ConocoPhillips Approves 2008 Capital Budget of $14.3 Billion, Including $0.7 Billion of Capitalized Interest

Additional $1 billion of investments/funding of affiliates; Additional cash available for dividends and share repurchases

ConocoPhillips [NYSE:COP] today approved a 2008 capital budget of $14.3 billion, including cash capital expenditures and capitalized interest. Loans to affiliates and contributions to fund the upstream business venture with EnCana add an additional $1.0 billion, bringing the total authorized capital program to $15.3 billion.

“Our 2008 planned capital program enables us to continue pursuing strategies for value-generating growth,” said Jim Mulva, chairman and chief executive officer. “The business environment remains challenging, with inflation in materials and services impacting both project investment and day-to-day operating costs. We have, however, built a strong foundation of assets that enables us to generate competitive investment opportunities. We will continue to exercise capital discipline and selectively invest in projects that add production and increase our capability to add value over the long term. This capital program will permit us to pursue a complementary financial strategy designed to strengthen distributions to shareholders through increased dividends and continued share repurchases.”

Approximately 80 percent of the company’s 2008 total authorized capital program will be allocated to its Exploration and Production segment. The Refining and Marketing segment will receive about 18 percent, with the remaining being spent in Emerging Businesses and Corporate. Additional details on the capital program for each of the company’s business segments are provided below.

“We look forward to discussing our 2008 capital and operating plans in greater detail when we meet with the investment community on March 12, 2008, in New York,” said Mulva.

Exploration and Production (E&P)
E&P’s 2008 capital budget is expected to be $11.0 billion, including capitalized interest of $0.6 billion. This, combined with approximately $0.4 billion for loans to affiliates and the company’s $0.6 billion of contributions to the upstream business venture with EnCana, results in a total E&P capital program of $12.0 billion. This program, and the regional totals below, include the capital allocated for the company’s global gas activities, as well as $1.6 billion for worldwide exploration activities.

In the U.S. Lower 48, the company intends to spend about $3.3 billion, primarily on its ongoing development programs, including those in the Bossier and Lobo trends and the San Juan, Permian, Fort Worth and Piceance basins. Funds also will be spent on the development of new projects, including the Rockies Express natural gas pipeline project.

Spending of $2.2 billion in Canada will primarily focus on ongoing development programs in the Western Canada gas basins and progression of heavy oil projects, including those associated with the EnCana business venture.

About $1.8 billion has been allocated for projects in the North Sea, including the continued development of the J-Block fields, Britannia and its satellite fields, and existing and new opportunities in the Ekofisk area.

Within the Asia Pacific region, the company anticipates expenditures of approximately $1.7 billion. The majority of the funding will support the continued development of Bohai Bay in China; oil and gas reserves offshore in Block B and onshore South Sumatra in Indonesia; and fields offshore Malaysia and Vietnam.

In the Russia and Caspian Sea region, about $1.3 billion of capital spending will primarily support the continued development of the Kashagan field in the Caspian Sea and the Yuzhno Khylchuyu field in northern Russia.

E&P capital spending of $1 billion in Alaska is expected to be primarily directed toward the development of the Alpine satellites and the West Sak heavy-oil field, as well as continued development within the existing Prudhoe Bay and Kuparuk areas.

In the Middle East and Africa, the company estimates it will spend approximately $0.7 billion, primarily on the continued development of the Qatargas 3 project in Qatar, the Waha Concessions in Libya, and several onshore developments in Nigeria.

Refining and Marketing (R&M)
The 2008 capital program for R&M is approximately $2.8 billion, including capitalized interest of $0.1 billion.

The company has allocated about $1.6 billion for U.S. refining, primarily for projects related to sustaining and improving the existing business with a focus on reliability, energy efficiency, capital maintenance and regulatory compliance. Work continues at a number of refineries on projects to increase crude oil capacity, expand conversion capability and increase clean product yield.

International R&M is expected to spend approximately $0.4 billion, with a focus on projects related to reliability, safety and the environment, as well as an upgrade project at the Wilhelmshaven, Germany, refinery and the advancement of a full-conversion refinery project in Yanbu, Saudi Arabia.

The remaining $0.8 billion of R&M capital is for projects in the company’s domestic transportation and marketing businesses, including the Keystone crude oil pipeline project.

Emerging Businesses and Corporate
The 2008 capital program for Emerging Businesses and Corporate is approximately $0.5 billion. The majority of the spending is earmarked for power generation, primarily for the second phase of an expansion project at the company’s Immingham Combined Heat and Power plant in the United Kingdom.

In Corporate, capital expenditures are expected to be primarily for global information systems and services projects.

Energy Resource Development
In addition to the research and development funds already dedicated to projects as part of the 2008 capital program, the company will again allocate more than $150 million for research efforts focused on the development of unconventional oil and gas resources and the development of new energy sources, such as alternatives and renewables.

“ConocoPhillips believes a number of energy sources are necessary to meet the demands of consumers,” said Mulva. “We are committed to diversifying our energy resource development and improving energy efficiency, and doing so in an environmentally responsible manner.”

Asset Rationalization Program
“Our asset rationalization program is expected to generate proceeds of approximately $3.1 billion during 2007,” said Mulva. “In 2008, we anticipate completing the disposition of our U.S. retail assets, and we will continue to evaluate additional opportunities to optimize and strengthen our asset portfolio.”

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