Gary Russell - GM of Investor Relations Jim Mulva - Chairman and CEO John Carrig - EVP of Finance and CFO

Dave Gutterman - Hurrington Research Doug Terreson - Morgan Stanley Michael LaMotte - J. P. Morgan Paul Cheng - Lehman Brothers Eric Milkie - Merrill Lynch Doug Leggate - Citigroup Mark Gilman - Benchmark Company Neil McMahon - Sanford Bernstein

Good day, ladies and gentlemen, and welcome to the ConocoPhillips fourth quarter 2007 earnings conference call. My name is Jen, and I will be your coordinator for today. (Operator Instructions) I will now turn the presentation over to Mr. Gary Russell, General Manager of Investor Relations. Please proceed, sir.

Thanks, Jen, and welcome everyone to our conference call this morning for the fourth quarter 2007. Joining me this morning is Jim Mulva, our Chairman and Chief Executive Officer and John Carrig, our Executive Vice President of Finance and Chief Financial Officer. The presentation that we will be going through this morning, has been prepared to help you more fully understand the financial and operating results of the company during the fourth quarter of 2007. You can find this presentation and access it on our web site, conocophillips.com. On page two, you are familiar with our Safe Harbor statement. It essentially says that during our presentation today and answering any questions that you might have, that we will be including forward-looking statements based on what we currently expect. Actual results may differ materially from those expectations. You can find a list of items that might cause material differences in our SEC filings. Now I will turn this call now over to Jim Mulva.

