AGM 2016

May 10, 2016

Slides

The 2016 ConocoPhillips Annual Meeting of Stockholders is about to begin. To ensure your safety, please listen to the following information. In the unlikely event that the ballroom should need to be evacuated for any reason, there are several exits around the room indicated by lighted signs. Please proceed to the exit nearest to you. We ask that you turn off all cell phones, pagers and similar devices during the meeting. No cameras or sound recording devices other than those used by ConocoPhillips personnel to record the proceedings are permitted. Ladies and gentlemen, please welcome Janet Langford Kerig, ConocoPhillips' Senior Vice President, Legal, General Counsel and Corporate Secretary. This meeting will include information about our 2015 results and about our 2016 plans. It will include forward looking statements. This is our standard reminder that actual results may differ materially, and you should refer to our filings for factors that could cause actual results to differ from our projections. Now please join me in welcoming Ryan Lance, Chairman and CEO of ConocoPhillips. Good morning, and welcome, everybody, to our Annual Shareholders Meeting. It's a pleasure to be here today and to welcome all our shareholders. And thank you, Janet. I'm Ryan Lance, Chairman and CEO of ConocoPhillips. And certainly, it's my pleasure to welcome you to our 2016 shareholder meeting. I'd like to first take this opportunity to introduce you to our Board of Directors that are all here today. As I introduce each one of the directors, I'd ask them to stand, please, and face the audience and be recognized. So in addition to myself, the members of the Board present here today are Richard L. Armitage. Rich is the President of Armitage International and a 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 Executive Chairman and former Chairman and Chief Executive Officer of PPG Industries Incorporated James E. Copeland, Jr. Jim is a retired Chief Executive Officer of Deloitte and Touche 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, Gaye Huey Evans. Gaye is the former Vice Chairman, Investment Banking and Investment Management of Barclays Capital and previously held various positions with Citigroup and the U. K. Financial Services Authority Arjan N. Murti. Arjan is the Senior Advisor at Warburg Pincus and previously served as a partner at Goldman Sachs. Robert A. Nibloc. Robert is the Chairman, President and Chief Executive Officer of Lowe's Company Inc. And Harald J. Norvick. Harald is the retired Chairman and Partner of Econ Management AF and the retired Chairman, President and Chief Executive Officer of Statoil. So please join me in thanking our Board of Directors and their willingness to serve. Next, I'd like to introduce the members of the executive leadership team that are with us here today. All of them are here today. And again, as I ask or introduce each one of them, please stand and be recognized by the audience. In addition to myself and Janet Carrig, whom you've already met, the members of our leadership team are Al Hirschberg, the Executive Vice President, Production, Drilling and Projects Matt Fox, Executive Vice President, Strategy Exploration and Technology Don Walette, Executive Vice President of Finance, Commercial and our Chief Financial Officer Andrew Lundquist, Senior Vice President of Government Affairs Ellen DeSanctis, our Vice President of Investor Relations and Communications and James McMoran, our Vice President of Human Resources, Real Estate and Facility Services. So thank you. Before I begin the formal part of the meeting, I'd like to take maybe 15 to 20 minutes just take you through how the company is doing, what 2015 looks like. I'd like to address some of the market environment that we find ourselves in, which is a pretty tough market, as you might imagine today. Spend some time talking about the macro and talk about our plans for 2016. I'll address the value proposition for you, our shareholders, that we have as a company today and then do a quick kind of around the world tour of our operations so you get an appreciation for what we're doing around the world. Now certainly, it's a pretty challenging market. You can see here from the plot the average prices in 2015 were about 50% of what they were in 2014. So we continue to see oversupply in the marketplace, coupled with some pretty resilient production, particularly coming from North America. What has industry been doing? Significant capital reductions, operating cost reductions across the industry. Our company has been doing that as well. We're trying to capture strong deflation from our supply chain, a lot of that directed in the heavy drilling activities that were going on in 2013 2014, particularly here in North America. Our company, we've reduced our capital program by 40%. We've had to adjust our operating costs by nearly $2,000,000,000 since 2014. So really a major shift in a very short period of time. I tell people externally, there's not many businesses around the world that have to endure 60% to 70% drop in your revenue in about 10 months' time. And that's what this industry has gone through as we went from the $100 oil of the 2013 2014 period to what we're experiencing today. And for us, we've even sold some noncore assets, generated about $2,000,000,000 of additional proceeds to help us shore up our financial position. Now