Exhibit 99.1
ConocoPhillips Reports Third Quarter Net Income of $1.3 Billion;
Strong Refining & Marketing Results
HOUSTON--(BUSINESS WIRE)--Oct. 29, 2003--ConocoPhillips
(NYSE:COP):
Earnings at a glance
Third Quarter Nine Months
----------------------------- ----------------------------
2003 2002 2003 2002
-------------- -------------- -------------- -------------
Income
(loss) from
continuing
operations $1,249 million $(74) million $3,607 million $140 million
Income
(loss) from
discontinued
operations $57 (42) $201 (7)
Cumulative
effect of
changes in
accounting
principles $ - - $(113) -
Net income
(loss) $1,306 (116) $3,695 133
- ----------------------------------------------------------------------
Diluted income
per share
Income (loss)
from
continuing
operations $1.82 $(0.15) $5.28 $0.34
Net income
(loss) $1.90 $(0.24) $5.40 $0.32
- ----------------------------------------------------------------------
Revenues $26.5 billion $14.7 billion $79.1 billion $33.7 billion
- ----------------------------------------------------------------------
ConocoPhillips (NYSE:COP) today reported third quarter net income
of $1,306 million, or $1.90 per share, compared with a net loss of
$116 million, or 24 cents per share, for the same quarter in 2002,
which included only one month of the combined company. Total revenues
were $26.5 billion, versus $14.7 billion a year ago. Income from
continuing operations for the third quarter was $1,249 million, or
$1.82 per share, compared with a loss of $74 million, or 15 cents per
share, for the same period a year ago.
"Our performance in the third quarter was solid," said Jim Mulva,
president and chief executive officer. "We operated as expected and
benefited from market conditions in both upstream and downstream.
Upstream production was 1.56 million barrels-of-oil-equivalent (BOE)
per day during the quarter. The downstream business generated a
significant portion of our total earnings by maintaining high
utilization rates, allowing us to realize the benefit of strong
refining margins.
"Net cash from operating activities for the first nine months of
this year totaled $7.4 billion. This, along with cash from asset
sales, enabled us to fund $4.4 billion in capital expenditures, reduce
debt by $3.7 billion, and improve our debt-to-capital ratio to 36
percent.
"We have completed asset sales of $2.2 billion since the merger,
and we expect to complete another estimated $1.3 billion by the end of
the year. This will meet our announced divestiture program target of
$3 billion to $4 billion by the end of 2004. During the third quarter,
we made significant progress with the announced agreement to sell The
Circle K Corporation and the completion of the sale of our New York
and New England retail marketing assets."
For the first nine months of 2003, net income was $3,695 million,
or $5.40 per share, versus $133 million, or 32 cents per share, for
the corresponding period in 2002. Income from continuing operations
was $3,607 million, or $5.28 per share, compared with $140 million, or
34 cents per share, for the same period a year ago. The company's
return on capital employed remained strong and, after adjusting for
purchase to pooling accounting, is comparable with the largest
companies in the industry. Total revenues were $79.1 billion, versus
$33.7 billion a year ago.
In the third quarter, the company elected to adopt Financial
Accounting Standards Board Interpretation No. 46, "Consolidation of
Variable Interest Entities," for synthetic leases and other financing
structures, with retroactive application to Jan. 1, 2003. As a result,
all prior 2003 periods reflect the application of this accounting
change.
The ConocoPhillips merger was consummated on Aug. 30, 2002, and
used purchase accounting to recognize the fair value of the Conoco
assets and liabilities. While the results of the third quarter and
first nine months of 2003 reflect the operations of the combined
company, the third quarter of 2002 includes two months' activity for
Phillips and one month's activity for ConocoPhillips. Similarly,
results for the first nine months of 2002 include eight months'
activity for Phillips and one month of activity for ConocoPhillips,
restated for discontinued operations. All asset dispositions required
by the Federal Trade Commission have now been completed.
The results of ConocoPhillips' business segments follow.
Exploration & Production (E&P)
Third quarter financial results: E&P income from continuing
operations in the third quarter was $967 million, down from $1,077
million in the second quarter of 2003 and up from $460 million in the
third quarter of 2002. The decrease from the second quarter was
primarily the result of impacts from one-time benefits associated with
international tax legislation changes in the second quarter, decreased
production due to normal seasonal declines and scheduled maintenance
activity, and the impact of asset dispositions. These decreases were
partially offset by higher realized crude oil prices and gains from
asset sales. Improved results from the third quarter of 2002 were due
to higher realized crude oil and natural gas prices and increased
production resulting from a full quarter of production from the Conoco
assets.