Okay. Gary, thank you, and we appreciate all those who are participating in our conference call. I'm really on page three, which is the fourth quarter highlights. You can see in the fourth quarter, our net income was $4.4 billion. Our operations in the quarter generated $6.9 billion of cash. We reduced our debt-to-cap ratio to 19%, and we purchased $2.5 billion of our common stock. On our upstream business we've produced 2.26 million BOE a day, and that includes an estimated 426,000 BOE per day from our LUKOIL Investment segment. On the downstream, we improved our crude processing capacity utilization by 1% from the previous quarter to 95%. Now, I'm moving on to page number four. Total company net income, where we compared the fourth quarter to the prior quarter. You can see in the fourth quarter, net income of $4.4 billion, that's $2.71 per share, and that's about $700 million more than the prior quarter. Then we start on the left side of the chart, you can see that we have lower gains this quarter from our asset rationalization program, which reduced our fourth quarter net income by $211 million when you compared to the third quarter. Then moving over towards the right, prices, margins and other market impacts improved fourth quarter income by about $1.4 billion, while higher volumes in E&P were more than offset by lower volumes in LUKOIL and Chemicals, thereby reducing fourth quarter net income $57 million when compared to the third quarter. Now, we had higher production taxes in Alaska as a result of recent legislation that also reduced fourth quarter net income by $234 million. And then there are number of other items, that in the aggregate reduced fourth quarter net income by $243 million on a sequential basis. I am going to talk about all these variances in more detail in the subsequent slide. So, I am going to move on to page number five, total company cash flow. Can we start on the left, and you can see that we generated $6.9 billion of cash from operations in the fourth quarter, that's about $1 billion more than the third quarter. Then this along with our beginning cash balance, provided about $8.3 billion in available funds, that was available for use in the fourth quarter. So during the quarter we spent just about $4.3 billion on our capital program. We paid $652 million in dividends, reduced our debt by $189 million and we repurchased 2.5 billion of our shares. We have $515 million in proceeds from assets sales, and $243 million in other sources to give to you up near that $758 million green bar towards the right side. And that left us with a cash balance at the end of the fourth quarter of $1.4 billion, just a little bit more than what we had at the end of the third quarter. Now I am going to go on to page six, total company cash flow where we look at what were all the funds that were available in 2007 on the left hand side and then what did we do with all those funds. Again, this summarizes for the full year 2007. If you look at the pie chart on the left you can see that during the year we generated about $24.6 billion in cash from operations, and we had $3.6 billion from asset sales and other sources bringing us to total available funds of $28.1 billion in cash. Then you go look on the right, the pie chart in the right you can see that we spent $12.9 billion on our capital investment program. Now that's slightly lower than our announced program of $13.5 billion. We paid out $2.7 billion in dividends and purchased $7 billion of out stock. Of that $7 billion in purchase for our stock, about $5 billion was in the third and fourth quarter. And we reduced our debt by $5.4 billion. So you can see essentially on the pie chart to the right, a little bit less than half of our funds were directed toward our capital program, and a little more than half was debt reduction, share repurchase and dividends. Now for 2008, we do not plan for debt reduction. Those funds are really going towards our capital program, our dividends and share repurchase. We have $10 billion remaining in our previously announced share repurchase program, and we expect first quarter repurchases to be between $2 billion and $3 billion. I'm going to move on to slide number seven. We'll look at the capitalization structure of the company. On the left hand side of the slide you can see we ended 2007 with $90 billion of equity and $21.7 billion of debt. We brought our debt-to-capital ratio down to 19%, which is slightly below the bottom of our target range at 20% to 25%. I'm going to move on to the operating segments of the company, first E&P on page eight, and you can see the highlights when we look at the comparison of the fourth quarter with the third quarter. Our realized crude oil and natural gas prices around the world were higher. Our realized crude oil price was $84.53 a barrel in the fourth quarter. That was $13.19 a barrel higher and our realized natural gas price in fourth quarter was $6.66 per MCF, and that was a $1.10 per MCF higher. Consistent with our previous guidance, E&P's production and sales volumes were higher than the previous quarter. I'll talk more about this on the next slide, and also as mentioned earlier, the fourth quarter earnings were negatively impacted by the effect of the tax changes in Alaska which increased our production taxes. So now I'm moving on to page nine, which looks at our E&P production. Production in the fourth quarter from our E&P segment was 1.84 million BOE a day and that was 76,000 BOE a day higher than the third quarter. As you can see starting from the left we saw improved production of the United Kingdom and Alaska due to seasonality and lower planned and unplanned downtime. We increased production 9,000 BOE a day essentially in the Lower 48, and then when you add 426,000 BOE a day, which is our estimate of the equity share of LUKOIL's production, you can see our totals of 2.26 million BOE a day in the fourth quarter. Before moving on, I refer back to our conference call in the second quarter. I mean in the second quarter we recognized the effect of the expropriation of our Venezuelan position and we said at the second quarter that our full year production, including LUKOIL, would be 2.325 million BOE a day. And if you look at what we actually did in all of '07, we did that, it was 2.324 million BOE a day. So now I'm moving on to page 10 E&P net income. You can see our fourth quarter income of $2.6 billion, that's about $500 million higher than the third quarter. So I start with the red bar on the left, and you can see there, lower gains from our asset rationalization program compared with the third quarter, and its impact was the reduction of $103 million when you compare the two quarters. Prices and other market impacts improved income by $883 million. Overall, our E&P sales and production volumes in the fourth quarter were higher than the third quarter, and that's improved income $34 million. Now I'd like you to note that our crude sales volumes in the US were about 40,000 barrels a day lower than the prior quarter due to timing of shipments in Alaska. Essentially, we saw more in the third quarter, caught up in the fourth, so essentially if you look at it as over lift or under lift, we're just balanced as we go in from '07 into '08. I mentioned earlier, Alaska recently passed legislation and retroactively increased production taxes. Now the impact of this tax legislation reduced fourth quarter income $234 million, of which $95 million relates to periods prior to the fourth quarter of 2007. We also had increased production taxes in the fourth quarter as a result of higher crude oil prices and production volumes, and the majority of this is related to Alaska. Resulting decrease in net income is included with other items in the red bar on the right which shows a $54 million sequential decrease in net income. Also included in the other category, is the impact of the favorable effect of a one-time Alaska Quality Bank adjustment that occurred in the third quarter but obviously didn't occur in the fourth quarter, and we also had higher impairments. These were partially offset by deferred tax adjustments in Canada as a result of a reduction in the Canadian federal income tax and the release of escrowed funds in connection with the extinguishment of the Hamaca, that's the Venezuelan project financing indebtedness and other