ConocoPhillips First-Quarter 2012 Interim Update

Bohai Bay

Gross production from the Peng Lai Field in Bohai Bay is currently at 40,000 barrels per day under an approved interim reservoir management plan. As previously announced, under an agreement with China’s Ministry of Agriculture (MOA), the company, as operator of the field, paid approximately $160 million to settle public claims for alleged fishery damage and to fund settlement of private claims from potentially affected fishermen in relevant Bohai Bay communities. The company also paid the MOA approximately $16 million to fund work to improve fishery resources and for related projects in the area. A revised environmental impact assessment and overall development program have been submitted to the appropriate government agencies as part of the process for returning the field to normal operation. The company is currently engaged in administrative discussions with the State Oceanic Administration to resolve outstanding claims.

Mackenzie Delta

ConocoPhillips has been involved with three other energy companies, as members of the Mackenzie Gas Project, on the development of the Mackenzie Valley Pipeline and gathering system, which was proposed to transport onshore gas production from the Mackenzie Delta in northern Canada to established markets in North America. The company has a 75 percent interest in the Parsons Lake natural gas field, one of the primary fields in the Mackenzie Delta, which would have anchored the pipeline development. In the first quarter of 2012, the co-venturers elected to suspend funding of the project due to a continued decline in market conditions and the lack of acceptable commercial terms. The company expects to record a noncash impairment for the carrying value of the undeveloped leasehold and capitalized project development costs of approximately $525 million after-tax, during the first quarter of 2012.

Refining and Marketing (R&M)

The table below provides market indicators for regions where the company has significant refining operations. The Weighted U.S. 3:2:1 margin is based on the geographical location and capacity of ConocoPhillips’ U.S. refineries. Realized refining margins are likely to differ due to the company’s specific locations, configurations, crude oil slates or operating conditions. ConocoPhillips’ refining configuration yields somewhat higher distillate and secondary product volumes, and lower gasoline volumes than those implied by the market indicators shown below.

			Market Indicators ($/BBL)
						1Q 2012			1Q 2011			1Q 2012 vs. 1Q 2011			4Q 2011
			Refining Margins
			East Coast WTI 3:2:1			$25.79			$19.09			$6.70			$22.94
			East Coast Brent 3:2:1			10.29			8.10			2.19			7.69
			Gulf Coast WTI 3:2:1			24.22			17.25			6.97			19.37
			Mid-Continent WTI 3:2:1			21.33			18.95			2.38			20.75
			West Coast ANS 3:2:1			16.63			16.14			0.49			10.74
			Weighted U.S. 3:2:1			22.01			17.76			4.25			18.16
			NW Europe Dated Brent 3:1:2			12.73			12.31			0.42			13.97
			Singapore Dubai 3:1:2			15.67			16.33			(0.66)			15.12
			WTI/Maya Differential			(5.94)			4.67			(10.61)			(9.35)
			WTI/Brent Differential			(15.50)			(10.99)			(4.51)			(15.24)
			Source: Platts and Argus

While the table above reflects that refining market crack spreads were generally higher than in the first quarter of 2011, R&M’s results for the first quarter of 2012 are expected to be negatively impacted by significantly weaker crude differentials and secondary product margins due to higher crude prices. As is typical in a period of rapidly rising crude prices, the company also expects marketing margins to be adversely impacted due to the lag in rack prices. The company’s average worldwide crude oil refining capacity utilization rate for the first quarter is anticipated to be in the low-90-percent range. The domestic and international utilization rates are expected to be in the high-80-percent range and high-90-percent range, respectively. First-quarter turnaround costs are anticipated to be approximately $170 million before-tax.

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