Is unconventional oil and gas a sustainable game changer?

Is Unconventional Oil and Gas a Sustainable Game Changer?

Antoine Rostand - President Schlumberger Business Consulting

John Knight - Executive Vice President Global Strategy and

Business Development Statoil

Marianne Kah - Chief Economist ConocoPhillips

Alex Krueger - President and Co-Head of Buyout Funds First Reserve

CHAIR Herman Franssen - Executive Director Energy Intelligence and

Conference Chairman

Is Unconventional Oil and Gas a Sustainable Game Changer?

CHAIR Herman Franssen

Executive Director Energy Intelligence

and Conference Chairman

Is Unconventional Oil and Gas a Sustainable Game Changer?

Antoine Rostand

President

Schlumberger Business Consulting

0

1

2

3

4

5

6 -40%

Fayetteville MarcellusHaynesvilleBarnett

-24%-29%-41%

201120092008 2010 2013

More maturedevelopments

Newer

developments

US market

gas price

range

2010-2013

Source: SBC Analysis

USD/McfBREAK EVEN PRICES IN MAJOR US SHALE GAS PLAYS

EXAMPLE: NORTH AMERICA LNG LANDED COST IN JAPAN2

GLOBAL LNG DEMAND AND NORTH AMERICA GAS POTENTIALTcf USD/Mcf

1,170

520

3422

$5/Mcf$4/McfHighBase

4.05.2

4.0

3.0

4.64.6

2.8

4.31.1

Resource

Gulf Coast w/o Panama Canal

Conversion

Shipping

12.9

West Coast

10.9

Gulf Cost w/ Panama Canal3

9.8

2025 Global LNG Demand

NAM Gas Resource Potential1

15-24 years of demand

34-53 years of demand

1: North America natural gas resource potential after supplying local demand (which is expected to range from 30 to 35 tcf/year from now to 2025)2: Acreage cost is included as leasehold cost and royalty 3: North American NG Cost ($4.4/Mcf) is based on internal and external breakeven analysis. This is largely industry consensus view of the Street. Most contracts assume $5/ MMBtu over the long term. All other NG, conversion and shipping costs are based on external estimatesSource: EIA; IHS; Bank reports; SBC Analysis

40

80

60

3,000 6,000

0

4,5000 1,500

100

20

Remaining TRR (Billion barrels)

Production cost(2012, $ per barrel)

Already produced ME & North Africa

Extra heavy oil&

bitumen

Artic

Other conventionalEOR

$ per barrel, billion barrelsSUPPLY COST OF LIQUID FUELS

LTO

Source: IEA World Energy Outlook 2013; SBC analysis

5863

7074

93

6056

464038

0

20

40

60

80

100

2013201220112009 2010

Majors Full cycle cost

LTO Breakeven price -11%

+12%

CAGR

1: F&D + Lifting costs. Pure unconventional NAM players2: S&GA + F&D + Total Production + WACC. MajorsSource: 1) Rystad, IHS; 2) Evaluate Energy; Goldman Sachs

USD/boeLTO BREAKEVEN PRICE1 AND MAJORS FULL CYCLE COST2

John Knight

Executive Vice President Global Strategy and

Business Development Statoil

Is Unconventional Oil and Gas a Sustainable Game Changer?

Statoil’s positions in three core unconventional plays

EAGLE FORD BAKKEN MARCELLUS

• Entered October 2010

• ~ 61,000 net acres

• Production 30,000 boepd

• Entered October 2011

• ~ 335,000 net acres

• Production 56,000 boepd

• Entered November 2008 and

December 2012

• ~ 612,000 net acres

• Production 123,000 boepd

Will the next ten years be a re-run of the past ten years?

¹Total shareholder return = The total amount returned to

investors (capital gains + dividends) in USD

CAGR 15,4%

CAGR11,1%

CAGR9,4%

Will conventional exploration be able to sustain IOC’s growth post 2020?

Comparison of produced & discovered volumes

5 year average (bn boe) 1960 – 2013

Comparison of discovered volumes

Discovered, recoverable volumes (mmboe) 2012 - 2014

Is Unconventional Oil and Gas a Sustainable Game Changer?

