EXHIBIT 99.1
April 3, 2003
(CONOCOPHILLIPS LOGO)
FIRST QUARTER 2003 INTERIM UPDATE
This update is intended to give an overview of market and operating conditions
experienced by ConocoPhillips during the first quarter of 2003. The market
indicators and company estimates may differ considerably from the company's
actual results.
HIGHLIGHTS - FIRST QUARTER 2003 VS. FOURTH QUARTER 2002
o Exploration and Production
o Higher prices for crude oil.
o Improved natural gas prices.
o Daily production to exceed previous estimate of 1.55 million barrels
of oil equivalent (BOE).
o Refining and Marketing
o Improved benchmark refining margins.
o Realized refining margins negatively impacted by co-product margins.
o Higher energy costs.
o Capacity utilization rate in the low 90 percent range.
o Widening light-heavy crude differentials.
o Midstream/Chemicals/Emerging Businesses
o Midstream margins improved versus previous quarter.
o Chemicals segment loss expected due to higher feedstock and energy
costs.
o Emerging Businesses' results expected to be similar to fourth quarter
2002.
o Corporate
o Debt balance reduced by approximately $1.5 billion in first quarter.
o Corporate affected by merger-related items, a loss on early debt
redemption, reduced capitalized interest, and insurance
demutualization proceeds.
EXPLORATION AND PRODUCTION
The table below (click here for graphs) reflects market indicators for crude oil
and natural gas. The company's actual crude oil and natural gas price
realizations may vary from the market indicators due to quality and location
differentials, as well as the effect of pricing lags.
MARKET INDICATORS
<Table>
<Caption>
1Q 2003 4Q 2002 1Q 2002
------- ------- -------
Dated Brent ($/bbl) $ 31.51 26.78 21.14
WTI ($/bbl) 34.06 28.20 21.56
ANS USWC ($/bbl) 33.23 26.75 19.90
Henry Hub first of month ($/mcf) 6.58 3.97 2.34
</Table>
Source: Platt's
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The increases in U.S. crude oil and natural gas realizations are expected to be
less than the increase in market indicators due to quality and location
differentials, as well as the effect of pricing lags.
Upstream crude oil, natural gas and natural gas liquids (NGL) production for the
quarter is expected to be higher than the previous estimate of 1.55 million BOE
per day. Venezuelan operations resumed full production in early March, reaching
approximately 80,000 barrels per day net to ConocoPhillips. Earnings from
Venezuela in March will partially offset losses resulting from downtime in
January and February.
REFINING AND MARKETING
The table below (click here for graphs) provides market indicators for regions
where the company has significant refining operations. The Weighted U.S. 3:2:1
margin is based on the geographical location of ConocoPhillips' U.S. refineries.
MARKET INDICATORS
<Table>
<Caption>
1Q 2003 4Q 2002 1Q 2002
------- ------- -------
Refining Margins ($/bbl)
East Coast WTI 3:2:1 $ 6.35 4.64 2.82
Gulf Coast WTI 3:2:1 5.83 3.79 2.70
Mid-Continent WTI 3:2:1 6.31 5.75 3.80
West Coast ANS 3:2:1 12.79 8.40 9.67
Weighted U.S. 3:2:1 7.15 5.29 4.15
NW Europe Dated Brent 5.68 2.72 .74
WTI/Maya differential (trading month $/bbl) 7.65 6.04 5.42
</Table>
Source: Platt's
Realized refining margins may differ due to the company's specific locations,
configurations, crude oil slates or operating conditions. As shown above, the
weighted U.S. refining margin for the first quarter is expected to be higher
than that of the fourth quarter. The improvement in the company's realized crack
spreads were negatively affected by the impact of higher crude oil prices on
co-product margins, as co-product prices do not fluctuate directly with the
price of crude oil. Refinery co-product volumes, primarily petroleum coke and
asphalt, represent about 10 percent of the company's product output. Further
impacting realized crack spreads was the lack of crude oil availability from
Venezuela during the first quarter, which led to a less-than-optimum crude slate
in certain locations. Finally, the increase in crack spreads is expected to be
offset in part by higher energy costs.