miscellaneous items. So, all these things were in that $54 million bar. Now I am going to move from E&P to Refining and Marketing, so I am going to slide or page 11. In our downstream business we improved our crude capacity utilization to 95%, so that's up 1% compared to third quarter. Our realized worldwide refining margins were higher than the third quarter, but our US margin stood at $11.56 a barrel, now that's $0.70 a barrel higher than the third quarter, and our international margin was $6.72 a barrel and that's $0.67 higher than the third quarter. I'll go over our realized margins in more detail in the next slide, and then, the other last point I'd like to make on this slide is that our turnaround and utility costs were also higher in the fourth quarter. So now I am going to move on to the net income of Refining and Marketing on page 12. Our fourth quarter net income was about $1.1 billion, which is approximately $200 million lower than the third quarter. You can see in the first red bar on the left that the fourth quarter did not have a $141 million benefit from tax legislation in Germany that was in our third quarter results. We also had lower gains from our asset rationalization program, and that reduced fourth quarter income by $108 million as compared to the previous quarter. Our prices, margins and other market impacts improved net income, that's a green bar, by $229 million. We previously indicated that we expected fourth quarter results to benefit from our planned crude and refined product inventory reductions. We estimate that prior year LIFO layer liquidation impact to be about $260 million, and most of this is associated with the formation of our downstream EnCana joint venture. Now as a result of our realized refining margins in the US, they were higher than the previous quarter in spite of lower US market indicators. Crude differentials, higher clean product yield and commercial trading and transactions contributed to the improvement. Now in the first quarter of 2008, we will likely be building inventories in anticipation of the switch over to summer grade gasoline, we normally do this. So, we would expect our refining business to return to a more normalized market capture, which for the US is around 75%. Now given our, hydroskimmer refinery at Wilhelmshaven, our international market capture is lower than 75%, so on a blended basis around the world you might look at something like 70%. So in other words, we don't see the inventory impacts that we experienced as a result of the EnCana joint venture and market movements that took place in 2007 to have the same impacts as we go into the first quarter in 2008. Our overall volumes in Refining and Marketing were higher than the prior quarter. That's consistent with higher refinery utilization, but then you have to look at the regional mix. The net impact resulted in the $36 million reduction in income. Now we have higher value West Coast and Gulf Coast refining volumes were lower than the previous quarter, but those volumes were more than offset by lower value volumes from our East Coast operations and the Central US and by much lower value volumes from the Wilhelmshaven refinery. But then there were other items in the aggregate. You can see that red bar that reduced income by $129 million. These items were higher operating costs, higher turnaround costs, utilities and higher environmental accruals. And I'm going to go from 12 to page 13. This is where we talk about LUKOIL and the joint ventures and corporate costs. Our estimate of fourth quarter equity earnings from LUKOIL was $649 million. This was $262 million higher than the previous quarter, mainly due to higher estimated realized prices in the absence of an $85 million reduction recorded in third quarter to align our estimate to actual results reported by LUKOIL. The net effect of alignment was an improvement in the fourth quarter income regarding LUKOIL of $94 million. Turning to the Midstream business, income was $162 million compared to $104 million in the third quarter. Chemicals joint venture with Chevron contributed net income of $99 million. This included a one-time capital loss tax benefit of $65 million, the $65 million is included in the $99 million. Our income in the third quarter was a $110 million. Our Emerging Businesses contributed $2 million in the fourth quarter, that's down a $1 from $3 million in the prior quarter. Now our Corporate costs were $271 million in the fourth quarter compared to $320 million last quarter. This decrease was the result of lower net interest expense, and lower acquisition-related cost, partially offset by the net impact of foreign exchange losses. For guidance going forward, I think you should be looking at around $300 million in quarterly corporate costs. Now moving onto the next page, 14. We look at our E&P metrics, first E&P and then second the downstream. By the way our Peer Group, when we look at our Peer Group, we look at the largest integrated international oil companies, that's made up of Exxon Mobil, BP, Shell, Total and Chevron. So this chart shows E&P's income and cash per BOE for the years 2003 through 2006, as well as first three quarters, and then we have the fourth quarter of '07. You know the effect of purchase accounting has impacted our earnings per BOE when compared to peers. In both '06 and '07 you can see our cash contribution per BOE now remains very competitive. Since we're the first international oil company, we just don't have comparisons at this point for the fourth quarter. Now moving onto slide 15, Refining and Marketing, Peer Group is the same, the largest international public integrated oil companies, and you can see our income per barrel and our cash per barrel continues to be quite competitive with our Peer Group. And I move onto page 16, we look at return on capital employed. The shaded area shows the same international oil company peer group. And the bar chart reflects that ROCE with no adjustments for purchase accounting, we do make adjustments for the Peer Group to reflect purchase accounting and that is shown how the adjustments are made in table 3 attached to this presentation. Our annualized fourth quarter ROCE was 15%, that's 1% higher than the first three quarters annualized. And then I go to the last slide or page 17, outlook. We just recently announced yesterday, that we acquired 50% in the Keystone crude oil pipeline. We have significant transportation requirements on the pipeline, so it's logical for us to have equity ownership. This pipeline will play a critical role in supplying Canadian crude oil to refineries in the US Mid-Continent. We also recently announced the decision to join and support the World Bank's Global Gas Flaring Reduction partnership. We think that this is a very good program minimizing the environmental impact, improving the energy and material efficiency of our operations. I think this partnership will do lot of good things for reducing gas flaring around the world. With respect to our production in the first quarter, we expect our E&P first quarter segment production will be 1.8 million BOE a day, now remember the 1.8 million BOE a day excludes the LUKOIL segment. And we expect, that it's essentially flat, the same as the fourth quarter. We expect exploration expenses to be in the range of $250 million to $300 million in the first quarter. Downstream, we expect worldwide refining crude oil capacity utilization to be in the mid 90% range. Turnaround costs in the first quarter to be about $125 million before tax. With respect to our share repurchases, we will be repurchasing between $2 billion and $3 billion in the first quarter. Remember we've got a remaining $10 billion on our program that we have for 2008. And then we continue to work on our asset rationalization efforts as we go into 2008, and that includes a completion of disposition of our US retail assets and we are always looking at other assets that we feel may have more value in a tax efficient way to others. And then, as you know we look forward to discussing in far more detail our 2008 and subsequent years' capital and operating plans when we meet the investment community in New York on March 12th. So that completes the presentation and the comments on the slide. So, Gary and John, I think we are ready now to take questions that anyone has of us.

