Exhibit 99.1
ConocoPhillips Reports Second Quarter Net Income of $2.1 Billion;
Balance Sheet Strengthened by Reduction in Debt
HOUSTON--(BUSINESS WIRE)--July 28, 2004--ConocoPhillips
(NYSE:COP):
Earnings at a glance
Second Quarter Six Months
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2004 2003 2004 2003
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Income from
continuing
operations $2,013 million 1,096 million $3,616 million 2,359 million
Income from
discontinued
operations $ 62 91 $ 75 144
Cumulative
effect of
changes in
accounting
principles $ - - $ - (95)
Net income $2,075 1,187 $3,691 2,408
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Diluted income
per share
Income from
continuing
operations $ 2.88 1.60 $5.19 3.45
Net income $ 2.97 1.73 $5.30 3.52
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Revenues $ 31.9 billion 25.6 billion $62.1 billion 52.6 billion
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ConocoPhillips (NYSE:COP) today reported second quarter net income
of $2,075 million, or $2.97 per share, compared with $1,187 million,
or $1.73 per share, for the same quarter in 2003. Total revenues were
$31.9 billion, versus $25.6 billion a year ago. Income from continuing
operations for the second quarter was $2,013 million, or $2.88 per
share, compared with $1,096 million, or $1.60 per share, for the same
period a year ago.
"Overall, our operating performance for the quarter was good, but
there were opportunities to do better," said Jim Mulva, president and
chief executive officer. "Due to unscheduled downtime, we did not
realize the full potential of our assets in a high price and high
margin environment.
"We made further progress in strengthening our balance sheet, with
our debt-to-capital ratio declining from 32 percent to 29 percent
during the quarter. In addition to operating cash flows of $2.3
billion, we received proceeds of $905 million from asset sales. This
brings the company's total proceeds realized from all asset
dispositions since the merger to approximately $4.7 billion. Cash
generation during the quarter allowed us to invest $1.6 billion in
capital projects, pay $296 million in dividends and reduce balance
sheet debt by approximately $1.5 billion."
For the first six months of 2004, net income was $3,691 million,
or $5.30 per share, versus $2,408 million, or $3.52 per share, for
2003. Income from continuing operations was $3,616 million, or $5.19
per share, compared with $2,359 million, or $3.45 per share, for the
same period a year ago. Total revenues were $62.1 billion, versus
$52.6 billion a year ago.
The results of ConocoPhillips' business segments follow.
Exploration & Production (E&P)
Second quarter financial results: E&P income from continuing
operations in the second quarter was $1,354 million, up from $1,257
million in the first quarter of 2004 and up from $1,077 million in the
second quarter of 2003. The increase from the first quarter was
primarily the result of higher realized crude oil prices, partially
offset by lower volumes, lower gains related to first quarter asset
sales, higher leasehold impairments, and higher operating costs
associated with regulated tariffs in Alaska and the production ramp up
at Bayu-Undan in the Timor Sea. Improved results from the second
quarter of 2003 were primarily due to higher realized crude oil and
natural gas prices, partially offset by lower volumes, reduced
benefits from tax law changes, and higher leasehold impairment and dry
hole costs.
ConocoPhillips' daily production for the quarter averaged 1.56
million BOE per day, including Canadian Syncrude. This was achieved
despite production being negatively impacted 18,000 BOE per day due to
the first quarter sale of Petrovera and 15,000 BOE per day from
unscheduled downtime at the Britannia field in the U.K. North Sea and
in Alaska. When compared with the first quarter, increased output from
Bayu-Undan during the second quarter was more than offset by the
impact of scheduled maintenance, normal seasonal declines and the
impact of asset sales. When compared with the second quarter of 2003,
volumes were lower primarily due to asset sales.
ConocoPhillips' second quarter 2004 average worldwide crude oil
sales price was $34.00 per barrel, up from $30.35 in the first quarter
of 2004. The company's U.S. Lower 48 and worldwide natural gas prices
averaged $5.36 and $4.43 per thousand cubic feet, respectively,
compared with $4.91 and $4.48 in the first quarter of 2004.
Six months financial results: E&P income from continuing
operations for the first six months of 2004 was $2,611 million, up
from $2,202 million in 2003, primarily due to higher realized
worldwide crude oil and natural gas prices, partially offset by lower
volumes largely associated with asset sales, reduced benefits from tax
law changes, and higher leasehold impairment and dry hole costs.
ConocoPhillips' average worldwide crude oil price was $32.14 per
barrel for the first six months of 2004, compared with $27.82 for
2003. The company's U.S. Lower 48 and worldwide natural gas prices
averaged $5.13 and $4.46 per thousand cubic feet, respectively, versus
$5.10 and $4.21 in 2003.
Midstream
Second quarter financial results: Midstream income from continuing
operations was $42 million, down from $55 million in the first quarter
of 2004 and up from $25 million in the second quarter of 2003. The
decrease from the prior quarter was mainly the result of asset sales
in the company's consolidated operations, as gains on dispositions
were more than offset by lower volumes associated with the disposed
assets. The increase over the second quarter of 2003 was primarily due
to higher natural gas liquids prices for Duke Energy Field Services,
LLC (DEFS).
