Exhibit 99.3
CONOCOPHILLIPS
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2002
Basis of Presentation
The following Unaudited Pro Forma Combined Statement of Operations has been
prepared to illustrate the estimated effect of the merger between ConocoPhillips
Company (formerly Phillips Petroleum Company (Phillips)) and ConocoPhillips
Holding Company (formerly Conoco Inc. (Conoco)). The Unaudited Pro Forma
Combined Statement of Operations for the year ended December 31, 2002, was
prepared assuming the merger occurred January 1, 2002.
This pro forma financial information is not intended to reflect the results of
operations which would have actually resulted had the merger been effective on
the date indicated. Moreover, this pro forma information is not intended to be
indicative of the results of operations which may be achieved by ConocoPhillips
in the future. The pro forma adjustments use estimates and assumptions based on
currently available information. Management believes that the estimates and
assumptions are reasonable, and that the significant effects of the transactions
are properly reflected. However, actual results may materially differ from this
pro forma financial information.
The preliminary purchase price allocation is subject to revision as more
detailed analysis is completed and additional information on the fair value of
Conoco's assets and liabilities becomes available. Final purchase accounting
adjustments may therefore differ from the pro forma adjustments presented here.
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Unaudited Pro Forma Combined ConocoPhillips
Statement of Operations
Millions of Dollars
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Eight Pro Forma
Historical Adjusted Months Purchase
ConocoPhillips Non-Recurring Historical Historical Accounting Pro Forma
Year Ended December 31, 2002 As Reported, Charges* ConocoPhillips Conoco** Adjustments ConocoPhillips
-------------- ------------- -------------- ---------- ----------- --------------
REVENUES
Sales and other operating
revenues $ 56,748 - 56,748 23,844 (16)(b) 80,576
Equity in earnings of affiliates 261 - 261 212 (21)(c) 452
Other income 215 - 215 190 - 405
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Total Revenues 57,224 - 57,224 24,246 (37) 81,433
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COSTS AND EXPENSES
Purchased crude oil and products 37,823 - 37,823 14,013 (8)(b) 51,828
Production and operating expenses 4,988 (381) 4,607 1,924 (15)(b) 6,516
Selling, general and
administrative expenses 1,660 (379) 1,281 546 - 1,827
Exploration expenses 592 - 592 273 - 865
Depreciation, depletion and
amortization 2,223 - 2,223 1,203 (110)(c) 3,380
64(d)
Impairments 177 - 177 - - 177
Taxes other than income taxes 6,937 - 6,937 5,187 - 12,124
Accretion on discounted
liabilities 22 - 22 - 10(e) 32
Interest and debt expense 566 - 566 341 (66)(f) 841
Foreign currency transaction
(gains) losses 24 - 24 18 - 42
Preferred dividend requirements
of capital trusts and minority
interests 48 - 48 29 - 77
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Total Costs and Expenses 55,060 (760) 54,300 23,534 (125) 77,709
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Income from continuing
operations before income taxes 2,164 760 2,924 712 88 3,724
Provision for income taxes 1,450 203 1,653 550 44(g) 2,247
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INCOME FROM CONTINUING
OPERATIONS (a) $ 714 557 1,271 162 44 1,477
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INCOME FROM CONTINUING
OPERATIONS PER SHARE
Basic $ 1.48 2.64 2.18
Diluted 1.47 2.62 2.17
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AVERAGE COMMON SHARES OUTSTANDING
(IN THOUSANDS)
Basic 482,082 482,082 677,482
Diluted 485,505 485,505 681,616
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See Notes to Unaudited Pro Forma Financial Statement.
*Adjusted to exclude non-recurring charges directly related to the merger,
including the write-down of acquired in-process research and development
costs ($246 million both before and after tax, excluded from production and
operating expenses), and work force reduction and other charges ($514 million
before tax, $311 million after tax-- $135 million before tax excluded from
production and operating expenses and $379 million before tax excluded from
selling, general and administrative expenses).
**Certain amounts have been reclassified to conform to ConocoPhillips'
presentation.
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NOTES TO UNAUDITED PRO FORMA CONOCOPHILLIPS
COMBINED STATEMENT OF OPERATIONS
(a) On August 30, 2002, the U.S. Federal Trade Commission (FTC) accepted for
public comment an Agreement Containing Consent Orders (Consent
Agreement) that permitted Conoco and Phillips to close the merger. This
Consent Agreement included a proposed Decision and Order that required,
among other things, the divestiture of specified Conoco and Phillips
assets. These assets include:
o Phillips' Woods Cross business unit, which includes the Woods
Cross, Utah, refinery and associated Phillips motor fuel marketing
operations (both retail and wholesale) in Utah, Idaho, Wyoming,
and Montana, as well as Phillips' 50 percent interests in two
refined products terminals in Boise and Burley, Idaho;
o Conoco's Commerce City, Colorado, refinery;
o Phillips' Colorado motor fuel marketing operations (both retail
and wholesale);
o Phillips' refined products terminal in Spokane, Washington;
o Phillips' propane terminal assets at Jefferson City, Missouri, and
East St. Louis, Illinois, which include the propane portions of
these terminals and the customer relationships and contracts for
the supply of propane therefrom;
o Certain of Conoco's midstream natural gas gathering and processing
assets in southeast New Mexico; and
o Certain of Conoco's midstream natural gas gathering assets in West
Texas.
These operations are excluded from income from continuing operations. No
pro forma adjustments have been made to reflect any earnings benefit
from the reinvestment of any proceeds which might be recovered, or
reduction of debt which may arise as a consequence of the asset
dispositions required under the consent agreement.
(b) Primarily reflects the elimination of a deferred credit arising from a
prior year settlement for future price modifications to a U.K. long-term
natural gas sales contract, as well as the revaluation of certain other
long-term contracts to their fair value.
(c) Reflects the estimated effects of depreciating and amortizing purchase
accounting adjustment balances in properties, plants and equipment;
equity method investments; and identifiable intangible assets with
definite lives, over their estimated useful lives.
(d) Under ConocoPhillips' accounting policy and current prevalent industry
practice for the acquisition of oil and gas businesses, ConocoPhillips
did not record an initial liability for the estimated costs of removing
Conoco's properties, plants and equipment at the end of their useful
lives. Instead, currently estimated total undiscounted removal costs are
accrued as an additional component of depreciation, building the
liability for removal over the remaining useful lives of the properties,
plants and equipment on a unit-of-production basis.
(e) Includes the impact of conforming accounting policies and discounting
Conoco's environmental liabilities and recording the corresponding
accretion.
(f) Reflects the restatement of Conoco's fixed-rate debt to fair value and
the corresponding reduction in interest expense as the resulting premium
is amortized. Also reflects the capitalization of interest based on the
estimated fair value of Conoco's qualifying assets using a
weighted-average interest rate of 5.3 percent.
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(g) Reflects the estimated federal and state income tax effects of the pro
forma adjustments to Conoco's pretax income using an approximate blended
statutory rate of 50 percent.
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