AGM 2017

May 16, 2017

Slides

Good morning, ladies and gentlemen. I'm Ryan Lance, Chairman and CEO of ConocoPhillips, and it's my pleasure to welcome all of you to the ConocoPhillips 2017 Annual Stockholders Meeting. We are excited to host today's meeting through this virtual online platform, which allows us to open access and participation in the meeting to all stockholders and employees around the world. We believe this is the right choice for a global company as it affords the opportunity for greatly increased engagement with our stockholders at a significant cost savings. While the meeting is virtual only, we welcome questions from our stockholders. When we come to the Q and A portion, we will first give stockholders the opportunity to ask a question or make a short statement over the phone by calling 1-eight seventy seven-three twenty eight-two thousand five hundred and two and pressing star 1. That number is on the bottom right hand of your screen. After taking calls, we will then take questions that are submitted online. You can submit your live questions through the text box also located on your screen. Please remember that you may vote your shares online at any time during this meeting prior to the closing of the polls. At this time, please let me take the opportunity to introduce you to the members of ConocoPhillips' Board of Directors. All of them are participating today other than Mr. James E. Copeland, Jr, who is scheduled to retire following this annual meeting. In addition to myself, the members of our board present today are Richard L. Armitage, Rich is the President of Armitage International and former U. S. Deputy Secretary of State Richard H. Auchinleck, Dick is the retired President and Chief Executive Officer of Gulf Canada Resources Limited. Charles E. Bunch, Chuck is the retired Chairman and Chief Executive Officer of PPG Industries Incorporated John V. Feraci, John is the former Chairman and Chief Executive Officer of International Paper Company. Jody L. Freeman. Jody is the Archibald Cox Professor of Law at Harvard Law School and the Founding Director of the Harvard Law School Environmental Law and Policy Program. Gay Huey Evans, Gay is the former Vice Chairman, Investment Banking and Investment Management of Barclays Capital and previously held various positions with Citigroup and the UK Financial Services Authority. Arjun N. Murti. Arjun is Senior Advisor at Warburg Pincus and previously served as a partner of Goldman Sachs. Robert A. Kniblock. Robert is the Chairman, President and Chief Executive Officer of Loews Companies Incorporated. And Harold J. Norvick. Harold is the retired Chairman and partner of Econ Management AS and the retired Chairman, President and Chief Executive Officer of Statoil. I'd like to thank our board members for their dedication and their willingness to serve. Next, I'd like to introduce you to the members of the ConocoPhillips executive leadership team. Here with me are Janet Langford Kerig, our Senior Vice President, Legal, General Counsel and Corporate Secretary and Ellen DeSanctis, our Vice President, Investor Relations and Communications. In addition to Janet and Ellen, the remaining members of the executive leadership team are also participating today, and they are Al Hirschberg, Executive Vice President, Production, Drilling and Projects Matt Fox, the Executive Vice President, Strategy, Exploration and Technology Don Walette, Executive Vice President, Finance, Commercial and our Chief Financial Officer and Andrew Lundquist, Senior Vice President, Government Affairs and James McMoran, our Vice President, Human Resources, Real Estate and Facility Services. Now we'll move to a review of the company's performance in 2016 and our plans for 2017. Let me begin with the agenda. We'll first discuss our 2016 results, then our business plan and our achievements in delivering on that plan. And after my prepared remarks, we'll call the meeting to order. Our business review will include forward looking statements. This is our standard reminder that actual results can differ materially. You should refer to our filings with the SEC for factors that could cause actual results to differ from our projections. Now let me move to our operating performance and accomplishments for 2016. Starting at the left with financial results. We continued lowering our breakeven price for the business by reducing our capital expenditures and our operating costs. Our capital expenditures last year were 4,900,000,000 dollars down 52% from 2015. Thanks to our portfolio, we can now maintain flat production or grow modestly with 1 of the industry's lowest capital intensities. We continue exercising discipline on our operating costs. We adjusted our operating costs were down 19%. These capital and cost reductions allow us to generate free cash flow at lower prices, which we'll allocate in part to shareholders via dividends and share repurchases. In late 2016, we initiated a $3,000,000,000 share repurchase program. Strategically, we realized $1,300,000,000 in proceeds from asset dispositions as part of our ongoing portfolio high grading. Our operational results were very strong with 6 project startups. Production grew 3% year over year excluding Libya and adjusted for downtime and dispositions, which is notable because of our reduced capital spending. So the business ran well and importantly, it ran safely. 2016 was our best safety performance as an independent E and P company. In fact, at bottom center, you'll see that we've cut our incident rate 70% since 2008. We've also improved our process safety and embedded into our culture the life saving rules that I mentioned last year. We continue to be a safety leader. The chart at the bottom right compares the construction and utilities industries against oil and gas. Then at the far right is ConocoPhillips. Our injury rate is lower than all the others. We've made a lot of progress, but the job of safety is never done. It's a core part of our culture. So too is environmental stewardship and sustainable development. Our commitment to those priorities continues. Our innovations in recycling and reusing water, reducing energy and material use, shrinking our land footprint and decreasing emissions, all help reduce our environmental impact and enhance our sustainability. We had a record year offsetting greenhouse gas emissions at our Wildflower Control project in Australia. This has brought the total offset for that project to 1,900,000 tons. We also