# Letter to Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-e-p/NYSE_COP_2022/NYSE_COP_2022.mmd` · pages 1-7_

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Letter to Shareholders

Dear Fellow Shareholders,

Energy supply and security were top priorities across the globe in 2022, as geopolitical and economic turmoil contributed to one of the most eventful years for our industry and the world in decades. Against this backdrop, ConocoPhillips demonstrated robust operational and financial results, generating a 27% return on capital employed and returning $15 billion of capital to our shareholders. We also announced new low greenhouse gas (GHG)-intensity production projects to enhance our global portfolio for decades to come, while expanding our commitment to reduce emissions.

These achievements align with our Triple Mandate of responsibly and reliably meeting energy transition pathway demand, delivering competitive returns on and of capital, and achieving our net-zero operational emissions ambition. They also reflect the high performance and ingenuity of our workforce.

## A Decade of Transformation

Since our 2012 spinoff, ConocoPhillips has strategically developed a deep and diverse portfolio that continues to generate impressive cash flows. With the completion of our acquisitions in the U.S. Permian Basin and our expanding opportunities in liquefied natural gas (LNG), we have established ourselves as a premier exploration and production company with a large, low cost of supply, low GHG-intensity resource base. Our strong balance sheet positions us to thrive through the price cycles of the evolving energy transition.

## CONOCOPHILLIPS PORTFOLIO TRANSFORMATION

<table><tr><td>27%</td><td>2012 \(94.16/BBL WTI</td><td>2022 \)94.23/BBL WTI</td></tr><tr><td>RETURN ON CAPITAL EMPLOYED IN 2022, HIGHEST SINCE OUR 2012 SPINOFF</td><td>Production 1.6 MMBOED Cash from operations (CFO) \(15.2B</td><td>1.7 MMBOED \)28.5B</td></tr><tr><td>Net debt</td><td>$17.4B</td><td>$7.2B</td></tr></table>

A decade of focus on execution excellence, balance sheet strength and returns.

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In 2022, we safely and efficiently produced more than 1.7 million barrels of oil equivalent per day globally, with record production in our Lower 48 operations. We achieved first production at Gumusut Phase 3 in Malaysia, Fiord West Kuparuk in Alaska and Montney's Pad 4 in Canada, while continuing to progress the Tommeliten A and Eldfisk North projects in Norway. As a major producer in the prolific Permian Basin, we continued to innovate with strategic acreage swaps that allowed us to significantly increase our long-lateral inventory and lower our cost of supply. Our global reserve replacement ratio was 176%, highlighting the breadth and depth of our portfolio.

Energy security has reemerged as a top global concern, and ConocoPhillips is well positioned to supply natural gas where it is needed most.

# "Our strong balance sheet positions us to thrive through the price cycles of the evolving energy transition."

We expect LNG to play a valuable role through the energy transition and beyond, as it is lower in GHG-emissions intensity than other alternatives, particularly coal. Building on our 60 years of LNG expertise, we made commitments to grow our global LNG business in Australia, Germany, Qatar and the United States. In 2022, we increased our ownership

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in Australia Pacific LNG, which supplies the growing Australian and Asia Pacific markets. We signed agreements with QatarEnergy to participate in the North Field East and the North Field South LNG projects and to jointly supply long-term LNG to Germany, Europe's largest gas market. In the U.S., we are working with Sempra Infrastructure to develop large-scale LNG and potential carbon capture projects along the Gulf Coast.

## Fulfilling Our Triple Mandate

We achieved a 27% return on capital employed, our highest since becoming an independent company, and returned a record 53% of cash from operations (CFO) — $15 billion return of capital — to our shareholders through dividends, variable return of cash (VROC) distributions and share repurchases in 2022. While this was our first year to offer VROC payments, our total shareholder return over the past five years has represented ~45% of CFO. We believe that our CFO-based returns framework differentiates us relative to peers and is a competitive advantage.

Advancing our Paris-aligned climate risk strategy, we joined the Oil and Gas Methane Partnership 2.0 and further strengthened our methane reduction ambition with a more aggressive near-zero 2030 methane emissions intensity target. We also published our Plan for the Net-Zero Energy Transition with a progress update expected in spring 2023.

Our emissions reduction efforts and operational net-zero ambition are supported by our multidisciplinary Low Carbon Technologies organization. In 2022, this team began developing and implementing region-specific plans focused on technology to accelerate emissions reduction. These opportunities include electrification studies, equipment design, enhanced monitoring and detection of methane emissions, reductions in flaring and methane venting volumes, as well as carbon capture and storage.

## CONOCOPHILLIPS AT A GLANCE

## 2022 Highlights

■ Generated earnings \( ^{*} \)  of 18.7 billion.

■ Returned $15 billion of capital to shareholders.
■ Produced 1.7 million barrels of oil equivalent per day.

■ Achieved record production in our Lower 48 assets.
■ Expanded our LNG business in Australia, Germany, Qatar and along the U.S. Gulf Coast.

■ Introduced Plan for the Net-Zero Energy Transition.

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Collectively, our 2022 actions will help reduce the average GHG-emissions intensity of our 20-billion-barrel low cost of supply resource base, reflecting our commitment to responsibly and reliably meet energy transition pathway demand.

## World-Class Talent

Our collaborative and innovative workforce drives our success, and we recognize the importance of creating a workplace where our people feel valued. In 2022, we continued our efforts to foster a workplace that attracts, retains and develops the best talent. We established a new diversity, equity and inclusion organization and welcomed our first chief diversity officer. We also continued to focus on programs and processes to ensure we have an engaged workforce with the skills to meet our business needs. As always, safety was our top priority. A safe company is a successful company, so I'm pleased to report that in 2022 we had our second-best safety performance since we became an independent company.

## Our Next Decade

The energy business will always be volatile, but we've built ConocoPhillips to deliver competitive results throughout price cycles. Aligned with our Triple Mandate, our deep and diversified portfolio will provide the energy to meet demand, deliver compelling returns and fulfill our commitments to shareholders, while we continue to execute on our net-zero operational emissions ambition. As we enter our next decade, ConocoPhillips looks forward to playing a key role in the energy transition by providing secure, dependable, low GHG-intensity energy solutions that help power civilization while enhancing global energy supply and security.

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Ryan M. Lance
Chairman and Chief Executive Officer
Feb. 16, 2023