here's a quick summary of the 2015 performance. I'll start from the left and go to the right, starting with our financial results, which were clearly impacted by the weak commodity prices. Now obviously, we can't control prices, so our revenue turned out to be 44% lower than it was the year earlier, and it resulted in a net loss of $4,400,000,000 for the corporation. Now while we can't control our operating response, we took several measures. You can see we lowered our capital and our operating costs and raised $2,200,000,000 from those asset sales that I mentioned. More importantly, we started up 7 major projects across the portfolio, including our 2 megaprojects at Sirmont Phase 2 in the oil sands and our APLNG project in Australia. That momentum in those projects led to 5% production growth year on year, pretty substantial for a company our size. We realized 30% reduction in our recordable incident rate. You have to be a safe and efficient company to run well, and we did that. It was our best year on record for our safety performance as a company. But certainly a challenging year on the price front, but the business, I'll tell you, running very well. And let me talk a little bit more about that. Now strong execution on ticket to performance goes hand in hand with really a relentless focus on both personal and process safety. Our total decarbonable rate right now is at the lowest level we've ever had for the company, and I'm extremely proud of that. I think my whole leadership team is most proud of that. For context, you look at the bottom right hand part of this slide, you'll see our performance relative to other key U. S. Industries. You'll see how safe our industry is relative to others that are working in our country. We've had excellent process safety performance. That's keeping our liquids and fluids in their pipes and in their vessels with 0 high risk events in 2015. We attribute a lot of that due to our implementation of what we call our life saving rules. We put our life saving rules out to the organization. They've embraced that. They're running with that, and I think it's really making a difference in terms of our performance, both on personal and process safety. We continue to learn from the incidents that we have. We're strengthening our defenses to make sure that we spend every employee and contractor home safely every night to their family and friends. And we're focused on reducing our spills and greenhouse gases. Both of those remain a priority. Because the long term viability of this business is really includes all aspects of sustainability. We need to reduce our greenhouse gas emissions. You'll see from the tagline, and over the last 7 years, about 6,800,000 tonnes of reductions since 2,009 for our company. So while our production has grown, we've kept our emissions flat. Now we recognize that stakeholders have high expectations of the company, So we keep engaging with our local communities. This downturn is having a significant impact on those communities. So we have to talk to them about what our activity changes are being are having and what impact they're having on their communities. We stay closely engaged with that. We certainly are actively engaged with our global stakeholders, especially around this carbon asset risk. If you read our website, look at our action plans, you see we're on track with our multiyear action plan. We continue to get external recognition, the 9th year that we've been included in the Dow Jones Sustainability Index, so we're proud of that. And we certainly continue to deliver on some of those economic, environmental and social performance practices that we have as a company. That's important to our sustainability as a company. Now 2015 was certainly a challenging year. So how did the stock perform? It's something we're working and we watch daily, obviously, and we're disappointed that the price collapse did have a pretty significant impact on stock prices. And it wasn't just ConocoPhillips. It was really across the sector. In 2015, we lagged just below the average of our peers but ahead of the S and P Energy Index. However, we if you look at since the spin, since 2012, we've outperformed all of our independent peers and all but one of our integrated peers. So it's important to perform over the long term, but certainly, we're doing everything we can to make sure the total shareholder return to your shareholders is maximized and as good as it can possibly be. So that's a really quick tour of our performance in 2015. What I really want to spend the bulk of the time on is really talk about 2016 and where we're at today and where we're going here in the next few years. And certainly, 2016 didn't start off with a bang. It didn't provide us any relief on commodity prices. In fact, we endured another drop down into the 30s and in fact, in January, into the high 20s commodity prices. So the market oversupply continues, and now it's coupled with concerns about global economic growth and oil demand. So the fundamentals yet aren't supporting a sustained recovery. We've seen a little bit of bounce over the last month or so in the oil price, but we don't expect to see that as we continue through this year and more recovery as we come into 2017. These weak prices caused a pretty significant credit capacity relook in our industry, across all of our industry, and it was reduced, and we had to take