commissioned a new water gathering facility in the Permian Basin. In fact, since 2013, we've reused or recycled 1,000,000 gallons of produced water across our operation. Additionally, in 2016, we earned recognition as a leader from the corporate human rights benchmark. These achievements benefit all stakeholders, including our shareholders. Overall, I'm proud of our accomplishments in 2016. Despite challenging commodity prices, the people of ConocoPhillips safely delivered very strong business results. Yet despite this, our total shareholder returns of 10% lagged the TSRs of the integrated companies and our E and P peers, as you can see at the top of the slide. We believe this largely reflected last year's dividend reduction, which we addressed in the 2016 annual meeting. For a longer term perspective, the bottom chart shows total returns since 2012 spin through the end of April. Notably, over these 5 years, we've achieved positive TSR and ranked at the top end of our peer group. Maintaining a long term focus is important in this cyclical business, particularly in a more volatile commodity price world. And let me give you some insights into that world. Our strategy work began with a view that oil prices will be lower and more volatile in the future. As the chart shows not long ago, oil prices were high and relatively stable. We believe that has changed as the insert chart of oil prices since the start of 20 16 shows. This means the industry shouldn't count on rising commodity prices to bail out its business models. Instead, ConocoPhillips has positioned itself to withstand the cycles, not chase them up or down. We've shifted to managing the business for free cash flow. This offers greater downside resilience while preserving participation in the up cycles. This further means we need clear priorities on allocating our free cash flow and that we can drive more predictable performance by maintaining a strong balance sheet and low cost structure, having a strong resource base and preserving strategic flexibility. These foundational concepts form the basis for our new strategy and value proposition, which we rolled out to the market last November. Let me walk through this with our strategy on a page. The top graph represents our aspiration to deliver value through the cycles. At $50 to $60 barrel Brent, we'll maintain our strong balance sheet and allocate our cash between per share and absolute growth. At higher or lower prices, we'll exercise flexibility to take the highest value actions for shareholders. We expect this disciplined approach to generate double digit total annual returns to our shareholders through a combination of margin and debt adjusted per share production growth plus our dividend. Our cash flow priorities are at the bottom. Also shown is an example of how this would work during the next 3 years at $50 barrel Brent prices, including our acceleration actions, which I'll discuss shortly. From left, we would maintain production, pay and grow the dividend and retire some debt. Including proceeds from dispositions, we will achieve our debt target, execute our repurchase program and deliver up to 2% high return production growth, all at $50 barrel Brent price. Now farther right, prices above $50 per barrel Brent would yield available cash to buy more shares or increase investments in high margin organic growth. And these aren't mutually exclusive. We could choose to do both. We believe this strategy is achievable through the cycles, competitive among energy investments and compelling. It offers investors a disciplined formula for a volatile business. We believe we're uniquely positioned to deliver on it because of our strategic transformations and our portfolio. When we first laid out our value proposition, we recognized that we needed to take action to accelerate our plan, mainly through targeted asset sales. I'm pleased to report that since November, we've not only significantly exceeded, but accelerated our 3 year plan. Now let's look at that progress. We're holding the line on CapEx at $5,000,000,000 while anticipating up to 2% underlying production growth, excluding the impact of our 2017 divestitures. And we also recently announced a 6% dividend increase. The big news is our more than $16,000,000,000 of announced dispositions in Canada and the San Juan Basin. These transactions improve underlying margins, allow us to significantly reduce debt and enable us to double our share repurchases to $6,000,000,000 over 3 years. So we're staying disciplined, honoring our priorities and making step function improvements in our financial position. We're deleveraging essential for withstanding the cycles. And we're returning to shareholders 20% to 30% of not only cash from operating activities, but also from disposition proceeds. It took a lot of discipline to make these changes, but so far the market has responded favorably to our new value proposition and let me show you that next. Since November, we've delivered near peer leading TSR performance to the end of April this year. We aren't declaring victory, but we're convinced our strategy is right. It's differential, it's shareholder friendly and it's disciplined. It's built around core commodity business principles such as low breakeven price, low cost of supply resource base, capital flexibility and a strong balance sheet. You might ask, why doesn't everybody do this? Well, they can't, because at the core of our strategy is what we consider an unmatched portfolio. Let's take a look at that. This map shows our current focus areas by country. Just a few years ago, we were in 27 countries. Now we are in less than half of that. This chart shows our production and resources already reflecting the dispositions announced this year and our capital. Even after the sale closings, we'll remain the largest independent E and P based on production improved reserves, with 1,200,000 barrels a day in production, heavily weighted to liquids or liquids priced gas like LNG. After the recently announced dispositions, we'll still have 14,000,000,000 barrels of resource with less than a $50 per barrel cost of supply, balanced between conventional, unconventional and long lived low decline LNG and oil sands. At bottom is our $5,000,000,000 capital program, down from $17,000,000,000 in 2014, but still the largest amongst the independent E and Ps. We're spending $1,800,000,000 in the Lower forty eight, which is higher than many of the pure play companies. We're also investing $1,100,000,000 in Europe, dollars 900,000,000 in Alaska, another $900,000,000 in Asia Pacific and the Middle East and $300,000,000 in Canada. And included in these numbers is about $600,000,000 for exploration. So we're still a significant company, still investing substantially in profitable investments across the globe. Now let me wrap up by summarizing the tenets of our value creation approach. Underlying everything are smart growth, superior returns and spirit values. By smart growth, we mean disciplined growth, spending within our cash flows, focused on free cash flow generation and allocating capital to the lowest cost of supply opportunities in an outstanding portfolio. Smart growth also sometimes brings shrinking to high grade our portfolio and drive higher and superior returns. And by superior returns, we maintain maintaining our balance sheet strength and reducing cost to our breakeven price, all in service to driving higher financial returns. This is key to delivering our goal of double digit annual returns through the cycles. And finally, our Spirit values. These include a relentless focus on safety, treating our people with respect, exercising integrity, taking responsibility for our actions and utilizing innovation and teamwork. We take these seriously. And now a few closing comments. Our industry faces uncertain times with uncertain markets, but we're charting our own course by executing a disciplined returns based value proposition. We believe this strategy will stand the test of time and market volatility and deliver value through the cycles. And that was a quick run through of the business, but I hope it gives you confidence in how we're stewarding the business in this volatile environment. Now we'll move to the formal business items. I now call the formal part of the annual meeting to order. We will first present the 4 proposals submitted by management for approval, and then I will ask each of the stockholder representatives participating today to present their proposals by phone. We will save all comments and questions for Q and A session after the proposals have been presented. After the Q and A period, we will announce the results of the voting. If you have not voted, I encourage you to vote now online. Janet, can you report whether a quorum is present for the conduct of business? Our Inspector of Elections reports that stockholders entitled to cast more than 88% of the votes eligible for this meeting are present or represented by proxy. Therefore, a floor is present and the meeting may proceed. Thank you, Janet. The meeting will now consider the 6 business items as described in our proxy statement. We will present each of the business items 1 at a time. For the stockholder representatives presenting a proposal, please state your name and verify that you are a stockholder or representative of a stockholder. I'll ask that you keep your comments to 5 minutes in the interest of time. Item 1 is a proposal to elect 10 directors to serve for a term of 1 year. As indicated in the proxy statement, the Board of Directors recommends that the stockholders elect the director nominees. Item 2 is a proposal to ratify the appointment of Ernst and Young as the company's independent registered public accounting firm for 2017. The Audit and Finance Committee reappointed Ernst and Young to serve as ConocoPhillips' independent registered public accounting firm for 2017 and seeks ratification of that appointment by the stockholders. As indicated in the proxy statement, representatives of Ernst and Young are participating today and available to answer questions you may have for them during the Q and A session. Item 3 is an advisory proposal to approve the compensation of our named executive officers as disclosed in the proxy statement. As indicated in the proxy statement, the Board of Directors recommends that the stockholders vote in favor of this proposal. Item 4 is item 4 is an advisory vote on the frequency of the vote on the compensation of our named executive officers. As indicated in these statements, the Board of Directors expects that we'll adopt the frequency receiving the highest number of votes. Item 5 is a stockholder proposal for the company to provide an annual report on payments used for lobbying and grassroots lobbying. The introduction and supporting statement will be limited to 5 minutes. The operator is Tim Smith from Walden Asset Management available to introduce this proposal and make a brief supporting statement. Mr. Smith, your line is open. Good morning, Mr. Lance, Board members and fellow shareholders. My name is Tim Smith of Boston, Massachusetts, and I'm pleased to be with you for our 2017 virtual stockholder meeting. I'm here representing Walden Asset Management, a long term owner of ConocoPhillips, which with its parent company owns approximately 678,000 shares. And I'm pleased to move this Resolution 5 on behalf of Walden and over 20 co filers. Walden truly appreciates ConocoPhillips leadership on environmental, social and governance issues, which Mr. Lance, you mentioned quite prominently in your speech, which we appreciate. We also recognize and appreciate the ongoing constructive dialogue, which goes back over a decade with management on issues like indigenous people's rights, climate change, fracking, lobbying, issues like that. As we all can see, this resolution seeks to expand our company's disclosure on lobbying. This is the 6th year this resolution has been presented, receiving approximately 25% last year. I think we all know the global investor concern about company public policy advocacy and lobbying, especially by oil and gas companies on climate change has expanded rapidly. For example, this year, this resolution sponsored by approximately 25 sponsors, including the pension funds of the states of Rhode Island and Connecticut and a prominent Swedish pension fund called AP7. Why is there such intense new interest in the global oil company role in advocating on climate policy? Well, of course, we can go back to the Paris agreement and the urgency that's emanated from that to work on climate change. We all know that global oil companies have a significant role in influencing laws and regulation through direct public policy advocacy or through third parties. But none of us can tell what Conoco's lobbying record looks like without more information and our present disclosure on lobbying, I would respectfully submit, has significant gaps. For example, there's no report of the issues