ConocoPhillips' daily production for the quarter was lower than
that of the second quarter, averaging 1.56 million BOE per day,
including Canadian Syncrude. Decreased production was primarily the
result of seasonal declines and scheduled maintenance activity in
Alaska and the North Sea, as well as asset dispositions in the Lower
48. Disposition proceeds of approximately $400 million during the
third quarter bring total E&P asset sales for 2003 to approximately
$750 million. These dispositions, together with those expected to
close in the fourth quarter, represent a production rate decrease of
approximately 50,000 BOE per day.
ConocoPhillips' third quarter 2003 average worldwide crude oil
sales price was $27.00 per barrel, up from $25.19 in the second
quarter of 2003. The company's U.S. Lower 48 and worldwide natural gas
prices averaged $4.56 and $3.80 per thousand cubic feet, respectively,
compared with $4.72 and $3.93 in the second quarter of 2003.
Nine months financial results: E&P income from continuing
operations for the first nine months of 2003 was $3,169 million, up
from $941 million in 2002, primarily due to additional volumes from
the Conoco operations, higher realized worldwide crude oil and natural
gas prices, and one-time benefits associated with international tax
legislation changes.
ConocoPhillips' average worldwide crude oil price was $27.55 per
barrel for the first nine months of 2003, compared with $23.43 for the
same period in 2002. The company's U.S. Lower 48 and worldwide natural
gas prices averaged $4.92 and $4.08 per thousand cubic feet,
respectively, versus $2.42 and $2.37 in 2002.
Midstream
Third quarter financial results: Midstream income from continuing
operations was $31 million, up from $25 million in the second quarter
of 2003 and up from $11 million in the third quarter of 2002. The
increase from the second quarter was due primarily to improved
margins, partially offset by a second quarter gain on asset sales in
equity earnings from Duke Energy Field Services, LLC (DEFS). The
increase over the third quarter of 2002 was primarily due to higher
natural gas liquids prices and a full quarter of operations from the
Conoco assets.
Nine months financial results: Midstream operating results
increased to $87 million, from $35 million in 2002. Contributing to
the increase were higher equity earnings from DEFS and the addition of
the Conoco midstream operations.
Refining and Marketing (R&M)
Third quarter financial results: R&M income from continuing
operations was $485 million, improved from $321 million in the
previous quarter and up from $57 million in the third quarter of 2002.
The improvement in third quarter R&M earnings, compared with the
second quarter of 2003, was primarily driven by higher refining
margins (net of narrowing light-heavy differentials) throughout the
United States. Additionally, earnings benefited from lower utility and
turnaround costs. Increased refining results were partially offset by
lower U.S. and international marketing margins, as well as an
estimated $30 million impact related to decreased utilization at the
Ponca City refinery. The improved results over the third quarter of
2002 were attributable to higher refining and marketing margins, a
full quarter of operations from the Conoco assets, and business
improvements, which included the benefits from progress made on
implementing synergy initiatives.
The company's crude oil capacity utilization rate averaged 95
percent, compared with 96 percent last quarter. After-tax turnaround
costs were $13 million and $26 million in the third quarter and second
quarter of 2003, respectively.
Nine months financial results: R&M income from continuing
operations for the first nine months of 2003 increased to $1,195
million, compared with $38 million for the first nine months of 2002.
Increased refining and marketing margins, as well as the addition of
the Conoco assets, contributed to the increase.
Chemicals
Third quarter financial results: The Chemicals segment, which
reflects the company's 50 percent interest in Chevron Phillips
Chemical Company LLC, reported income from continuing operations of $7
million, compared with $12 million in the second quarter of 2003 and
$3 million in the third quarter of 2002. Decreases from the second
quarter were the result of lower margins, partially offset by higher
sales volumes. The increase from the third quarter of 2002 primarily
reflects third quarter 2002 losses from asset retirements and higher
margins in the third quarter of 2003, particularly in aromatics and
styrenics.
Nine months financial results: During the first nine months of
2003, the Chemicals segment had a loss from continuing operations of
$4 million, compared with $1 million for the same period a year ago.
The increased loss was primarily due to slightly lower margins, as
well as higher employee severance accruals, partially offset by third
quarter 2002 losses from asset retirements.
Emerging Businesses
The Emerging Businesses segment had a loss from continuing
operations of $18 million in the third quarter of 2003, compared with
losses of $23 million in the second quarter of 2003 and $262 million
in the third quarter of 2002. The improvement from the second quarter
was primarily attributable to reduced costs associated with a
gas-to-liquids plant. The decrease in costs from the third quarter of
2002 primarily resulted from a 2002 write-off of purchased in-process
research and development costs.
Corporate and Other
Third quarter after-tax Corporate expenses from continuing
operations were $223 million, compared with $317 million in the
previous quarter and $343 million in the third quarter of 2002.
Contributing to the decrease during the third quarter from the second
quarter of 2003 were reduced merger-related expenses, from $115
million to $41 million. The decrease from the third quarter of 2002
also primarily resulted from lower merger-related expenses, partially
offset by a full quarter of expenses associated with the Conoco
assets.