The company's average crude oil capacity utilization rate for the first quarter
is expected to be in the low 90 percent range. The capacity utilization rate
benefited from a full quarter of operations at the Humber refinery in the United
Kingdom. This benefit was partially offset by crude sourcing issues created by a
lack of Venezuelan crude at the company's U.S. refineries, as well as planned
downtime at the Ferndale, Wash., Wood River, Ill., and Sweeny, Texas,
refineries. Turnaround costs are expected to be in line with previously stated
targets.
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First quarter marketing margins and sales volumes are expected to be similar to
those of the fourth quarter of 2002. However, as previously reported, 2003 net
income will be negatively impacted by additional lease loss provisions stemming
from the planned sale of a major portion of the company's retail sites. For the
first quarter, these after-tax provisions are expected to be approximately $25
million related to continuing operations and $25 million related to discontinued
operations.
MIDSTREAM/CHEMICALS/EMERGING BUSINESSES SEGMENTS
For the Midstream segment, first quarter results are expected to exceed the
previous quarter as NGL sales prices increased more than raw gas feedstock
costs. This segment reflects ConocoPhillips' 30.3 percent interest in Duke
Energy Field Services, as well as consolidated midstream operations.
In the Chemicals business, poor market conditions deteriorated further in the
first quarter, as this segment was negatively impacted by higher fuel and
feedstock costs. Losses in this segment are expected to completely offset
Midstream earnings.
Emerging Businesses' performance includes gas-to-liquids, carbon fibers, fuels
technology, power generation, and emerging technology. Losses are expected to be
similar to those of the fourth quarter of 2002.
CORPORATE
Corporate charges from continuing operations are estimated to be approximately
$240 million. Corporate charges were impacted by reduced capitalized interest,
the inclusion of merger-related expenses and a loss on early debt redemption,
partially offset by insurance demutualization proceeds.
The effective tax rate for the first quarter is expected to be higher than that
of the fourth quarter of 2002, primarily due to the absence of certain deferred
state income tax benefits resulting from the fourth quarter retail asset
impairment, and the expiration of Section 29 credits.
The company's debt balance at the end of the first quarter is expected to be
approximately $18.3 billion, reflecting strong cash flow from operations,
including working capital changes, and disciplined capital spending.
Effective Jan. 1, 2003, the company adopted Statement of Financial Accounting
Standards No. 143 "Accounting for Asset Retirement Obligations." In the first
quarter of 2003, the company is expected to report an after-tax benefit of
approximately $137 million for the cumulative effect of this change in
accounting principle.
The company anticipates that its synergy run rate will reach $1.25 billion per
year by the end of 2003. Benchmarks used to measure progress on synergy capture,
as well as the sources of the cost reductions achieved, will be discussed in the
company's first quarter 2003 earnings release and conference call, expected on
April 30, 2003.
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CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This update contains forward-looking statements within the meaning of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995. The
forward-looking statements are about ConocoPhillips' business segments:
exploration and production; refining and marketing; natural gas gathering,
processing and marketing; chemicals and plastics manufacturing; and emerging
businesses. There are also forward-looking statements about ConocoPhillips'
expected sales prices for crude oil, natural gas and natural gas liquids; crude
oil production; refining crack spreads; marketing margins; refinery utilization
rates; sales volumes; corporate charges from continuing operations; effective
tax rates; the company's debt balance; and synergy run rates. These statements
are based on activity from operations for the first two months of the first
quarter of 2003 and include estimated results for March, and as such are
preliminary and are estimates. All of the forward-looking data is therefore
subject to change. Actual results, expected to be reported in the company's
earnings release for the first quarter of 2003 on April 30, 2003, may differ
materially from the estimates given in this update.
Where in any forward-looking statement, the company expresses an expectation or
belief as to future results, such expectation or belief is expressed in good
faith and believed to have a reasonable basis. However, there can be no
assurance that such expectation or belief will result or be achieved. The actual
results of operations can and will be affected by a variety of risks and other
matters that could cause the stated expectation or belief to differ materially
from that stated in this update.
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