ConocoPhillips is betting on oil "lower for longer" and a lot of volatility ahead, its CEO told CNBC on Tuesday.
"Demand has been pretty good, so we watch that pretty closely, but I think it is difficult to set up a company right now betting on higher prices. You can't have prices bail out your business model," he said.
"We're thinking lower for longer and we're thinking with a lot of volatility, so we've got to be prepared. We may see $70, $80 in the next couple years. If we do, we're going to see $40 on the back end of it."
Oil prices have experienced more than a two-year downturn as U.S. shale oil production flooded the market. Despite the production cut by the Organization of Petroleum Exporting Companies (OPEC) late last year, oil prices have been stuck in a $3 band since February.
Lance said ConocoPhillips is planning for oil in the low $50s for the next couple of years.
"We've got to be prepared to not only survive but thrive in those kind of prices," he said, noting that the company now has some of the lowest breakeven costs in the business today.
Now the company is trying to get down to where it can free-cash-flow money at as low a price as possible, Lance explained.
"What do you do with that free cash flow? Well, you invest back in the company and hold production flat. You grow your dividend, second. And third, we need to repair the balance sheet," he said.
— CNBC's Tom DiChristopher and Reuters contributed to this report.