Okay, Jen, I think we are ready for questions if you'll queue them up. Dave Gutterman - Hurrington Research: Hello.

Hello, Dan. Dave Gutterman - Hurrington Research: Yeah, this is actually [Dave Gutterman with Hurrington Research]. A couple of questions for you guys, especially James. What are your operational improvement initiatives this year for manufacturing, TP and Six Sigma? And how do you see those benefiting your business?

Well, operating excellence is obviously so important, first and foremost for good safety and environmental performance and we've been on a program over the last several years, multi-year program continue to improve our operating excellence. And we believe good financial results come from good operations and good safety environmental performance. So it's a multi-year effort. A lot of emphasis on process hazard analysis, continuing to update everything that we do upstream and downstream in pipelines. And so this program has never been over, but we are always looking for that operational reliability of another 1% or 2%. So you will hear, if you come to our March 12th financial community presentation, a lot of emphasis that we have, and continue to place on, will be operational reliability. If you have reasonably higher oil prices and gas prices and crack spreads, you don't realize them if you don't run well. And so by running well, we realized that better financial performance. But by running well and not taking operations up and down, we know that we have far more safer operations and it really does contribute towards lower end and constraining our cost of operations.

Thank you, sir. Your next question is from Doug Terreson with Morgan Stanley. Doug Terreson - Morgan Stanley: Hi, Jim, congratulations on your results!

Thank you. Good morning. Doug Terreson - Morgan Stanley: On E&P and Refining and Marketing, profits were penalized by what you guys called lower net gains from asset rationalization by right around $0.13 per share and less than previous period. So, for clarification, my question regards to the absolute level of gains from asset rationalization during the period, meaning: while the sequential earnings benefit was lower, by what amount did it positively affect profits during the period?

Okay. No, John, I don't have that number immediately at hand for myself. Doug, what you are saying is: just what are the gains? Doug Terreson - Morgan Stanley: Yeah.

And net gains from what we sold in the fourth quarter? Doug Terreson - Morgan Stanley: That's right.

Well, while they look at that we also had some impairment because we wrote-down some assets, even though they weren't sold. We did write-down some things like our position in Ecuador. Doug Terreson - Morgan Stanley: Yeah.

And other places, but I don't know, maybe I have to come down.

Well, I can tell you in E&P they are about $48 million. Doug Terreson - Morgan Stanley: Okay.

In R&M, yeah, Doug, I think if you look at the certain items page, you'll pick up about $25 million for E&P and $147 million for international E&P, and a few other nits and nats, probably total $170, $180 million. Doug Terreson - Morgan Stanley: Okay.

