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December 10, 2002 --- Vol. 8, No. 129December 2002

ConocoPhillips approves reduced budget for 2003; $640 million for Alaska

ConocoPhillips’ board of directors has approved a $6.6 billion capital budget for 2003, down 25 percent from the combined 2002 capital budgets of predecessor companies Phillips and Conoco.

Seventy-three percent of 2003 dollars will go to exploration and production activities, the company said in a press release today.

Alaska’s share of the 2003 budget is $640 million, down from $807 million allocated in 2002.

“A majority of the capital spending will fund Greater Prudhoe, Kuparuk and western North Slope operations, and construction of Endeavor Class tankers to transport Alaska North Slope crude oil,” ConocoPhillips said.

In 2002, the company spent approximately $200 million for the second of five Endeavor Class tankers for its Alaska operations, leaving $607 million for exploration and production activities. It was expected to spend another $200 million in 2003 but a PNA source at ConocoPhillips said “less is likely to be spent on tankers in 2003.”

Additional information was not immediately available from the company.

In 2000, Phillips said its capital budget for Alaska was approximately $535 million, none of which was allocated for tankers.

ConocoPhillips would not provide a breakdown of Alaska’s capital budget at this time. In the last three years, exploration and production spending was as follows:

· 2000 $535 million (exploration $30 million, production $505 million)

· 2001 $942 million (exploration $68 million, production $874 million)

· 2002 $807 million (exploration $41 million, production $766 million).

“The reduced capital budget is part of our disciplined approach toward improving return on capital employed," ConocoPhillips CEO Jim Mulva said today. “The leaner capital budget is strategically focused on growing our upstream segment, especially on developing legacy assets that provide strong returns over long periods of time.”

In a Nov. 22 presentation to analysts, Mulva said big legacy areas such as Alaska’s North Slope and the North Sea are the future focus for ConocoPhillips. (See cover story in the Dec. 8 edition of PNA.)

Note: See full budget story in the Dec. 15 edition of PNA.

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