Conoco focuses on in lobbying or how our Board oversees it. And while ConocoPhillips along with other companies files quarterly reports with the government, these reports are very hard to decipher. It will be so simple if Conoco could do a small chart of the lobbying expenditures in the last 5 years. For example, ConocoPhillips spent approximately $18,000,000 in lobbying in the last 5 years. This could easily be summarized and broken down. And as we've noted, ConocoPhillips refuses to disclose the specific dollar amount of payments to trade associations that engage in lobbying or the portion used for lobbying. So these become forms of secret funding for lobbying. It could be $50,000 it could be $250,000 given to a trade association. And neither do we disclose expenditures for lobbying at the state level. Thus, we're urging our company to carefully review our lobbying and public policy advocacy, making sure that it works with our values and doesn't work against needed solutions for climate change. One final example is the role of trade associations on public policy and particularly their role in a campaign to eliminate the filing of shareholder resolution. The attack on shareholder resolutions is led in part by the Business Roundtable more recently joined by the U. S. Chamber of Commerce. And our CEO is a prominent member of the Business Roundtable as he should be. It's an important group of prominent CEOs. But the Business Roundtable is making a proposal that to file a resolution for example with Apple, you need to own $1,000,000,000 in Apple stock, an impossibility obviously. So we're concerned about why the BRT, a prestigious organization would go to such efforts to eliminate this shareholder right. Many of the sponsors of resolutions are major pension funds, long term institutional investors. As Mr. Lance knows, these are not special interest groups, the BRT says, but as ConocoPhillips well knows, our long term stockholders in companies. So resolutions to Conoco, even a decade ago urged the company to take environmental or social issues into account in ConocoPhillips encouraged or supported this attack on shareholder rights by the BRT, but we are concerned that we may be standing by silently as our trade association uses our dues and our reputation to try to destroy shareholder rights. So I finish by saying, in short, the resolution process is often helpful even as our corporate secretary would testify it's occasionally a pain in the neck and we acknowledge that. We do urge ConocoPhillips and you Mr. Lance to call on the business roundtable where you have great influence to end this attack on shareholder And I make this call on behalf of numerous state and city pension funds, foundations, investment firms, mutual funds who are part of a coalition to try to protect our right. Mr. Lance, we'd appreciate hearing from you about your response on that particular point and thank you very much for the opportunity to present. Well, thank you, Tim. We appreciate your ongoing engagement with the company. As to the proposal, the Board's response to it begins on Page 83 of the proxy statement. The Board votes or recommends that you vote against this proposal. Item 6 is a stockholder proposal for the company to publish an annual report to closing the extent to which executive incentive compensation promotes resilience to low carbon scenarios. The introduction and supporting statement will be limited to 5 minutes. Operator, is Tim Brennan from the Unitarian Universalist Association available to introduce this proposal and make a brief supporting statement. Mr. Brennan, your line is open. Thank you. Mr. Chairman and members of the Board and fellow shareholders, thanks for the opportunity to speak today. I'm Tim Brennan. I'm the Treasurer of the Unitarian Universalist Association, and we are a long time shareholder in the company. Before addressing our proposal, I just wanted to say make a comment about the format of the meeting. I actually welcome the online virtual meeting. I think it provides a great opportunity for more shareholders to participate. And it can in our case, it can save some travel. But I do really miss the in person meeting. I think there's something about the eye to eye contact and the personal contact in an annual general meeting, which is lacking in this. So I would really urge the company to consider a hybrid version. That's actually what the UUA does with our own Annual General Meeting. We have 2,000 delegates present and we also have people participating virtually. So just for consideration. I'm here to move our proposal, which is number 6 on the card, and that asks ConocoPhillips Human Resources and Compensation Committee to report annually to shareholders on the extent to which ConocoPhillips incentive compensation programs for senior executives promote resilience to low carbon scenarios associated with efforts to limit global temperature rises to 2 degrees Celsius. As the manager of endowments entrusted to us by our congregations and we're in every state in the union, we take our fiduciary duties very seriously. We are in some ways the definition of a long term investor with many of the trusts and endowments we manage dating back to the 19th century. And as people of faith, Unitarian Universalists are committed to an even greater responsibility, the stewardship of the earth itself. I want to note along with Tim Smith that we very much appreciate the commitment of the company to shareholder engagement. The UUA has participated in several dialogues addressing issues important to the company, including relations with indigenous peoples, methane emissions, climate change and other issues. An important aspect of our stewardship is ensuring that compensation arrangements promote long term view of value creation and align the interests of top executives with those of long term shareholders. As you addressed, Mr. Lance, in your remarks, the oil and gas industry is undergoing disruptive transformational change that creates a lot of uncertainty. We've already seen a large and sustained drop in crude oil prices, as you referenced, from over $100 a barrel to about 50 today as low I think you've got down into the 20s. And many observers, as you did, are characterizing this as a new normal. We're seeing a dramatic move towards electrification of transport and many experts are now talking about reaching peak oil I'm sorry, peak demand in the near future. Furthermore, with the global agreement through the Paris