actions in the Q1 to address that. Our goal has been to preserve cash and really protect the balance sheet as we go through this downturn. So as we come into a recovery, we're well set to apply capital back into the business. So we have been exercising a lot of capital flexibility, been reducing our cost quite a lot. And then in the Q1, we made the difficult decision really difficult decision as a company to reduce the dividend. And I'd like to address each one of those actions in just a little bit more detail. So the level of flexibility we've exercised as a company is shown here on this slide. Since 2014, we've reduced our capital spending by an excess of $11,000,000,000 or 65%. So that gives you a sense of how quickly we've had to react to the environment that we find ourselves in. We're nearing completion of a multiyear phasing of major projects, and we're coming to the end of spending on our deepwater plan. And as we look at the portfolio, look at the investment opportunities, we believe we can sustain this $5,500,000,000 to $6,000,000,000 level of capital and keep our production flat. And you look at 2014 through 2016 on the cost side, we reduced our cost over $2,700,000,000 or 30 percent since 2014, and we continue to look for ways to address the low commodity prices that we find ourselves in today. And despite all those reductions, like I said, on the capital, the operating cost side, you look at the production. Because of the major projects that are coming on, we're in a unique position relative to our peer group and industry. We're able to maintain flat production at some pretty low levels of capital spend that's shown here on the right hand side of that curve. That's been normalized for asset sales, but the underlying business is delivering well. So let me address the dividend decision in a bit more detail. I'm sure that's on a lot of people's mind. So what do we do? We had to we entered a period where low commodity prices, we had to manage cash as a company. And at the same time, the credit rating agencies were rerating the whole business. Where balance sheet capacities might have been this wide in December January, overnight in February turned out to be this wide. So how much could you really borrow keep borrowing to keep funding the dividend? That became the issue. And that really was not just the case for ConocoPhillips. It was industry wide. All the E and Ps were being rerated by the energy business. Many of them went from investment grade to non investment grade overnight, meaning their capacity to go borrow money to continue to survive through the downturn was put in jeopardy. And in fact, you've seen over 50 companies go bankrupt since the 1st of the year in this business. That's had a pretty big impact. Now the dividend remains a core part of our offering as we go forward, and we're targeting annual real growth in that dividend each year as we look forward. But we did have to reset it for the environment that we find ourselves in today. We're committed to maintaining a strong balance sheet. We're going to need that. This business is going to go through the cycles again. As prices start recover, if they overshoot to the high side, we're going to have another volatile downside to these prices, giving the well supplied role that we find ourselves in. In supporting an investment grade balance sheet, we think, is pretty critical. And the dividend decision was in part to protect that balance sheet for the volatility we see in prices going forward. The reduction that we made in the dividend gives us a lot of flexibility as a company to navigate these low prices. They lowered our breakeven price by $15 a barrel, which is pretty significant in this business in this commodity business when margin is king. I think we're better positioned for the recovery. As we come out of the recovery, we start to generate free cash flow. We'll generate that free cash flow at a much lower price for the company and even relative to our competition. So it kind of leads me to, well, what is the value proposition for the company after the decision on the dividend? How do we create value for the shareholders? Well, we believe the best way to create value through these cycles is a combination of what's shown on this page. It's the right portfolio attributes combined with our allocation principles, how are we going to allocate capital to our shareholders and back to the company. Now some of these principles are not a lot different than when we launched as an E and P company back in 2012. So it's give cash back to the shareholders first off the right off the deck. And then it's about maintaining that strong balance sheet and exercising disciplined growth. Now I do recognize that these principles have been reset and these elements have been reset a little bit, but that still we expect that is a winning formula to deliver value back to the shareholders. Now after paying the dividend, we're going to have to reduce the debt. We're going to have to get the balance sheet back in order. So some of our free cash is going to go to debt reduction as we come out of this downturn because we think that strong balance sheet is differential for our company and it's essential as we go through these volatile cycles. Now that pace of repayment on the balance sheet, net debt is going to be a function of how fast is the recovery on prices. And we do have some additional