautionary statement. We will make some forward-looking statements during this morning's call. Actual results could differ due to the factors described on this slide and also in our periodic filings with the SEC. We will also refer to some non-GAAP financial measures today, and reconciliations to the nearest corresponding GAAP measure can be found in this morning's press release and on our website. And with that, I'm going to turn the call over to Ryan.

Thanks, Ellen, and welcome again to all our listeners. Well, it's certainly early in the new year, and the sector is already off to another volatile start. Volatility can certainly be tough on an industry or a company if you're not built for it. Well, we're built for it. With clear resilience to lower prices, full upside to higher prices, and a shareholder-friendly framework that works through the cycles. All of our usual results and outlook details can be found in today's published materials, but we're going to keep our prepared remarks pretty short. Our main goal is to reinforce why ConocoPhillips offers an attractive way to invest in this cyclical business. That's the key theme as we reflect on 2019, and we look forward to the future. 2019 capped off a successful three-year period in which we transformed our business model and significantly improved the underlying performance drivers across our entire business. Slide three summarizes those 2019 results that contributed to this transformation. In the financial column, we delivered strong earnings and we generated cash flow operations of $11.7 billion, delivering free cash flow of over $5 billion. Our balance sheet got stronger. We ended 2019 with over $8 billion of cash in short-term investments and lowered our asset retirement obligation by almost 30%, largely due to dispositions. And our North Star return on capital employed was 11%. We delivered on our volume projections for the year with roughly 5% underlying growth, including 22% growth from the big three unconventionals. The rest of our portfolio delivered strong base performance, and we progressed new projects and exploration opportunities across our regions. Our world-class portfolio keeps getting better. As part of our high-grading efforts, we generated over 3 billion of disposition proceeds, and we have another 2 billion of announced dispositions that we expect to close in early 2020. But we're not just selling. We're also on the lookout for opportunities to add low cost of supply resources to the portfolio, like we did last year in the lower 48, Alaska, and internationally. And when reserves closed for the year, we replaced 117% of our production organically. 2019 was another outstanding year for delivering on our disciplined, shareholder-friendly strategy. We returned 43% of our CFO to our shareholders, That's essentially all of our free cash flow. We paid $1.5 billion in dividends, including a 30% increase in our quarterly dividend, and we repurchased $3.5 billion of shares. In today's announcement, you saw our board approve an increase of our existing repurchase authorization by $10 billion to a total of $25 billion. This demonstrates our commitment to executing a consistent long-term buyback program. Finally, our execution focus goes beyond just the numbers. We continue to take leadership role in environmental, social, and governance matters through target setting, engagement, disclosure, advocacy, and stakeholder alignment. We call this performance with purpose, and it's an imperative. So 2019 is over, and we're in the starting gates for a new year and a new decade. In November, we laid out a powerful 10-year plan that can deliver on all the elements we believe investors want from this sector. A disciplined strategy framework, consistent execution, strong free cash flow, and compelling returns of and returns on capital. That's the path we set for ourselves in 2016. That's what we delivered in 2017, 18, and 19. And that's what we're ready to do again in 2020. We're focused on executing a strategy that we believe is right for the future of our industry and certainly right for ConocoPhillips and our investors. So with that, let's go to your questions.