Accord, the temperature increases must be kept below 2 degrees Celsius. Regular structures throughout the world are creating incentives to decarbonize the energy system, positioning the company for long term value creation in this environment is challenging. It's been said that you get what you incent, as long term shareholders were looking for executive compensation structures that drive long term value creation. We're pleased to see that the company has adopted a robust scenario planning, strategic planning approach. And for the last several years, the UUA has submitted proposals for this Annual General Meeting suggesting that the company move away from the reserve replacement ratio as specifically their inadequate disclosure of targets. Therefore, we believe that a report to shareholders that we've asked for on how incentive compensation is aligned with global to limit temperature increases is appropriate and helpful and would be good disclosure. Thanks for your time. Thank you, Tim. Certainly appreciate your comments on the virtual meeting as well. We'll take all the comments from our shareholders as we go through this process this year and make adjustments as necessary. Now the Board's response to this proposal begins on Page 85 of the proxy statement. The Board recommends that you vote against this proposal. Now, if you have not already voted online, please do so at this time and I will close the polls at the end of the Q and A session. We will now take questions from the stockholders. I'll first take questions or comments from any stockholder by phone. You may call 1-eight seventy seven-three twenty eight-two thousand five hundred and two. 3 minutes. All questions submitted in writing on our website within 72 hours. So operator, do we have any stockholders that are on the phone? The first question comes from Mary Minette. Please go ahead. Thank you. My name is Mary Minette. I'm Director of Shareholder Advocacy for Mercy Investment Services, a long time shareholder of ConocoPhillips. Mercy manages the assets of the which include a critical concern for the care of the earth. Mercy and many other investors collectively representing 1,000,000,000,000 of dollars in assets in management are wrestling with the question, in light of the global commitment to transition to a low carbon economy, what is the future of the oil and gas industry? None of us can predict with precision how responses to climate change will impact the industry and not all players in the industry will navigate the change equally. For several years, ConocoPhillips has told investors it integrates low carbon scenarios in its strategic portfolio management process. Last year, the company substantially increased its disclosure on this topic, providing investors insight into how these low carbon scenarios fit into its business planning process. We have learned that the company evaluates this portfolio of assets across a range of low carbon scenarios to identify leading indicators of change in the business environment. This enables actions to lower the cost of supply, shorten project cycle times and develop technology to reduce costs, curb emissions and cut product losses. In contrast to this thoughtful and prudent approach to risk management, some oil and gas companies have taken a head in the sand approach, telling concerned investors that they don't believe a transition is likely. We want to take this opportunity to thank ConocoPhillips for its leadership in this area for both the approach it is taking to manage the risks associated with the transition to a low carbon economy as well as the effort it has put into disclosing this information to investors. As our understanding of the issues evolve, we hope that ConocoPhillips will strive to maintain this leadership position. Thank you. Thank you, Mary. We appreciate your comments. That's as you mentioned, we've used scenarios to plan around carbon constraints for some time now to try to understand the future supply demand and commodity prices. 3 of those scenarios, as you described, meet the IPCC's 2 degree emissions trajectories out to 2,035. So we use that to stress test our portfolio and we'll continue to do so. So thank you for your comments. Operator, do we have any other questions? The next question comes from Meredith Bloch. Please go ahead. Thank you and good morning, Mr. Lance, Board of Directors and other shareholders. My name is Meredith Locke with Rockefeller and Company in New York. ConocoPhillips has been a leader among E and P companies that taking climate change into consideration is posing a material risk to its business. This is evident in your comprehensive risk management strategies, including the use of scenario planning as well as Mr. Lance's public support for the United States remaining in the Paris Climate Agreement. As shareholder representative, we believe that the United States having a seat at the table will remain important for businesses like ConocoPhillips going forward. The removal of the United States from the Paris Climate Agreement could have negative unforeseen consequences having to do with regulation, trade negotiations, taxes and the ability to fairly do business abroad. Since the company has demonstrated support for proactive and practical climate policy and clearly recognizes the business case for staying in this agreement, we are hopeful that the company will continue to use its voice in support of the Paris agreement. So my question specifically is for Mr. Lance. Given the administration is close to a decision on this treaty, how does the company intend to communicate and demonstrate its support for the United States to remain a party to the Paris Climate Agreement? Thank you for your time. Thank you, Meredith. As you point out, the company has long advocated in and around the climate issues back even 15 years ago when we joined the cap and trade effort and here more recently as we've advocated on behalf of the United States staying in the Paris climate change agreement. We do that for a number of reasons. We think the U. S. Should participate in these discussions and be a participant in a global discussion that climate needs to have. And certainly, it provides us the opportunity to encourage other nations to incorporate their commitments underneath the agreement and then share technology to lower emissions. As the United States has already seen switching to natural gas as and those market forces associated with that have driven our emission profile