non core asset sales that we'll get back into the market in. We didn't it hasn't made sense to sell assets in this low market. We're not getting fair value for them. But as the recovery comes back, we do have some assets we can sell, and we'll give those proceeds back to help repair the balance sheet. And we're making progress on that. We'll continue to be very disciplined in terms of how we allocate to our organic growth capital. And you'll notice we're stating growth on an absolute and a per share basis. But returns are really core to this value proposition. If we get the returns right, the rest will follow. And we're committed to getting those returns right. So we think about creating value through the cycles is to have a clear set of principles that align with a strong portfolio and generate strong returns for the shareholders. 1 without another is not sufficient, we know that, and we believe we've got both that will do that. So let me wrap up with a quick update on our portfolio and our operations. Here's a snapshot of that portfolio. We ended 2015 with about 1,500,000 barrels equivalent per day. 60% of that is liquid spread across 5 regions around the world. We have a reserve base that's 8,200,000,000 barrels, and it's diversified across the globe. 85% of that's focused in lower risk OECD countries. And on the far right, what's the feeder stock to the reserves? We have 44,000,000,000 barrel reserve base resource base already captured in the company today. It includes multiple opportunities and sources of growth from a pretty large, low cost to supply, diverse high quality inventory. That's already captured, exists in the company today. And certainly, that portfolio is underpinned by a lot of technical capability and the culture really of safe execution and delivery for the company. So we're pretty proud of that. Now as I walk around the world, here you get a snapshot of what that 1,500,000 barrels a day equates to in the regions around the world. I'll start with the Lower 48, strong legacy of unconventional production growth. 2015 production of 510,000 BOE per day. So we're one of the largest in the Lower 48 from a production perspective. Our primary focus there is on these liquid rich, low cost of supply unconventional opportunities we have captured in the portfolio today. You go to Alaska, where we're offsetting a very mature basin, but we're offsetting that decline through major project investments near our existing infrastructure that we built over the last 40 years in Alaska. You can see our 2015 production about 180,000 BOE per day. Go to Canada. You can see we're very large in North America. That includes Canada, which where we have a vast resource position in the oil sands and in the unconventionals in the Western Canadian Basin. We're currently ramping up Surmont Phase 2 in 2015 production of about 280,000 barrels equivalent per day. You go to Europe, again, another legacy area for the company, over 40 years of production from Europe. We've had major project start ups and infill drilling that are going on over the last couple of years that offset decline there as well, and our 2015 production was 205,000 barrels equivalent per day. Then across Asia, where we have a strong legacy position, and it's being supplemented with a lot of new projects in both Malaysia and in Australia. Our APLNG, our Asia Pacific LNG Train 1, was completed, and it started up production earlier this year, and we expect we ended 2015 with 350,000 barrels equivalent per day. And last but not least, we have an ongoing exploration and appraisal program that's spread really across this whole globe and this whole portfolio. It's really focusing the program on areas designed to appraise discoveries near existing infrastructure and really add to our unconventional opportunities that we have as a company. That's really a quick rundown and update of where we stand with the company. I'd hope to leave you really with a few key takeaways for the company. We assure you we're focused on delivering value in an environment by executing on what we believe is a very prudent plan that's responsive to the commodity price environment that we find ourselves in. I think we're delivering a safe, responsible manner. It's going to continue to underpin our approach to running the business. It's all about our spirit values. We've lowered the breakeven cost of the company through the business, and we're committed to returning cash to our shareholders through the cycles, the ups and the downs. And we have a really strong reserve and resource captured reserve and resource base that will drive long term low cost to supply disciplined growth while continuing to maintain that strong investment grade balance sheet and really a priority and a focus on delivering strong financial returns back to our shareholders. I think that's how we're going to win, and that's how we're going to differentiate ourselves from our competition. And I think is what sets ConocoPhillips apart from many of our peers. So I'll end on really what drives this as a company. It really is these spirit values. It is about the safety, 1st and foremost, safety of our people and our processes, the integrity that we have as a company, the responsibility we take and the accountability that we take everywhere that we operate and to our shareholders around the world. We're about innovation. We're about trying to deliver