Better, Faster Decisions through Contracting Analytics From: By: Taylor Smith Supply Chain Supervisor of Technology Enablement
Stuff I m going to talk about About ConocoPhillips Our History with Emptoris The Information Opportunity Results Summary & Take Aways Questions & Answers
Cautionary Statement 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, operating results or the industries or markets in which we operate or participate in general. Actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that may prove to be incorrect and are difficult to predict such as oil and gas prices; operational hazards and drilling risks; potential failure to achieve, and potential delays in achieving expected reserves or production levels from existing and future oil and gas development projects; unsuccessful exploratory activities; unexpected cost increases or technical difficulties in constructing, maintaining or modifying company facilities; international monetary conditions and exchange controls; potential liability for remedial actions under existing or future environmental regulations or from pending or future litigation; limited access to capital or significantly higher cost of capital related to illiquidity or uncertainty in the domestic or international financial markets; general domestic and international economic and political conditions, as well as changes in tax, environmental and other laws applicable to ConocoPhillips business and other economic, business, competitive and/or regulatory factors affecting ConocoPhillips business generally as set forth in ConocoPhillips filings with the Securities and Exchange Commission (SEC). We caution you not to place undue reliance on our forward-looking statements, which are only as of the date of 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 company operating performance across periods and with peer companies. Any non-gaap measures included herein will be accompanied by a reconciliation to the nearest corresponding GAAP measure on our website at www.conocophillips.com/nongaap. 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 possible reserves. References in this presentation to resources include estimates of quantities of oil, natural gas liquids, natural gas and bitumen that are not classified as proved reserves, as defined in SEC regulations, and therefore this term represents a broader description of potentially recoverable volumes than SEC definitions of probable or possible reserves. Estimates of such unproved resources may change significantly as development provides additional data, and actual quantities that are ultimately recovered may differ substantially from prior estimates. For more information regarding our reserves as calculated pursuant to SEC rules, please read the oil and gas disclosures in our Form 10-K and other reports we file with the SEC. Copies are available from the SEC website and from the ConocoPhillips website.
About ConocoPhillips
Company Profile As of June 30, 2016 20 COUNTRIES WITH OPERATIONS AND ACTIVITIES 15,400 EMPLOYEES WORLDWIDE HOUSTON, TX COMPANY HEADQUARTERS COP NYSE TICKER Explore for, produce, transport and market hydrocarbons, including crude oil, natural gas, natural gas liquids (NGL), liquefied natural gas (LNG) and bitumen Operations and activities in 20 countries Exploration in 15 countries Production in 11 countries 15,400 employees worldwide Six operating segments Alaska Lower 48 Canada Europe and North Africa Asia Pacific and Middle East Other International 5
High-Quality Global Portfolio Production Reserves Resources 1,546 MBOED 1 8.2 BBOE 2 44 BBOE 3 32% 26% 22% 19% 22% 10% 12% 12% 18% 17% 10% 32% 16% 6% 46% APME Canada Europe & North Africa Alaska Lower 48 1 2Q16 production. 2 YE 2015 reserves. 3 YE 2014 resources.
Maintaining Discipline Across Time Horizons Short Term Weaker Prices Medium Term Price Recovery Longer Term Cycles and Volatility Protect against protracted downturn Priority to strengthen balance sheet Achieve target debt level Set dividend for lower end of cycle Target annual real growth in dividend Share repurchases compete with capex Efficiently execute capital plans Continued focus on execution Low cost of supply investments Complete major projects Prudent activity ramp-up Execute portfolio high-grading Focus on lowering breakeven price Sustain low cost structure Predictable performance through cycles
The Oil and Gas Supply Chain Magnolia Platform Gulf of Mexico Oil & Gas Production Facilities & Construction Drilling & Completions Operations & Maintenance Drilling Rig in Eagle Ford Highly Dependent on Contractors 70% of the people 80% of our spend 90% of anomalies Production Facility in San Juan Basin
Oil Price Movements Price in Constant Dollars $120 Iran Iraq War begins Arab Spring $100 $80 Iranian Revolution; cuts production Asia Growth $60 $40 Arab States Embargo Israel Supporters Persian Gulf War Global Financial Crisis $20 US Production Peak $ of the Day 9/11 $0 Asia Demand Recovery 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
History with Emptoris
ConocoPhillips & Emptoris Implemented Contract Management & Sourcing Globally in 2012 Currently on Version 10.0.2.7 1K ConocoPhillips Users 12K External Users (for Sourcing) 15K Active Contracts 30 Sourcing Events per Month 11
Why Enterprise Contract Management? Improve Efficiency & Effectiveness of creating and managing contracts Improve governance and ability to Manage Risk Utilize contract data to leverage cost & improve quality