The gains from asset disposition are pretty modest in the fourth quarter. The other thing I would say, we boys put a lot of emphasis on making sure that when we sell something, that's tax efficient. And when I just saw the report during this past day that if you look at our disposition program that we announced in the latter part of 2006, if we go through 2006 and '07, when we've already sold, it's been very tax efficient. I don't want to go on the exact number. But that's what we thought was important and we're not interested in selling something at high price and then paying half of the proceeds to tax entities. So it's been very efficient. But we continue to look as we go on to 2008, what else can we be looking at selling and making sure that it doesn't hurt us in anyway in terms of our strategic objectives, but it's also tax efficient. Doug Terreson - Morgan Stanley: Okay. And Jim, I also have a strategic question too. On Sunrise, a variety of different fields may eventually be included in that project, and liquefaction and re-gasification options are multiple too. And so I want to see: whether you can provide an update on this project? Specifically plant drilling activities in the area in 2008, if you may have? And also: whether a most likely development outcome has emerged? If there is such a thing, and if so: what it might be in your opinion?

Well, Sunrise is important to us, and we feel that as a result of Bayu-Undan, we have a really nice position in Darwin to look at doing Sunrise by taking LNG to Darwin shows as our partner at Sunrise and they've always had an interest in doing a [floating] LNG concept. Our other larger partner is Woodside. What we do, we feel that the time is come to advance and develop Sunrise. I know that East Timor feels the same way. So here recently the CEO's of Woodside, Mitchell and myself really have come to the decision that this is the year that we need to be moving out on Sunrise. In terms of whether it’s a Darwin proposal or its offshore or something else, I think this is the year that we've all agreed that we need to advance Sunrise. So hopefully, as we go through the year, this is going to come on harvest that the project to be developed. Doug Terreson - Morgan Stanley: Okay. It sounds like real progress. Thanks a lot.

Thank you. Your next question is from Michael LaMotte with J.P. Morgan. Michael LaMotte – J. P. Morgan: Thank you, and good morning. Jim, first question, just wanted clarification in the press release U.S. crude differentials is also mentioned as one of the reasons: why is their capture rate is so high, as well as clean product yield? And then in your comment you mentioned just the inventory factors. Wondering: if you could give us the sense as to how much of that capture was inventory versus as other items such as differentials?

Okay. We've said in our comments that $260 million really relates to going in to LIFO layer, that is associated with the formation of WRB joint venture with EnCana. Now we also had some pretty -- we had commercial trading results associated with how we build and reduce inventory as we go through the year to support our operations. And so that's really where it comes from. Michael LaMotte – J. P. Morgan: Okay. So, on the product side nothing really there?

No, it's just that the way we always build inventories as we go through the year getting ready for a different seasonality and then summer to the winter. And we do that in a way that gets our operating plans for our downstream operations. So we don't speculate in any way, but we do take positions that support our physical volumes and the way we handle that was done really in the right way with the market movements, it created a lot of value capture in our results. Michael LaMotte – J. P. Morgan: Okay, great. Thank you. And then, secondly, there are lot of assets on the block right now, both upstream and downstream, and obviously you've been in a rationalization mode for a while. Wondering: if you could talk about the M&A environment as we get head into '08, what you're thinking about value on the price side?

We always get this question. As a company if you look at how we've been formed since 1999, we've done mergers, we've done joint ventures, BD developments, acquisitions and recently we really haven't done that much because we really have created the company that we like. We don't feel we have glaring holes in our portfolio, but I just don't see that the M&A environment fits into plans. As we look at 2008-2009, we have a lot on our plate in terms of our capital program. If you look at the M&A environment or substantial asset acquisitions, they just don't seem to work in terms of really what's available, the quality necessarily or the price or whether it's even doable. So, we are really staying despite what we've done and how we've created our company. We are really sticking with knitting of our capital program that we've announced, which is $15.3 billion. The cash side of that $14.6 billion. We are going to be very aggressive in terms of our share repurchase and we'd like to raise our dividend each year. So, I don't see the M&A markets and sizable acquisitions fitting into our plans over the next several years. Michael LaMotte – J P. Morgan: That's great. Thanks Jim.

Thank you. Your next question is from Paul Cheng with Lehman Brothers. Paul Cheng - Lehman Brothers: Good morning gentlemen.

Good morning.

Good morning. Paul Cheng - Lehman Brothers: Jim, can you give us an update about YK, then your Timan-Pechora joint venture: how is that? Is your development progressing?