The company's balance sheet debt level at the end of the third
quarter was $18.9 billion. This reflects debt reductions of $1.4
billion during the third quarter, as well as accounting changes that
increased balance sheet debt by $2.9 billion. These accounting changes
reflect the adoption of Financial Accounting Standards Board (FASB)
Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest
Entities," for synthetic leases and other financing structures, as
permitted by FASB Staff Position No. FIN 46-6, and the adoption of
FASB Statement No. 150 (SFAS 150), "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." The
third quarter implementation of FIN 46 was retroactive to Jan. 1,
2003, while SFAS 150 was adopted and applied as of July 1, 2003. The
FASB continues to issue guidance related to variable interest
entities, which the company will monitor in connection with its
implementation of FIN 46 and SFAS 150.
The company's third quarter effective tax rate of 46 percent was
higher than that of the second quarter primarily due to the one-time
impact in the second quarter of tax law changes in certain
international jurisdictions, partially offset by a higher proportion
of income in lower-tax-rate jurisdictions.
Discontinued Operations
Third quarter 2003 earnings from discontinued operations were $57
million, compared with $91 million in the second quarter. The decrease
was primarily related to lower marketing margins and asset
dispositions.
Outlook
Mr. Mulva concluded:
"During the quarter, we celebrated our first anniversary as
ConocoPhillips. We remain committed to deliver superior returns to our
shareholders through continued strong earnings, debt reduction, cost
and capital discipline, and a competitive dividend. We recently
announced an increase of 7.5 percent to our dividend rate.
"Upstream, we continue to strengthen our portfolio through legacy
project advancement and planned asset dispositions, which are
progressing as expected. In addition, we are continuing to pursue
expansion of our portfolio of worldwide natural gas opportunities in
places such as Qatar, Venezuela and Australia.
"Downstream, we are on track with our plan to rationalize a
substantial portion of our U.S. retail marketing assets. During the
fourth quarter, we expect higher turnaround activity and scheduled
maintenance than in the previous two quarters, and we anticipate crude
oil utilization rates to exceed 90 percent.
"These and the other plans we are implementing are designed to
achieve higher long-term returns on capital employed. We remain
committed to this objective and look forward to updating the
investment community on the status of our operating and investment
plans at our November security analyst meeting."
ConocoPhillips is an integrated petroleum company with interests
around the world. Headquartered in Houston, the company had
approximately 54,800 employees, $82 billion of assets, and $106
billion of annualized revenues as of Sept. 30, 2003. For more
information, go to www.conocophillips.com.
ConocoPhillips' quarterly conference call is scheduled for
noon Central today. To listen to the conference call and to
view related presentation materials, go to www.conocophillips.com
and click on the "Third Quarter Earnings" link.
For financial and operational tables, go to
www.conocophillips.com/news/nr/earnings/highlights/3q03earnings.html.
For detailed supplemental information, go to
www.conocophillips.com/news/nr/earnings/detail/3q03summary.xls.
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, such as "...we
expect higher turnaround activity and scheduled maintenance than in
the previous two quarters"; "we anticipate crude oil utilization rates
to exceed 90 percent"; and "these and the other plans we are
implementing are designed to achieve higher long-term returns on
capital employed," involve certain risks, uncertainties and
assumptions that are difficult to predict. Further, certain
forward-looking statements are based on assumptions as to future
events that may not prove to be accurate. Therefore, actual outcomes
and results may differ materially from what is expressed or forecast
in such forward-looking statements. Economic, business, competitive
and regulatory factors that may affect ConocoPhillips' business are
generally as set forth in ConocoPhillips' filings with the Securities
and Exchange Commission (SEC). ConocoPhillips is under no obligation
(and expressly disclaims any such obligation) to update or alter its
forward-looking statements whether as a result of new information,
future events or otherwise.
Cautionary Note to U.S. Investors -- The SEC permits oil and gas
companies, in their filings with the SEC, to disclose only proved
reserves that a company has demonstrated by actual production or
conclusive formation tests to be economically and legally producible
under existing economic and operating conditions. Production is
distinguished from oil and gas production because SEC regulations
define Syncrude as mining-related and not part of conventional oil and
natural gas reserves. We use certain terms in this release, such as
"including Canadian Syncrude" that the SEC's guidelines strictly
prohibit us from including in filings with the SEC. U.S. investors are
urged to consider closely the disclosure in the company's periodic
filings with the SEC, available from the company at 600 North Dairy
Ashford Road, Houston, Texas 77079. This information can also be
obtained from the SEC by calling 1-800-SEC-0330.
CONTACT: ConocoPhillips
Kristi DesJarlais, 281-293-4595 (media)
or
Clayton Reasor, 212-207-1996 (investors)
www.conocophillips.com