Why Enterprise Contract Management? gcms Contracting Objectives: Improve Efficiency & Effectiveness of creating and managing contract Improve governance and ability to Manage Risk Improve Leverage of contract data to support cost & quality optimization A Contract Repository Store all contracts Version history Searchable Class and Term values A Workflow Tool Ownership & Reassignment Govern DOA Approvals Enable Review Assignments A Language Library Pre-approved article language Contract Templates Ability to track article modifications
Timeline May 2012 July 2013 Nov 2014 System Adoption Aug 2015 Improve Standards Language Usability: More with Less Join COP Last Empower Today Focus on Efficiency Price of Oil Launched Global Templates and Language Upgrade to version 10.0.2 Transition to Cognos Reporting Emphasize Importance of Authoring Contracts Standardize Business Terms (BTVs) ConocoPhillips (Upstream) & Phillips 66 (Downstream) Split Launch gcms as the global contracting system Consolidate and retire various legacy Contracting systems
Progress.. gcms Contracting Objectives: Improve Efficiency & Effectiveness of creating and managing contract Improve governance and ability to Manage Risk Improve Leverage of contract data to support cost & quality optimization A Contract Repository Store all contracts Version history Searchable Class and Term values A Workflow Tool Ownership & Reassignment Govern DOA Approvals Enable Review Assignments Support Strategic Decision Making A Language Library Pre-approved article language Contract Templates Ability to track article modifications Phase Status 0: 1: 2: 3: 4: Pre Adoption Standardization Language More & Trend GCMS Opportunity Good Not So Good Dodgy Positioned to: Stay the Same Get worse Get Better
The Information Opportunity
Using Contract Data Initial Objectives What Contracts do we have with Vendor ABC? Success! What did the last Drilling Rig Contract from Eagle Ford look like? How many contracts do we have that are valued over $10M What contracts are owned by Western Canada? How many Norway Contracts Expire this Quarter? All Contracts available in Emptoris CM Reasonably standardized data Information is available and researchable Workflow processes allow approval tracking Language templates allow T&C diligence but..
Traditional Consumption
Using Contract Data better Initial What Contracts do we have with Vendor ABC? What did the last Drilling Rig Contract from Eagle Ford look like? How many contracts do we have that are valued over $10M What contracts are owned by Western Canada? How many Norway Contracts Expire this Quarter? Next Level Where are we using non standard T&Cs? How many contracts am I spending more than estimated? Where am I spending money on expired Contracts? What are the most important contracts that expire this quarter?
Traditional Consumption Data Data People Decision Makers Price of Oil
What is Tier 2? This is a conversation about using data to make smarter decisions = Faster More Informed Less Resources
Why is this so hard? Bad Data To fix that Don t Maintain Don t Use
Why is this so hard? Resource Burden to maintain Lack of priorities & standards Don t Limited (visible) Consequences Maintain (because it is not expected to be used) Bad Data Hard to Access Information Don t and/or Use Resource burden to curate information Lack of priorities & expectations 23
Why is this so hard? Don t Maintain Technology Don t Use Resource Burden to maintain Lack of priorities & standards Limited (visible) Consequences (because it is not expected to be used) Behavior Bad Data Hard to Access Information and/or Resource burden to curate information Lack of priorities & expectations 24
Approach
One-Two Punch Behavior Focus on a few things Limit focus to specific objectives Reduce information to be maintained Set expectations for data usage Focus on top contracts only Expect to iterate Technology Use technology to make things easy Allow Spend vs Contract reporting (cross system) Make accessing information simple Ensure information is actionable Make it easier to maintain data
Focus on a few things
Specific Objectives Objective Data Required Focus A Contract Template Usage None (all system data) Master Agreements B Contract Closure/Renewal Validation Contract owner, Sub-status & dates Lower 48 Business Unit C Actual Spend vs Contract Estimates Contract owner, value & dates ERP Purchase Doc Reference Top 100 Contracts
Make it Easy
A bigger data picture Source Stage & Relate Consume
A bigger data picture Source Stage & Relate Consume ERP Behind the Scenes Other Stuff Categorized Calculated Filtered Related and more Excel
How are we using Cognos?
What we built Easier Reporting More Comprehensive Data Drillable Granularity Customizable Easily Enhanced A Supply Chain Reporting Solution
What we built Web Accessible Spend + Contracts + more Summary & Line Level Save & Share Views Easy to Evolve A Supply Chain Reporting Solution
Making Maintenance Easier Emptoris Fast Loader Update thousands of BTVs via Excel Teams can maintain critical data more easily Eg. Owners, Sub-status,
Results
Graphic Reports being approved by COP Will be screen shots of dashboards To be updated ASAP
Measurable results (Aug 15 to Present) So Far: Standard Language Usage L48 Contract Closeout Spend tied to contract Spend Over Estimate 15% 30% 10% 5% Newest effort
Summary & Take- Aways
Summary & Key Take-Aways Still a work-in-progress Start small and grow Expect to iterate (on data quality and data views) Have solutions to address barriers (technology & behavior) Must be Actionable Find Business stakeholder champions
41 Q&A