lower cost of supply resources into the supply mix for the world, and we can't do without the whole team. So it takes everybody. It takes everybody on the field, takes everybody here in all the offices in order to do what we do as a company, and I think that we do differentially well. So let me stop there. I think a quick look back to 2015 and where we stand at 2016. I'll take some Q and A, but I'd like to do that at the end. So if you have any questions about the company, how we're running the operations of the portfolio, the value proposition, please take note of those. You'll get plenty of time at the end after we run through the formal piece of the business, and I'll take those questions and address each one of those into order. So with that, let me call the formal meeting now to order, and we'll first present the 3 proposals submitted by management for approval, and then I'll ask each of the shareholder representatives present today to come forward and present their proposals. Now we found the best way to do this in the past is and ensure that we have plenty of time at the end for comments on any of these proposals as well as questions we may have from you to me is to save all those comments and questions at the end of the proposals after they have been presented. Now after that Q and A period, we'll take ballots from anyone in the audience who has already voted by proxy and announced the results of the voting. So Janet, can you please 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 to be cast at this meeting are present in person or represented by proxy. Therefore, a quorum is present and the meeting may proceed. Thank you, Janet. The meeting will now consider the 5 business proposal items on the agenda. I will present each one of the business items 1 at a time. When a stockholder representing the proposal or the representative is recognized, the meeting host will provide them with a microphone. Please state your name and verify that you are a stockholder or a representative of a stockholder. If you are a representative, please state the name of the stockholder that you represent. Item 1 on the agenda is the proposal to elect 11 directors to serve the term for 1 year. As indicated in the proxy statement, the Board of Directors recommends that the stockholders elect the director nominees. Item 2 on the agenda is a proposal to ratify the appointment of Ernst and Young as the company's independent registered public accounting firm for 2016. The Audit and Finance Committee reappointed Ernst and Young to serve as ConocoPhillips' independent registered public accounting firm for 2016 and seeks ratification of that appointment by the stockholders. As indicated in the proxy statement, representative of Ernst and Young are here today, and they're available to answer any questions you may have for them during the stockholder question and answer session. Item 3 on the agenda 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 to shareholders and stockholders vote in favor of this proposal. Item 4 is a stockholder proposal the company to provide an annual report on payments used for lobbying and grassroots lobbying. Is Donna Meyer here to introduce this proposal and make a brief statement? Thank you, Donna. Good morning, Mr. Lance, Board of Directors and shareholders. I'm Johnna Meyer, as Mr. Lance said, and I'm here on the proxy of Walden Asset Management, the long which is a long term owner of ConocoPhillips with the parent company together they own about 6 63,000 shares and I'm here to move the resolution on their behalf. Walden really appreciates ConocoPhillips' leadership on environmental, social and governance issues and the ongoing constructive dialogue that they've had with management on issues like indigenous people's rights, climate change, fracking and so on. As you see, this resolution seeks to expand our company's disclosure on lobbying. This is the 5th year for this resolution. Last year, it received 27% of the vote, but the concern about companies lobbying, especially by oil and gas companies on climate change, has increased rapidly over the last year. And this year, this resolution is supported by over 20 sponsors, including my employer, Mercy Investment Services, as well as the state of Connecticut pension funds and a prominent Swedish pension fund, AP7. Why is there such heightened interest in the global oil companies playing an advocacy role in climate policy? To start with, we believe that since the Paris Agreement, the global game on climate change has changed rapidly. There's now an urgent challenge in front of us to have our countries and our companies strive to keep increases of temperature to under 2 degrees centigrade. Above that level, scientists believe there will be even more dangerous hazards facing our environment and our people. We all know that global oil companies have a significant role in influencing laws and regulations. The prestige of ConocoPhillips' political spending and lobbying oil companies certainly impacts state and federal government laws and regulations. At the time at this time of climate crisis, we urge the Board to do a review of all advocacy or lobbying related to climate change. We think it's important for ConocoPhillips to be on the right side of history on this issue. None of us can tell what Conoco's lobbying record looks like without more information. Our company's disclosure