Marianne Kah, Chief Economist

ConocoPhillips

Cautionary Statement

17

The following presentation includes forward-looking statements. These statements relate to future events, such as anticipated revenues, earnings,business strategies, competitive position or other aspects of our operations or operating results or the industries or markets in which we operate orparticipate in general. Actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Thesestatements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that may prove to be incorrect and aredifficult to predict such as oil and gas prices; operational hazards and drilling risks; potential failure to achieve, and potential delays in achieving expectedreserves or production levels from existing and future oil and gas development projects; unsuccessful exploratory activities; unexpected cost increases ortechnical difficulties in constructing, maintaining or modifying company facilities; international monetary conditions and exchange controls; potentialliability for remedial actions under existing or future environmental regulations or from pending or future litigation; limited access to capital orsignificantly higher cost of capital related to illiquidity or uncertainty in the domestic or international financial markets; general domestic andinternational economic and political conditions, as well as changes in tax, environmental and other laws applicable to ConocoPhillips’ business and othereconomic, business, competitive and/or regulatory factors affecting ConocoPhillips’ business generally as set forth in ConocoPhillips’ filings with theSecurities and Exchange Commission (SEC). We caution you not to place undue reliance on our forward-looking statements, which are only as of the dateof this presentation or as otherwise indicated, and we expressly disclaim any responsibility for updating such information.

Use of non-GAAP financial information – This presentation may include non-GAAP financial measures, which help facilitate comparison of companyoperating performance across periods and with peer companies. Any non-GAAP measures included herein will be accompanied by a reconciliation to thenearest corresponding GAAP measure in an appendix.

Cautionary Note to U.S. Investors – The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possiblereserves. We use the term "resource" in this presentation that the SEC’s guidelines prohibit us from including in filings with the SEC. U.S. investors areurged to consider closely the oil and gas disclosures in our Form 10-K and other reports and filings with the SEC. Copies are available from the SEC andfrom the ConocoPhillips website.

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16

18

Mill

ion

Bar

rels

pe

r D

ay

Conventional Production

U.S. Tight Oil

NGLs

Alaska Crude

High Resource Case

NGLs

Source: U.S. Department of Energy, EIA, Annual Energy Review 2013, Table 5.1b. Forecast from EIA Annual Energy Outlook 2014, Various forecasts*Includes crude, condensate and natural gas liquids production

"Peak Oil"

18

U.S. Oil Production Forecast

Eagle Ford Efficiency Improvement

Enerdeq Database 8/1/14. Play level month averages. IP rate – Initial 24 hour production rate for wellhead crude.

Drilling Days Oil Initial Production Rate

19Source: IHS Inc. Use of this content authorized in advance by IHS; further use or redistribution strictly prohibited without written permission from IHS. All rights reserved .

0

200

400

600

800

1,000

1,200

2008 2009 2010 2012 2013 2014

10

15

20

25

30

35

40

45

50

2008 2010 2013 2016

Bar

rels

pe

r D

ay

Spu

d t

o R

ig R

ele

ase

Government Policy Enablers• Positive business climate for

investment– Realistic tax policy– Efficient and effective regulation

• Resource access– Timely permitting– Private mineral rights

• Infrastructure availability– Timely development– Open access

• Access to markets– Free trade– Free market pricing

20

Crude Export Ban Constrains U.S. Oil Production• Domestic crude price discounts

would reduce investment in new production– Some wells and plays become

uneconomic

– Reduced cash flow to invest

• Without crude exports, U.S. crude production would be ~1.5-3.0 MMBD lower in 2020

21

0

1

2

3

4

5

6

7

8

2013 2014 2015 2016 2017 2018 2019 2020

Flat production

3.5

M

MB

D3

.1

MM

BD

2015-2020 Cumulative CapEx:

$620 Billion(Rystad Energy)

Source: ConocoPhillips, for decline rates, Rystad for forecast and cumulative capital expenditures*Brookings Institution, “Changing Markets: Economic Opportunities from Lifting the U.S. Ban on Crude Oil Exports,” September, 2014

U.S. Tight Oil ProductionExcluding NGLs

Mill

ion

Bar

rels

pe

r D

ay