in the United States down dramatically over the last few years. So we think there's the right solution and to be able to participate in the Paris Accord is important, we think, as a country and something we'll continue to support as a company. Operator, are there any other questions? The next question comes from Carly Greenberg. Please go ahead. Thank you. Hello, everyone. My name is Carly Greenberg. I am here today on the proxy of the Brainerd Foundation in Seattle, Washington. I wanted to say a comment on the election of directors and mostly to commend ConocoPhillips for its longstanding commitment to Board Diversity, including the inclusion of women and people of color on our Board. Not only does Conoco have an exceptionally well qualified Board of leaders, but we also have been a leader for champion racial and gender diversity among our directors for years. For example, 20% of Conoco's Board members are women. We are glad that this is a part of our company's culture and see it as a wise business decision. The issue for diversity is increasingly being recognized as an issue of good governance to many investors. For example, the 30 Percent Coalition, which works to improve Board diversity, has investors with over 2,500,000,000,000 dollars in assets promoting improvements in diversity at the Board level. Furthermore, investors like the State of Massachusetts and Rhode Island are voting against boards that are inadequately diverse. These are signs of the growing seriousness with which investors take this issue. At present, national progress is slow. Only 19% of Board members in the S and P 500 are women. So with those sorts of statistics, we are glad that our Board stands as an example to other companies. Thank you for your leadership. Thank you for your comments, Carly. Yes, we viewed diversity inclusion important throughout the whole company, including the Board. Any other questions, Mr. Operator? The next question comes from Timothy Smith. Please go ahead. Yes. Thank you very much. I just wanted to pick up on Jim Brennan's comments about the virtual meeting. And note, I think the audio is very clear and also the folks have worked very hard to make it clear about how to get into the meeting. We appreciate their work. It would be helpful at least though to have a video so that we can we could be watching to see Mr. Lance how you're responding to questions and how the Board is responding, so a thought there. You are well aware that numerous investors are quite concerned about going to virtual only meetings. I agree with Tim Brennan having a hybrid meeting is an exceptionally good idea. But increasingly you're hearing investors like New York City who are strongly opposed to the virtual only process and they've communicated to Conoco and other companies saying that they urge you to go to a hybrid meeting next year and if not they're ready to vote no on Board members that serve on the governance committee. In addition, the Council of Institutional Investors, which is the coalition of America's largest pension funds with portfolios that have over $3,000,000,000,000 adopted a guideline stating that cyber meeting should only be a supplement. Face to face with a cross section of their shareholders. You've had people come to your meetings for many years thanking you for specific things and asking questions. Investors consider that kind of interaction important. It allows questions to be posed directly to the chair of the audit or comp or governance committees. I know we can do that on the phone, but it feels very different, especially if a company is in the midst of a scandal. So can you imagine Wells Fargo having a virtual only meeting this year? It would have been an travesty, when the company faces such controversy. So we are worried that when ConocoPhillips, a respected company and governance moves in this direction, it actually creates a slippery slope. And if I was there personally, Mr. Lance, I thank you for your comments about the lobbying proposal and indicate that the response is in the proxy, but I would have followed up on the question about what you plan to do with the business roundtable. So I'd like to do that now, sir, and ask if you'd go on the record about where ConocoPhillips stands on the BRT's campaign to eradicate shareholder resolution. Thank you. Well, thank you, Tim. And appreciate your comments about the again about the virtual meeting. Of course, we'll take all the comments from the shareholders as we consider what we do. Just as a bit of context around that, I would point out that participation has been dropping meetings. So there's something here about a hybrid meeting, but we take your points as well. With respect to the BRT, we do support what they're trying to do in terms of some of the resolution. I think your example of $1,000,000,000 with Apple is a little bit misleading. I think it's appropriate that for resolutions to come, shareholders need to have a significant ownership in the company. We don't agree with all of the aspects of what the BRT is doing and we are trying to improve that. But just in terms of a general overall approach to what they're trying to accomplish, we are supportive of that effort. So operator, any other questions? And as a reminder to everybody to get into the queue on the Q and A line. The next question comes from Tim Brennan. Please go ahead. Thank you. This is Tim Brennan from the Unitarian Universalist Association. I won't take up much time because I'm actually making similar comments to the one made by Rockefeller and Company. But just to ask you, Mr. Lance, it is we appreciate the statements you've made about staying in the Paris Agreement, but it is a particularly perilous time. The White House is in the midst of a decision making process. ExxonMobil has now weighed in again directly to the President, urging him to stay in the agreement and I would request that you do the same. All right. Thank you, Tim. We have weighed in. Operator, is there another question? We do have a follow-up from Carly Greenberg. Please go ahead. Thank you. And thank you again for the chance to ask one more question. Picking up on Tim's question about the BRT proposal, I can understand ConocoPhillips wanting shareholders to hold a significant portion of stock before filing. But I just did the math and according to what the Financial Choice Act proposal is, a shareholder would have to hold nearly $600,000,000 worth of ConocoPhillips stock for 3 years in order to be able to file