on lobbying has some gaps, some significant gaps. For example, in our report, there's no summary of the top issues ConocoPhillips focuses on in lobbying. And when ConocoPhillips along with other companies file quarterly reports with the government detailing expenditures to influence legislation, these reports are hard to decipher. How simple it would be to do a little chart of the lobbying expenditure Conoco has had in the last 3 years? For example, Conoco Phillips spent over $50,000,000 in lobbying from 2010 to 2015 and over $800,000 in the Q1 of 20 16. So it's no small sum. Also Conoco does not disclose the specific dollar amount of payments to trade associations that engage in lobbying nor the portion used for lobbying. In conclusion, we as investors urge our company to carefully review our lobbying and political spending policy advocacy to ensure that it does not work against solutions for climate change. Thank you very much. Thank you, Ms. Meyer. Appreciate your proposal. Thank you. The Board's response to this proposal begins on Page 81 of the proxy statement, and the Board recommends that you vote against this proposal. Item 5 on the agenda is a stockholder proposal for the company to defer partial payment of an award to executives under the variable cash incentive program based on reserve metrics for a period of 5 years, adjusting the remainder to reflect reserve performance during that deferral period. Is the Reverend Randy Partain here to introduce this proposal? Thank you, Reverend. Mr. Chairman, members of the Board and fellow shareholders, thank you for the opportunity to speak to you. I am Doctor. Randolph Partain, Campus Minister at the Copperfield Campus of the First Unitarian Universalist Church of Houston, a member congregation of the Unitarian Universalist Association, the shareholder I represent today. I hereby move our proposal, shareholder proposal number 5 on your proxy card, which requests that ConocoPhillips retain part of senior executives bonus based on metrics related to adding reserves. Our proposal asks that the held back portion be adjusted over the following 5 years to reflect the reserves performance. As the manager of the endowments entrusted to us by our congregations, we take our fiduciary duties seriously. And as people of faith, Unitarian Universalists are committed to an even greater responsibility, the stewardship of the earth itself. An important aspect of our stewardship is ensuring compensation arrangements promote a long term view of value creation and align the interests of top executives with those of long term shareholders. ConocoPhillips uses reserve replacement ratio as a metric in both its bonus and performance shares plans suggesting the company believes that proved reserves reliably create value for shareholders. While that may have been a reasonable assumption in the past, it may not hold today. The oil and gas industry is undergoing disruptive transformational change that creates substantial uncertainty. We've already seen a large and sustained drop in crude oil prices from prices of over $100 per barrel in mid-twenty 14 to prices under $30 per barrel, many observers characterize low prices as the new normal. Regulations aimed at reducing greenhouse gas emissions and slowing the rate of climate change have the potential to reduce demand as do shifting consumer and business consumption preferences. New technologies and the entrance of new producers may affect supply. Taken together, these uncertainties increase the risk that proved reserves will not be profitably exploited. The arrangement we suggest, sometimes referred to as bonus banking, has been used in the banking industry to discourage risky behavior whose impact might not be felt for several years. In that way, we believe it would be better to align the executives' interests with those of long term shareholders. Therefore, we urge shareholders to support this proposal. Thank you. Thank you, Rev. Martain. The Board's response to this proposal begins on Page 82 of the proxy statement. The Board recommends that you vote against this proposal. Now we'll take general questions and comments from our stockholders. If you have a question or a comment, you may approach the microphone nearest to you. Pursuant to our meeting guidelines, each stockholder will be allowed to speak for up to 2 minutes and ask no more than one question each time the stockholder is recognized. Additional turns will be given to those who have already spoken as permits. Please note, if any stockholder has not delivered his or her proxy, you may cast your vote by ballot at this meeting. If you've already submitted a valid proxy, your votes will be cast as indicated on your proxy card. You do not have to vote by ballot unless you wish to change your prior proxy vote. If you need a ballot, please stand or raise your hand and a meeting host will provide you with a ballot. At the end of the question and answer period, we'll collect all those ballots. So please open the floor. Yes, Mr. Lance. My question is if do you see long term I mean, I heard that the price per share could go up to $80 a barrel or $80 a share. Do you see maybe in the future the price continuing to grow maybe $90,000,000 $100,000 $110,000,000 possibly or something of that nature? Thank you. Thank you. No, we certainly are hopeful that, and we believe that we're executing the business to start to