Okay, we have a small amount of production, very small, but I think really I can't remember the exact month, but it really does come out in production as we go into 2008. It's a challenging project because it's way up there in North Siberia, so it's challenging technically and that's challenging just because of harsh climatic conditions, but we expected it and we'll comeback to you on this ramping up of our production as we go through 2008. Paul Cheng - Lehman Brothers: When do you expect to get to the 200 amount? Any change from the previous guidance?

No, there is no change in previous guidance. And in terms of any new or changes to that, I'm not aware of, but we'll go through that in our financial presentation on March 12. Paul Cheng - Lehman Brothers: Okay, Jim, wondering for the Burlington Resources acquisition. It is now close to two years. If we do a look back, I'm sure that you guys did it: any positive or negative surprises from that transaction, and what you had learned, that may lead you to do somewhat differently going into the future?

Okay. First of all the volumes, the resource base and the volumes production is spot on, it's not really different from what we expected when we did the transaction. The synergy capture is higher than we expected and in terms of the Henry Hub price that we used when we made the acquisition in the first two years, it was less than what we assume and as we go through 2008, the gas prices we are seeing today are higher. So essentially as we go through 2008 to the extent that natural gas prices at Henry Hub are north of $6 to $6.50 per MCF. We essentially are capturing back where we were lower on 2006 and 2007. And so we continue with the kind of markets we're seeing today. At the end of three years, we essentially are going to be for three years average where we thought we are going to be. Paul Cheng - Lehman Brothers: So you think that the process at the time you're looking at Burlington Resources is the right process? And: you don't see any changes to that?

Well, in terms of the assumptions, we made the acquisition. Paul Cheng - Lehman Brothers: No, not assumptions, but the way how you look at, say, concession or that looking at how to evaluate those assets. Do you think that the process is -- do you reason the public is satisfied that, other than the macro environment, nothing has fundamentally changed from what you previously assumed when you're getting into the transaction?

Well, fundamentally, we look at: yes, inventories in the U.S. are higher than we would have expected as a result of weather and all weather that's summer or the winter. But our view towards natural gas markets in North America has not changed, and in fact I think we feel more bullish about natural gas markets longer-term in North America than we did at the time we announce and did the transaction. And the reason for that as far as imports coming from Canada for all the reason why there will be less imports from Canada, and we also think that the availability of LNG coming to the U.S. is going to be take longer and less amounts, because I think a lot of that LNG is going to be competed the way the stronger markets in Europe and Asia. So compared to when we actually did the transaction, we feel just as stronger and stronger about natural gas in North America than at the time we did it. And there is one other thing about Burlington, even though the natural gas prices for '06 and '07 are somewhat less than we expected when we did the transaction, are really catching up in '08. This has a very sizable cash flow. And you can see cash flow from the production and the asset base, and you can see our cash flow per BOE, you may not see the net income per barrel because you are using purchase accounting, but you do see the impact already even in the fourth quarter little bit better than natural gas price and oil price has quite an impact in our cash flow per barrel. Paul Cheng - Lehman Brothers: Sure. I find those short one, this is for John, in your pension plan asset, is there any meaningful exposure to the CDO or the [exotic] debt instruments?

No, we have not identified any meaningful exposure to the CDOs. Paul Cheng - Lehman Brothers: Thank you.

Thank you, gentlemen. Your next question is from Eric Milkie with Merrill Lynch. Eric Milkie - Merrill Lynch: Hey, good morning. Thank you for taking my question. My question relates to your strategy for increasing long-term access and exposure to the Middle East, pertaining with the spread to cut on also Abu Dhabi? And how we should think about some of your initiatives in that region? You recently signed an MOU with Qatar Petroleum to pursue energy prices outside Qatar. Do you think this could be linked downstream projects in Qatar? Or you are looking at downstream projects particularly in the LNG value chain? And other than gaining a credible partner, do you expect this partnership would improve your access to further projects in Qatar when the moratorium is lifted?

