ConocoPhillips has a plan to deliver 3-5% growth in both its oil and gas volumes and its margins, but don’t look for it to happen this year.

A “pretty significant inflection point” is expected later in 2013, as the company pares about $8.5 billion worth of assets from the portfolio, CEO Ryan Lance told shareholders at the company’s annual meeting last week. The sales “will cause a low point in our production, but we come out growing in the fourth quarter of 2013 and…in 2014 and beyond.”

The asset sales “add the flexibility to the company, put the cash on the balance sheet” to fund development programs now in the portfolio. “You will see some more results on the exploration side, both on the conventional and the unconventional, as we execute our programs over the next two, three, four and five years. And so as our volumes start to grow, you are going to start to see the margin grow as well.”

The volatility in oil and natural gas prices “represents a range of uncertainty,” said the CEO. The spread between Brent/West Texas Intermediate crude oil prices and Henry Hub natural gas has caused “some regional dislocations in the U.S. and in North America…When you think about WCS, which is Western Canadian Select, that netback of bitumen prices to the Canadian oilsands projects, and really in North America natural gas liquids or NGL prices, we see some of these dislocations and disconnects in the spreads between some of these commodities.”

Management uses “a fairly conservative estimate of future prices, so we can set our capital programs and make sure that we’re doing the best to the best in our portfolio…We think about low side and high side prices” and “test our plan against these scenarios and think about what sort of actions would we take if we saw a different commodity price environment that is represented by that those large ranges in prices.

“But in an uncertain world, the key is diversity and a key is size, scale and scope, and that’s what we have as a company. We believe that’s the competitive advantage and differentiates us from our competition in our peer group in this business. We’re not relying on one product, one geography, one geology to succeed as a company.” Over time, “we’d like to shift our portfolio to a lower cost of supply,” to ensure “resilience…against the swing in commodity prices…But we’re not in a hurry.”

About 45% of ConocoPhillips capital spending this year is earmarked to develop oil and gas assets within its portfolio, which by 2017 are forecast to boost output to 600,000 boe/d. Today, about 250,000 boe/d is being produced from legacy conventional properties in North America and around the world. Another 200,000 b/d is from three large unconventional U.S. plays: the Eagle Ford and Bakken shales, and the Permian Basin. More unconventional output is in “early stages of development,” said the CEO.

Lance dismissed the common rub about ConocoPhillips, that production and earnings growth forecasts fail to hit the targets. Over the past decade the portfolio was shuffled and reshuffled, which appeared to add substantial prospects but not much output to show for the money, except in the U.S. onshore.

“A lot of people said, ‘well, you’ve got to wait for the growth in ConocoPhillips,’ but you don’t,” said the CEO. “The growth is coming in, because we exit the year in 2013, the growth is coming in 2014. The growth is coming in 2015, 2016 and 2017. You don’t have to wait for that growth and the margin improvement…”

ConocoPhillips’ portfolio is split in half between conventional and unconventional exploration, with about two-thirds of that in the United States. A lot of recent talk has been about the unconventionals, but the operator’s conventional program is gaining momentum as well, especially in the deepwater Gulf of Mexico (GOM), where ConocoPhillips participated in two recent discoveries: the Shenandoah and Coronado wells. Plans are to drill five wells a year in the GOM, Lance said.

Lance caused a stir for some comments about the company’s “social and environmental performance,” which he said was a paramount concern.

“It’s important to make sure that we do things with affinity and we are responsible in the communities that we operate in. We think about the environment. We think about the water that we are using. We think about the technology that we are employing to reduce our footprint and reduce our emissions…” The internal Sustainable Development Report “describes what we believe in this space and how we’re going to operate as a responsible exploration and production company.”

Lance later said he had no doubt that human beings were playing a role in climate change.

“As a company we recognize the impact that humans are having on the environment and that CO2 [carbon dioxide] is having an impact on what’s happening in the climate,” he said. “We know there is a lot of disagreement on both sides of that argument, but we think it’s the smart thing to do for the company to recognize that there is an impact and we’re trying to do the right things within our company to reduce our footprint.”

However, no single industry should be singled out to reduce CO2 emissions, said the CEO. “We do think, as we think about this and try to tackle this issue as a global community, it needs to be tackled on a global scale and it needs to be industry-blind. It needs to cut across all industries. You shouldn’t be picking on one industry or another to try to solve the problem.”

Lance’s comments were similar to other producers, including ExxonMobil Corp. and Royal Dutch Shell plc executives, who have acknowledged climate change and both have expressed support for a carbon tax versus a cap-and-trade system.

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