deliver that. Obviously, it's going to be a function of what commodity prices do in this business. So we've our share price has been impacted by the low commodity prices. But certainly, we think we're putting the actions in place, have the inventory, the portfolio to deliver not only real returns through a dividend increase annually, but also share price appreciation as we go over the next few years. So yes, thank you. Hello, Steve. Mr. Lance, good morning. I'm Steve Mason. I represent the Church of the Brethren Benefit Trust, a long term shareholder of ConocoPhillips. And it's May and so it seems like the place to be in May is in Houston. I've been coming here for 10 years and have enjoyed the trip. I have I represent this group and express appreciation for the ongoing conversations we have with the company. But this is the only time I get to say thank you in front of the Board. And so I have no issues to raise other than the fact that we're in transition in terms of the company staff that are interacting with us. And during that transition, there's always going to be a lull. That's not a concern. That's just an acknowledgment of reality. Our interests are related to human rights and the rights specifically of the indigenous peoples where the company does its business. And I just want to thank the company and you for providing us the opportunity to be in a regular conversation with members of company on this issue and we look forward to continued work in progress. Thank you, Steve. Appreciate it. Thank you. Yes, ma'am? Good morning, Mr. Lance and Board of Directors and Stockholders. My name is Sister Cecile Raker from Houston, Texas, and I'm here as a proxy for Need More Funds at Toledo Based Foundation. I'm glad to return to this annual meeting and to add a few remarks. As investors, we are well aware that Conoco is deeply concerned about climate change and its impact on our environment and our company and the economy. We have skilled and knowledgeable staff working on this issue, and we know that our leadership understands the importance of forward looking public policy on climate change. But the climate crisis requires that we take new urgent steps to make a difference and carefully review our climate lobbying record. For example, ConocoPhillips is a key member of some major trade associations that play a substantial role in shaping elections, influencing public policy and have a very powerful voice on climate change. The U. S. Chamber of Commerce, the company's large the country's largest lobbying group has spent over $1,200,000,000 on lobbying since 1998, and $87,000,000 in 2015 and its lobbying on climate change is well known. This is an integrity problem for ConocoPhillips because the chamber has an active campaign opposing effective environmental regulations and recently sued the EPA to block its new clean power plan. We urge Conoco to stand up and oppose the actions of this trade associations like the Chamber and API who are aggressively attracting the nation's solutions being proposed to lessen our carbon emissions. Our dollars and our reputation are sadly lined up against important steps seeking solutions on climate change. Thank you. Thank you, ma'am. Please. Yes. My question is how come ConocoPhillips is not using a hedging program via derivatives? Yes. Good question. We've looked at that in the past, and I would tell you that the market's probably not big enough for a company our size. And I would tell you that we're pretty naturally hedged today. So we have production that's traded at West Texas Intermediate WCS, West Canadian Select. We have international. So we're actually pretty naturally hedged as a company across all the markers. We have looked at it to try to protect the floor in a base if we go through another downturn. So that's maybe something that you might see us think about as we go forward. But for the size of the company that we are and the ability to have a material impact on our cash flows and our budgets, it's really difficult for us to lock in a price on a significant portion of our crude such that would have a material impact on our capital and our financial plans going forward. But it's something that we're actively looking at because we know that the industry has done that the smaller company side. And is there any way we could take advantage of that technique? Good morning. Good morning. My name is Charlie Berning. I'm a retired Conoco employee many years ago. And I was most interested in your presentation this morning. Thank you very much. We constantly read about what the Saudis are doing, twisting the nose of the American oil industry. It was in the paper this morning on the restructuring of Aramco, that various things they're going to do, probably some joint ventures, maybe with BP, with Sinopec and so forth. Does ConocoPhillips in their internal working besides this left foot, right foot standard business model of reducing, reducing hide behind the log sort of thing. Do you do any research or workup of an innovative program like maybe a joint venture with a marketing company, a downstream organization where we might do something positive in respect to the oil industry? Well, we have a a we're very active in the marketing of this business. So we participate with our trade unions via API, IPAA and the other organizations to try to address some of the issues I think that you're referring to. We