Well, first, with respect to Qatar, we've had a really strong relationship and it's been a great investment for us, first, on the chemical side and now what we are working on which is Qatargas 3, our LNG project, which is planning to start up in 2009. But obviously we want to do good job but anything we haven't got because to the extent that there is more opportunity after there you see the developments of reservoir performance of the Northfield, we know it would be strong competition, but we would like to do more in Qatar. We stock about more in Qatar that both on the chemical side through our joint venture but also we would like be doing more on both the oil and the liquid side as well as well as natural gas. The MOU that we signed and they do sign with other company bourses because of this relationship. What more could we do, to some extent inside the country, but really outside the country both upstream and downstream. And those discussions have really just started. So it's premature to say just what they would lead to, but we really do like and respect each other. We are looking for more things to do. Other countries in the Middle East that we'd like to more with., obviously we are in competition, we'd like to be doing things, some are gas with Abu-Dhabi, and hopefully other things in Abu Dhabi. Kuwait has not really opened up yet, but we'd like to see possibly, maybe we can do something in Kuwait and to the extent that we have petroleum oil and we have security, we'd like to be doing things in Iraq. We can't do anything with Iran, but to the extent that that's maybe at some point in time sanctions get lifted and better of what you call relationships, Iran would be a country we would surely we want to take a look at. So, the Middle East has and we expect that we have strategic importance to our company. Eric Milkie - Merrill Lynch: Just staying on that thing, on Iraq: Can you update on the West Qurna project with LUKOIL? Or: is it not on the table at the moment?

No, I think we'll talk more about this at our March 12th, but continue to work with Vagit Alekperov, the CEO of LUKOIL, working both with the Russian political side as well as the Iraqi side and U.S. government side to see. We really believe that their contracts should be affirmed and we are the right company technically and commercially to do West Qurna and so we work that pretty hard. Eric Milkie - Merrill Lynch: Thanks very much.

Thank you. Your next question is from Doug Leggate with Citigroup. Doug Leggate - Citigroup: Hi, good morning, gentlemen. It's Doug from Citi. Couple of questions, if I may. First one I guess on the upstream [Joan Tarik], the tax change in Alaska: does that come through in on the tax line, or does it come above the tax line as production tax? Can you just give us some clarification on where we should look for that?

You should look for that in the production taxes, not in the income tax line. Doug Leggate - Citigroup: Okay. So it's obviously not stripped out in the tax line this quarter?

That's correct. Doug Leggate – Citigroup: Okay. And the second question is just a guess relate following on to Eric's question. In the event that you are successful in winning some of these projects and obviously we're going to have great deal of speculation about Abu Dhabi in particular: Can you just give us some idea of what your anticipated [head run] on capital expenditure would be, where does the CapEx line go, assuming you get everything you were aiming for, how would expect your CapEx guidance to move?

I don't think you're going to see a great deal of movement in our capital expenditure in 2008, that's going to be more in 2009 and subsequent years and we do build in something and we will talk more about this on March 12. But I think the '08 program if we set $14.6 billion in cash, I mean realistically that could be between $13.5 million and $15.5 million and that will enable us to eccentrically do anything that we have in mind that we would be tasked with or win or have opportunities to do because on lot of these projects you don't immediately spend a lot of money, you spend a lot of time working and sorting through the technical aspects and working through the project. Doug Leggate – Citigroup: Okay, thanks. And I guess my final question is actually relating to LUKOIL. I think John Lowe had made some comments late last year regarding how that relationship was going in terms of securing international joint ventures, and basically the overall partnership. Could you just give us some update as to how you currently view the effectiveness of in terms of securing additional opportunities?

Well, I will meet with Vagit about every six weeks or so. We feel that the relationship between the two companies is very strong. There is a very strong personal relationship, friendship. We are working at what we can do together inside and outside of Russia, upstream and downstream, what are the new opportunities? And we'd like to do things quicker than it's always that way. We're not that patient. But we'd like to do things more quickly. But a lot of these kind of things, just take more time. But there is no change whatsoever in the intent of what we're doing, and we are very pleased and satisfied with the LUKOIL relationship. Doug Leggate – Citigroup: Okay. That's it from me. Thanks.

Thank you. Your next question is from Mark Gilman with the Benchmark Company. Mark Gilman - Benchmark Company: Guys, good morning. Jim, I had a couple tactical questions and then one very specific numbers oriented question. Jim: can you give us an idea of what kind of un-leveraged returns you are expecting from your enhanced Keystone investment and also your investment in REX? And: to what extent those lines are likely to be FERC regulated? Also secondly, I'm looking for some clarification in terms of your decision not to divest the Whitegate Refinery and exactly what went into that? Finally, John Carrig, could you give us an idea: what's in the international upstream earnings in the quarter for the reversal, if you will, of a portion of the impairment associated with the Hamaca project financing guarantees?