a shareholder proposal. Personally, I feel like the size of an investor's holding does not necessarily negate or influence the importance of the issues that they may wish to bring to the company. And so I was wondering if you could comment on that. Well, I think that's the part of the BRT proposal that we're trying to comment on. As you can imagine with all the companies associated with that association, it's a large group of people. I think the principle that people are trying to get is you cite the $600,000,000 to be able to do a resolution. I think we're trying to impact that. What we want to avoid is somebody who owns a share or 5 shares being able to put in a resolution each and every year. So I think that's where the discussion is happening within BRT is what is that appropriate threshold amount. Operator, any other questions? The next question comes from Kathy Mulvey. Please go ahead. Great. Thank you for the opportunity to participate. I am also with the Unitarian Universalist Association. And I have a question. I was disappointed to note that ConocoPhillips funded a new report by IHS Markit criticizing the recommendations of the task force on climate related financial disclosures. As you know, the task force was set up by the Financial Stability Board recognizing the potential systemic risks posed by climate change to the global economy and economic system. And through an open collaborative process in December last year, the task force released its recommendations report recommending disclosure of climate related financial risks in mainstream financial filings and specifically recommending that companies disclose what a 2 degree Celsius scenario would mean for their businesses, strategies and financial planning. There was an extensive consultation period around those recommendations, and overall respondents expressed general support for the recommendations. So we also note that the U. S. Chamber of Commerce, which is referenced in item number 5 on policy advocacy and lobbying is reportedly hosting an event today to highlight this report. So I'd like to ask how funding this report and opposing the climate action recommended by the task force is consistent with ConocoPhillips' stated commitments to disclosure and transparency and with its own use of climate change scenarios? Yes. Thank you, Kathy. We don't see those as mutually inclusive. I think the issue that we took with the report was that not many in the business community were engaged as part of that process. And I think what it does is it upends the whole premise of materiality that the SEC uses when reporting our results. And while we use scenarios and we believe in that, we won't stop using scenarios to address some of the climate. The scenarios that we use aren't appropriate for other companies that might have to react to that. So we felt like it was a one size fits all approach that wasn't really appropriate given the issue with the principle around materiality that the SEC uses and that we all use in reporting our results and when we describe our risks to our plans. So while we'll continue to disclose and talk about the risks of climate and what our scenario planning exercises do, we thought this approach was a bit heavy handed and went over the top with respect to some of the principles that we use when we disclose our annual results. And our company is different than even other fossil fuel companies or E and P companies in the business and we're different than other manufacturing companies in this business. We all have different risks and we all have different degrees of materiality. But thank you. Any other questions, operator? We do have a question from Steve Mason. Please go ahead. Greetings, Mr. Lance and Board members in the queue apparently and thankfully the operator came back on and helped me with my affliction. Given my position in the queue, I'm going to revise and condense my comments because many of the items that I was going to mention have been addressed already. I would just like to offer as it relates to the matter of type of meeting that is conducted by ConocoPhillips that one thing that is unavoidably lost in a virtual meeting is the opportunity for spontaneity, that, that circumstance also be considered as you contemplate the merits of possibly going to a hybrid system. It's clear that participation has been higher. I can speak from personal experience since I've been at all of the last nine meetings in Houston and missed the opportunity to greet you personally. I also though will now turn to the other matter that I wanted to do, which is to be a bit of a cheerleader for the company as I've been recently, especially as it relates to shareholder engagement. I've seen an evolution over the years that is encouraging. I'd like to express appreciation for the opportunity to meet along the way with members of the company staff, Board, other shareholders and even you, Mr. Lance, that has been appreciated. Appreciate the ongoing relationship with Sabrina Watkins and James Vare. And we on behalf of the shareholders, we think that it's a good sign that the shareholders to the shareholders, I'm sorry, that despite the economic and financial challenges, the company has continued to fill the position currently held by James Varay. However, anytime there is the kind of turnover that has occurred in the past 2.5 years in that position, unavoidably progress will be slowed. And we are interested as we move forward and seeing the pace quicken again in terms of the internal and or the development of internal and external measurable social indicators of the company's fulfillment of its human rights position, including attention to the rights of indigenous peoples in the locations where the company does its business. We are encouraged by the interaction with the folks that we've had and we look forward to continued good interactions. And thank you for your time. Yes. Thank you, Steve, and thank you for your continued engagement with the company. I recognize you've been a constant participant in our annual meetings and have been involved with our sustainable development group for quite a number of years and we appreciate that engagement. And again, we'll take your comments under consideration with respect to the virtual meeting. Operator, any other questions? We have no more questions All right. At this time, I'll turn to questions that have been submitted online and ask Ellen to have any of those questions come in. Thank you, Ryan. I'm going