# Letter to Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-e-p/NYSE_COP_2021/NYSE_COP_2021.mmd` · pages 1-7_

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Letter to Shareholders

Dear Fellow Shareholders,

For ConocoPhillips, 2021 saw remarkable achievements during a constructive time for our company and industry. Coming out of one of the most challenging years for our sector, we entered 2021 in an advantaged position, which we attribute to our disciplined business model — generating free cash flow, maintaining a strong balance sheet, delivering compelling returns on and of capital, and

"ConocoPhillips enters 2022 a stronger, more resilient company with momentum from a transformative year. We are prepared to reliably generate competitive returns while thoughtfully moving forward as a responsible and valuable player throughout the energy transition."

demonstrating ESG leadership. These principles enabled us to deliver strong financial, operational and organizational performance, and complete two highly accretive and transformative transactions in the Permian Basin.

Underpinning our value proposition is our Triple Mandate, which ensures that everything we do aligns with the underlying realities of our business as society focuses on transitioning toward a lower-carbon energy future. Our actions throughout 2021 supported and enhanced three objectives:

• Meeting energy transition pathway demand.

• Delivering competitive returns on and of capital through the price cycles.

• Achieving our net-zero ambition on operational emissions.

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## A Year of Operational Progress

We began 2021 by completing the acquisition of Concho Resources and successfully integrating its talented workforce and assets into our company, ultimately exceeding our target and delivering $1 billion in synergies. Then late in the year we further expanded our Permian Basin holdings through acquisition of Shell's Permian assets, adding complementary properties that feature low cost of supply and low greenhouse gas emissions intensity. These two additions to our existing holdings made

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ConocoPhillips a major producer in the Permian, which is now the world's most productive oil field and a leading contributor to recent and projected future U.S. production growth.

Globally, we produced nearly 1.6 million barrels of oil equivalent per day and achieved significant milestones that included startups from GMT2 in Alaska, a third Montney multi-well pad in Canada, Phase 2 projects at Malikai and SNP in Malaysia, and completion of the Tor II development in Norway.

We further high-graded our portfolio with several noncore Lower 48 asset sales. In the Asia Pacific region we announced the sale of our Indonesia assets for about $1.4 billion and exercised our preemption rights to increase our stake in Australia Pacific LNG. Collectively our 2021 transactions helped reduce both the average supply cost and greenhouse gas emissions intensity of our more than 20-billion-barrel resource base.

## Meeting Commitments

Fulfilling longstanding commitments, during 2021 we generated a 14% return on capital employed and returned 38% of cash from operations through \(2.4 billion in dividends and \)3.6 billion of share repurchases. We introduced a third return tier, a variable return of cash (VROC), with the initial two payments scheduled for the first and second quarters of 2022.

2021 saw continued momentum toward our net-zero emissions ambition. We improved our Scope 1 and 2 greenhouse gas emissions-intensity reduction targets to 40-50% from a 2016 baseline on a net equity and gross operated basis by 2030, from the previous 35-45% target on only a gross operated basis. We thus committed to working with partners that operate net-equity assets to ensure that their climate strategies align with our own. We established a Low-Carbon Technologies organization to evaluate potential investments in emissions-reduction and low-carbon business development opportunities.

## 2021 Highlights

Generated earnings of $8.1 billion

Produced 1.567 million barrels of oil equivalent per day (including Libya)

Made two transformative and accretive acquisitions that added production and long-term potential

Introduced Human Capital Management Report

Started up projects in Alaska, Canada and Malaysia; completed Tor II in Norway

Returned $6 billion to shareholders

## Who We Are

ONE OF THE
WORLD'S
LARGEST
INDEPENDENT
E&P
COMPANIES

![](images/2_0.jpg)

AMONG LEADING
PRODUCERS
FROM NORTH
AMERICAN SHALE

![](images/2_1.jpg)

$91B
IN TOTAL ASSETS

![](images/2_2.jpg)

14
COUNTRIES WITH
OPERATIONS AND
ACTIVITIES

![](images/2_3.jpg)

BALANCED,
DIVERSIFIED
GLOBAL
PORTFOLIO

![](images/2_4.jpg)

~9900
EMPLOYEES

![](images/2_5.jpg)

As of Dec. 31, 2021

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## Focusing on Our People

Our strategy, performance, culture and reputation are fueled by our world-class workforce. They made possible all our 2021 achievements. We highlighted their stories in our inaugural Human Capital Management Report, which details our ongoing actions to inspire a compelling culture that attracts, retains and develops our people.

We took multiple steps to strengthen our SPIRIT Values-based culture, particularly as we integrated employees from Concho and Shell. We rolled out multi-year global diversity, equity and inclusion (DEI) priorities and tactics that will guide our actions over the next few years. At several office locations we implemented a Hybrid Office Work (HOW) program offering increased flexibility to work from home two days a week, while retaining the benefits of in-person office-based interaction and collaboration on the other three days.

Ensuring our employees' health and well-being remained an ongoing focus as the world continued adapting to the realities of COVID-19. Our actions were guided by three companywide priorities set during the pandemic's early stages: protect employees and contractors, mitigate COVID-19's spread and safely run the business. Our Crisis Management Support Team provided overall guidance, frequent communications and flexible programs to help manage the challenging environment.

## Looking Forward

ConocoPhillips enters 2022 a stronger, more resilient company with momentum from a transformative year. We are prepared to reliably generate competitive returns while thoughtfully moving forward as a responsible and valuable player throughout the energy transition. We sincerely thank our employees for their efforts during a highly productive year, and our shareholders for their continuing support.

![](images/3_0.jpg)

Ryan M. Lance
Chairman and Chief Executive Officer
Feb. 17, 2022