# Letter to Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-e-p/NYSE_COP_2020/NYSE_COP_2020.mmd` · pages 1-7_

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Letter to Shareholders

Dear Fellow Shareholders,

We entered 2020 with strong momentum after a multi-year transformation that positioned ConocoPhillips to deliver superior returns across the volatile cycles of our industry. Little did we know that 2020 would bring never-before-seen challenges, not just in our industry, but across the globe. The severe downturn tested our value proposition, but it held up even in the face of the historic challenges. We continue to believe that the core principles of our value proposition — focus on generating free cash flow, maintain a strong balance sheet, commitment to differential returns on and of capital, and ESG leadership — are the right ones for the upstream business. Our conviction led us to seize an opportunity to acquire Concho Resources Inc. in a transaction that closed in January 2021. Our combination of two premier companies leaves us uniquely positioned to lead a structural change for our vital industry, one that we also believe is critical to attract and retain investors.

## RISING TO THE YEAR'S CHALLENGES

Throughout the year we set priorities around work-force health, exercised available flexibility across our operations, preserved financial strength and safely delivered the underlying business. We want to sincerely thank our employees for their efforts. Together, they worked successfully to overcome unprecedented challenges. It is with tremendous pride and gratitude that we reflect on their contributions, especially the resilience and dedication of those in the field who, during one of the most difficult years in memory, allowed us to deliver our business plans while achieving our best personal safety year on record.

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## EXECUTING OUR BUSINESS PLAN AND COMBINING TWO PREMIER COMPANIES

Throughout 2020, our flexibility enabled us to conserve cash and preserve value. In the second and third quarters, we led the industry by curtailing a significant portion of our production based on clear economic criteria. We completed critical dispositions, achieved two significant discoveries in Norway, acquired high-value acreage in the Montney and progressed major projects across our global operations. Our balance sheet remained strong and we satisfied our commitment to return greater than 30% of cash from operations to shareholders.

Our relative success navigating 2020 put us in a strong position to acquire Concho in another transformational

## COVID-19 RESPONSE

At the beginning of the COVID-19 pandemic, we put in place three core priorities: protect our people, mitigate the spread of the virus and safely run the business. In conjunction with these priorities, we developed a governance structure and protocols that have served us well in managing through the pandemic, including:

• Standing up a Crisis Management Support Team with global reach.

• Communicating regularly with employees and providing them with sufficient flexibility, including remote work capability, to confront the pandemic's unique challenges.

• Implementing rigorous sanitization protocols to keep our workplace safe.

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moment in our history. ConocoPhillips is now the world's largest independent oil and gas company, with production of approximately 1.5 MMBOED. The combination of Concho's best-in-class position in the Permian Basin and ConocoPhillips' best-in-class globally diverse portfolio creates a company of unmatched scale and quality among independent peers. To ensure the acquisition's success, we established a governance structure with responsibility to oversee integration activities and deliver the expected transaction values. In the brief time since completing the acquisition

"We want to sincerely thank our employees for their efforts. Together, they worked successfully to overcome unprecedented challenges. It is with tremendous pride and gratitude that we reflect on their contributions."

We responded swiftly to local COVID-19 realities and did so in keeping with our SPIRIT Values. In our field locations, our personnel performed self-assessments for symptoms each day. When appropriate, to provide further protection we implemented travel restrictions and enforced additional safety protocols for business-critical travel.

We took a cautious approach to occupancy levels in certain operations to minimize health risk exposure and enable effective social distancing. A significant portion of our office staff worked remotely and productively for extended periods. They then safely returned as our global offices executed carefully designed and flexibly phased reentry plans in compliance with national, state and local guidelines. These measures
Ryan Lance discusses COVID-19 safety protocols.

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proved effective at mitigating the spread of COVID-19 and reducing business disruptions. Of course, as of this writing the pandemic persists, so we continue implementing and evolving our COVID-19-related business continuity plans.

We also maintained support of our local communities by donating more than $1.3 million in relief aid, food and medical supplies to area hospitals and first responders, in addition to our planned contributions.

All of us at ConocoPhillips extend our deepest sympathies to those impacted. We also express our sincere gratitude to everyone inside and outside the company helping us manage through this ongoing global health crisis.

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in mid-January, we have already exceeded our initial estimates of expected value capture from the combined company.

## LOOKING TO THE FUTURE

2020 brought other challenges in the form of stakeholder expectations for the sector to deliver stronger financial as well as climate-related performance. While ConocoPhillips has a long history of fully meeting our corporate responsibilities, we have now embraced a commitment to three essential mandates that tie clearly to our value proposition: provide affordable energy to the world by investing in the lowest-cost resources, generate competitive financial performance and demonstrate ESG leadership and excellence.

In October 2020 we became the first U.S.-based oil and gas company to adopt a Paris-aligned climate-risk strategy with specific targets, including:

• Setting an ambition to become a net-zero company for gross operating (scope 1 and 2) emissions by 2050 and, through our membership in the Climate Leadership Council, advocating for a U.S. carbon price to address end-use (scope 3) emissions.

## DIVERSITY AND INCLUSION

At ConocoPhillips we are building a truly diverse culture of belonging in which everyone feels valued. Despite the many business disruptions in 2020, we took meaningful and visible steps forward on our diversity and inclusion efforts. Among these, we:

• Diversified the standing group of leaders across our company who comprise our D&I Council.

• Published internal dashboards showing five-year trends across a broad range of demographic data for our global and U.S.-based employees.

• Conducted a company-wide D&I-focused survey of our workforce to identify key priorities critical to future progress.

We also added Martin Luther King Jr. Day to the U.S. paid holiday schedule, raised the Pride flag over our corporate headquarters and took actions to embed
• Strengthening our commitment to operational greenhouse gas emissions intensity reductions, setting a target of 35–45% reductions by 2030.

• Endorsing the World Bank Zero Routine Flaring by 2030 initiative, with an ambition to meet the goal by 2025.

• Including ESG performance in executive and employee compensation programs.

So, despite 2020's many unforeseen events, we took sound actions to manage through the difficult environment. And while some of last year's challenges persist, we enter 2021 with fresh, new momentum that we believe will make ConocoPhillips a sustained industry leader.

Thank you for your continued support.

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Ryan M. Lance

Chairman and Chief Executive Officer
Feb. 16, 2021

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D&I considerations into our feedback and selection processes.

These are only initial steps, and we recognize there is much work to do. But our 2020 progress brought renewed focus and attention to D&I and provided momentum to this important part of our culture.

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