to take these in the order that they were submitted. I'm going to read them verbatim. And just as a reminder to our listeners, if we're not able to complete all the questions, address them and answer them in the time we have today, we will post answers to all of the questions that were submitted online that we don't address within 72 hours. Ryan, our first question is why should the stockholders trust the Board of Directors and ELT to lead ConocoPhillips when they have failed to run the company in a cost effective manner in the past 3 years? Yes. Thank you for the question. We've certainly taken pretty significant steps over the last 3 years to transform the company. As I described in my comments about the performance of the company, we've cut the capital program by 2 thirds, certainly shifted our investments to shorter cycle programs, lower cost of supply. We've reduced our operating costs from $10,000,000,000 to $6,000,000,000 We've exited high cost areas like the deepwater and really sold assets that we weren't funding in our portfolio. And we've moved away from production growth as a driving goal. Instead, we're committed to delivering values through the cycles by executing the value proposition we described, very disciplined returns based value proposition. So we're positioning for a lot of volatility and to do that you need a low breakeven price, low cost of supply resource base and a strong balance sheet. And that's what we've been committed to doing over the last couple of years as this industry has experienced a very significant downturn. So I think we're on the right track and headed in the right direction as a company. Ellen, any other questions? Yes, Ryan. Our second driven by the SEC and their reporting requirements and our divestitures, driven by the SEC and their reporting requirements and our divestitures that we've had as a company. But importantly, significant resources remain for the company. Under the SEC rules and guidelines, we're required to move from our books those reserves, which cannot be economically developed in a timely manner due to low prices. But as those prices improve, the reserves get rebooked. And I would point out that even after our Canadian and San Juan dispositions, as we stated, we still have 14,000,000,000 barrels of resources that have a cost of supply on average of $35 a barrel. And these resources were unaffected by some of those market changes that we talked about. But how fast we rebook reserves are a function of the regulatory definitions and how fast we choose to invest capital back into the portfolio. One example I cite when answering this question is look at our Eagle Ford position where we have 3,000,000,000 barrels of resources, but have only booked 500,000,000 barrels to date. So as drilling and activity continues there, we expect to book an additional 2,500,000,000 barrels in the reserve categories, we move resources to reserve. So I think we're addressing the issue and we have a plan, a very robust plan over the course of the next decade to continue to increase the reserves of the company. Your next question, Ellen? Yes. And this will be our final question. We are running out of time here, Ryan. What are the prospects for ConocoPhillips continuing to seek organic growth overseas? Yes. Thank you. We continue to look for competitive opportunities really both inside and outside the U. S. I'd say a lot of our exploration activity today is focused on places like Malaysia and Norway. We're considering new investment opportunities in Colombia and Chile that provide both scale and flexibility for the company. That's combined with our current exploration efforts, both in the Lower forty and in Alaska. So we believe in a global diverse company, global being an important part of that. So we continue to look for good opportunities even outside of the U. S. And North America. Great. Well, thank you. I think that brings us to the end. Any questions that we have not answered that were received online, we will answer within 72 hours and place them on our web page. We appreciate all these stockholders' participation today and we'll get back to the business of the meeting. So I declare the polls have closed. The Inspector of Elections has filed certifications of our preliminary results of the voting. So Janet, would you please read those results? Mr. Chairman, the preliminary results based on the voting of shares represented by valid proxies on file and tabulated at the meeting this morning show that each of the 10 nominees for elections have been elected as directors to serve a 1 year term expiring at next year's annual meeting. Each director nominee received at least 93% of the votes present at today's meeting. The appointment of Ernst and Young as the independent registered public accounting firm for ConocoPhillips for 2017 has been ratified, having received the favorable vote of more than 98% of the votes present at today's meeting. The advisory approval of executive compensation has not passed with more than 68% of the votes present today's meeting abstaining or cast against the proposal. The Human Resources and Compensation Committee and the Board will take the outcome of this vote into account when considering future executive compensation arrangements. The frequency The frequency receiving the highest number of votes on the advisory vote on the frequency of the vote on executive compensation is 1 year with more than 91% of the votes present at today's meeting cast in favor of 1 year. The stockholder proposal for the company to provide an annual report on payments used for lobbying and grassroots lobbying has not passed with more than 76% of the votes present at today's meeting abstaining or cast against the proposal. The stockholder proposal for the company to publish an annual report disclosing the extent to which executive incentive compensation promotes resilience to low carbon scenarios has not passed, with more than 93% of the votes present at today's meeting abstaining or cast against the proposal. Mr. Chairman, that concludes the report of preliminary voting. Details of the final results will be available for all stockholders in our filings with the SEC within 4 business days. Stockholders may also obtain the voting results by calling or writing the office of the corporate secretary. Thank you, Janet. That completes the business scheduled for today. I want to thank you all for your participation. And our meeting is now concluded. Thank you all for attending.