DBRS Confirms ConocoPhillips Long-Term Ratings at ‘A’, Commercial Paper at R-1 (low), with Stable Trends

DBRS has today confirmed the ratings of the Unsecured Long-Term Notes & Debentures of ConocoPhillips (COP or the Company) and the Senior Unsecured Notes and Debentures of Burlington Resources Inc. at ‘A’ with Stable trends. This removes the ratings from Under Review with Developing Implications, where they were placed on July 14, 2011, following COP’s announcement of a proposal to separate its refining and marketing (R&M) and exploration and production (E&P) businesses into two, pure-play, stand-alone, highly focused, publicly traded corporations (the Transaction; please refer to DBRS press release dated July 14, 2011). DBRS has also confirmed the Commercial Paper rating of COP at R-1 (low) with a Stable trend.

At the time of the announcement, DBRS did not anticipate that the Transaction would result in a ratings downgrade for the remaining E&P company if the Transaction proceeded as expected. DBRS now views the Transaction as likely to proceed as expected, with closing estimated during Q2 2012.

The ratings confirmation is supported by the Company’s large size and geographical diversification. The E&P business will remain a very large and geographically diverse pure-play E&P operator, with approximately 1.6 million barrels of oil equivalent per day (boe/d) of production (as of December 31, 2011), and operations around the world. It is expected to maintain sufficient size to withstand market volatility. These supporting factors offset the Company’s limited financial flexibility at the current rating category as a result of an expected increase in gross leverage post-spin-off, and increased business risk due to the loss of integration in operations.

DBRS expects the Company to continue to manage future capital investment programs, share repurchases and other related activities within the context of the current ratings. Any material increase in leverage from currently anticipated levels could cause COP’s credit risk profile to deteriorate to a level that is no longer commensurate with the assigned ‘A’ ratings.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodology is Rating Oil and Gas Companies, which can be found on the DBRS website under Methodologies.