Okay. First, Mark, on the pipelines Keystone and REX, given our operations there, we are taking transportation obligations, long-term transportation obligations, very effectively. Economically, we have signed up and have support for those pipelines. So we look at that and we say, well, what is the equity return? And the equity return on those pipelines is pretty similar for any type of pipeline. There will be leverage to the point the most pipelines are which is a fair degree of leverage, so effectively, we look at it economically. We've signed up for the use and put our credit behind these pipelines. So having an equity ownership is a way to sense either lower our cost of our transportation or realize some of the benefit that comes with equity. But in terms of how they are structured and the financial returns is really no different than what you would expect on transportation. It really comes from a point of view that we've essentially, economically, have taken a substantial ownership in this pipeline. So why not get the benefit of it through equity ownership. It doesn't amount to that greater impact on our cash capital program because of great deal and this is going to -- is supported by all the other shippers and use of leverage. In terms of Whitegate, the marketplace in terms of refineries has changed pretty dramatically. We looked at that and as I said when we look at those selling assets, we want to make sure we get value and good after-tax proceeds from it, but we really didn't see that that was forth coming with respect to Whitegate’s. So, we essentially are embarking on a long-term program of retention and how we can improve its performance and its value to our portfolio. In terms of a specific question for John Carrig, John you…

Well, in terms of the impact of the Hamaca on the earnings, we really haven't disclosed that. We can say that it is in page 3, which we generally call special items and we don't plan on getting more specific for that. Mark Gilman - Benchmark Company: Okay. Thanks guys.

Thank you. And the final question is from Neil McMahon with Sanford Bernstein. Neil McMahon - Sanford Bernstein: Good morning. Two questions. The first really is on the LUKOIL earnings. There are obviously estimates at the sense that LUKOIL hasn't reported, but in terms of the taxes on the LUKOIL volumes: do you think there could much difference into your estimated numbers for those volumes given the fact that they were quite high and benefited very much the higher crude pricing for the quarter?

Neil, what you are referring is the fact that the tax rates are established two months in arrears that obviously does have an impact on fourth quarter results. We would expect that to be reflected in LUKOIL's results as well. What we do is we construct a model based upon publicly available facts that we are aware of and then we apply that in a disciplined way to try to reach -- to come up with the results. And if something is not publicly reported, we don't put that into the estimate. But certainly, as I said the tax on exports which is two months in arrears will have an impact on fourth quarter results. And of course, as a result of our higher prices, if that changes on the downside, it will have a negative impact, it will have an impact on first quarter results as well. Neil McMahon - Sanford Bernstein: Okay. Thanks for that. And the second question, maybe for Jim is really on Libya. When you just look back at your volumes over the past year and a half really, that sort of stabilized around the 47,000, 48,000 barrels of oil a day level. What can we read in to those numbers going forward? We continuously hear that you're planning on investing more money and you should see more growth, but frankly it doesn't seem like was seeing that over the last year, just wondering if you could walk through what we should be thinking about Libya?

With respect to Libya, we could, the volumes are pretty close to what we expected in the initial reentry into Libya, but we're disappointed. The volumes haven't ramped up more quickly. And the reason for that is not that we can't ramp them up, in fact, we think we could do even better than we initially thought when we went in to Libya. Our problem is getting the people, the technical resources into Libya, into the country. So as to do the work, spend the money to get the volumes up. So without a question of capability, it is capable. We can't get the people into the country quickly or there is a lot of administration. And we just sort through the administration, if we could and do it more efficiently. We could get the volumes up pretty dramatically. Now, the next thing is the volumes, if you look at the financial income that's associated with Libya, the financial take is quite high in Libya and not just for us I think its for all international oil companies. So one of the things that associated is, the volumes can go up, but the financial returns are strongly in favor of the Libya. So if you look out, yes, we want to get the volumes up. But they don't translate the same after-tax income per barrel that's associated with the rest of our portfolio. Neil McMahon - Sanford Bernstein: Okay. Great. Thanks.

Ladies and gentlemen, this does conclude our Q&A session for today. I'll turn the call back to management for any closing remarks.

Great. Thanks, Jim. And we do appreciate everybody's participation this morning and your interest in ConocoPhillips. I would remind you that the presentation you went through this morning along with the transcript of the call today will be available on our website conocophillips.com. Thanks again. Have a good day.

Ladies and gentlemen, we do thank you for your participation in today's conference. This concludes the presentation, and you may now disconnect. Have a good day.