haven't taken a stood out there in front of the line, if you will, on a number of those issues. But we do have relationships that we have and that we court that there were downstream other players in this business to try to address some of the issues that are facing our country. So we are active in that conversation. We play we think we play an important role in the advocacy of the issues that affect our industry. And we're not trying to hide our head in the sand at all. We're trying to be an active supporter of what we're doing. We took a very leading role in the repealing the export ban, which we felt was a policy given our large position in North America, we felt was a policy that put our company at risk. So we took a pretty active role in trying to educate and advocate on behalf of repealing a law that was in place in our country since the mid-70s that made no sense that didn't face the realities of the business that we have going forward. So a small example, I think, of where we have stepped out and tried to take a leadership position when we see it's important to the portfolio and the actions and the direction that we're trying to go as a company. If I could have a follow-up question. In relation to you mentioned API, which some people would say are rather helpless insofar as the industry is concerned. Is there any interaction with the federal government where they might interface with the U. S. Oil industry and give some help? Well, I think through the major forms, despite what many think at API, I think they are doing some good in terms of the recommended practices and setting standards for our industry. So our industry is one that the cost of entry in our business is pretty small. You can buy a piece of land, go get a drilling rig pretty quickly. And sometimes our industry is paint brushed with the lowest common denominator. So I think the folks like API, IPAA and those associations have an important role to play to set recommended practices and minimum standards that all of us in the industry need to account for. And we're trying to advocate with that with our friends and even with the folks that don't particularly like the business on Capitol Hill as well. And I think they recognize the importance of it. This shale revolution that's occurred over the last 5 to 6 years has put the United States back to the forefront of an energy policy conversation that's impacting the globe. So I think we're trying as an industry to play an important role in that advocacy. Thanks very much. Thank you. Hi. My name is Logan Smith. I'm 18 years old. And I just wanted to thank you for the experience and the opportunity to attend one of these meetings and see the steps that you're taking to grow ConocoPhillips and make sure that the investments I'm making are good investments. Well, thank you, Logan. It's I think he traveled I met him earlier today, traveled from just out of Atlanta, Georgia to be here today. So you give us a lot of confidence in the future. So get your engineering degree and come to work for ConocoPhillips. Thank you. Any other questions? All right. Well, thank you. I appreciate it. So now we'll take a vote on all the proposals that were properly presented at the meeting today. So I declare the polls are now open. If you have not completed your ballots, please do so at this time. The meeting host will collect the ballots, and please pass them to the aisles so they can be collected, if there are any out there. Okay. It appears that all the ballots are collected, so I'll declare the polls closed. The inspectors of election have filed certifications of the preliminary results of the voting. 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 11 nominees for election have been elected as directors to serve a 1 year term expiring at next year's annual meeting. Each director nominee received at least 92% of the votes present at today's meeting. The appointment of Ernst and Young as present at today's meeting. The advisory approval of executive compensation has passed with more than 83% of the votes present at today's meeting cast in favor of the proposal. 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 79% of the votes present at today's meeting abstaining or cast against the proposal. The stockholder proposal for the company to defer partial payment of an award to executives under the variable cash incentive program based on reserves metrics for a period of 5 years, adjusting the remainder to reflect reserves performance during the deferral period 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 preliminary results will be available for all stockholders in our filings with the SEC within the next 4 business days. Stockholders may also obtain the voting results by calling or writing the office of the corporate secretary. Thank you, Janet. Well, thank you all. That completes the business scheduled for today. I just personally want to thank you for your interest and for your support of the company. These are important and difficult days for the industry, but I want you to feel comfortable and secure in your investment and know that we're doing everything we can each and every day to make sure that we're running the company the best way we can and to make sure that we're competing well in the marketplace and beating our peers and our competition as we go forward. So thank you for your attendance, and thank you for your support.