Six months financial results: Midstream operating results
increased to $97 million, from $56 million in 2003. The increase was
primarily the result of higher natural gas liquids prices in both DEFS
and the company's consolidated operations.
Refining and Marketing (R&M)
Second quarter financial results: R&M income from continuing
operations was $818 million, up from $464 million in the previous
quarter and $321 million in the second quarter of 2003. The increase
in second quarter R&M earnings, compared with the first quarter of
2004, was primarily driven by higher U.S. refining margins.
The company's domestic facilities ran at 98 percent crude oil
capacity utilization, however realized margins were negatively
impacted due to lower clean product yield as a result of unplanned
cracking unit downtime at the Trainer (Pa.) refinery and an extended
cracking unit turnaround at the Alliance (La.) refinery. This
unplanned downtime also resulted in higher maintenance costs. U.S.
marketing results were lower due to unfavorable inventory impacts, the
timing of certain expenses and lower trading results.
The international crude oil capacity utilization rate was 62
percent, compared with 84 percent in the prior quarter, largely due to
turnarounds at most of the company's international refineries and a
longer-than-planned, 43-day turnaround at the Humber refinery in the
United Kingdom. Turnaround costs, after tax, were $25 million higher
than those of the previous quarter. Additionally, the company
experienced improved realized international marketing margins and
higher marketing volumes.
Overall, the company's second quarter refinery crude oil capacity
utilization rate averaged 92 percent, compared with 95 percent last
quarter. Turnaround costs, before tax, were $78 million during the
second quarter compared with $59 million in the first quarter of 2004.
The improved results over the second quarter of 2003 were
primarily the result of higher worldwide refining margins, partially
offset by lower global marketing margins and higher turnaround and
maintenance costs.
Six months financial results: R&M income from continuing
operations for the first six months of 2004 increased to $1,282
million, compared with $710 million in the first half of 2003. The
increased earnings were driven by higher worldwide refining margins,
partially offset by lower global marketing margins and higher
turnaround and maintenance costs.
Chemicals
Second quarter financial results: The Chemicals segment, which
includes the company's 50 percent interest in Chevron Phillips
Chemical Company LLC (CPChem), reported income from continuing
operations of $46 million, compared with $39 million in the first
quarter of 2004 and $12 million in the second quarter of 2003. The
improvement from the first quarter was the result of a gain on a
property settlement by ConocoPhillips. Results from CPChem, however,
were lower than the first quarter as improvements in the aromatics and
styrenics business line were more than offset by higher turnaround
costs in the olefins business line. The increase from the second
quarter of 2003 reflects higher volumes by CPChem, particularly in the
olefins business line.
Six months financial results: During the first six months of 2004,
the Chemicals segment had income from continuing operations of $85
million, compared with a loss of $11 million for the same period a
year ago. Contributing to the improvement were higher margins in the
olefins and polyolefins, aromatics and styrenics business units, as
well as improved olefins and polyolefins volumes.
Emerging Businesses
The Emerging Businesses segment had a loss from continuing
operations of $29 million in the second quarter of 2004, compared with
losses of $22 million in the first quarter of 2004 and $23 million in
the second quarter of 2003. The higher losses from both the first
quarter of 2004 and the second quarter of 2003 were primarily
attributable to increased operating costs as a result of the initial
commissioning of the Immingham combined heat and power plant in the
United Kingdom.
Corporate and Other
Second quarter after-tax Corporate expenses from continuing
operations were $218 million, compared with $190 million in the
previous quarter and $316 million in the second quarter of 2003. The
increase over the first quarter was primarily driven by higher net
interest expense and orphan site remediation costs. The decrease from
the second quarter of 2003 was primarily the result of reduced
merger-related costs and net interest expense, partially offset by
lower currency exchange gains.
Total debt at the end of the second quarter was $15.6 billion,
$1.5 billion lower than the end of the previous quarter and $2.2
billion below year-end 2003. At the end of the second quarter, the
company's debt-to-capital ratio was 29 percent, down from 32 percent
at the end of the first quarter.
The company's second quarter effective tax rate of 42 percent was
lower than that of the first quarter, primarily due to higher income
from global R&M operations relative to that of the company's
higher-taxed international upstream operations.
Discontinued Operations
Second quarter 2004 earnings from discontinued operations were $62
million, compared with $13 million in the first quarter. The
improvement was primarily related to gains on asset sales, partially
offset by lower volumes.
Outlook
Mr. Mulva concluded:
"Our operating performance, combined with above-average crude oil
and natural gas prices and strong refining margins, contributed to
strong earnings, cash flows and continued debt reduction. The company
continues to grow its asset base through disciplined capital spending
while controlling our operating costs and improving our financial
flexibility.
"Liquids production from the Bayu-Undan project continues to ramp
up toward the expected net peak production rate of 62,000 BOE per day.
In addition, startup of the Hamaca upgrader later this year is
progressing on schedule. Although we expect third quarter production
to be below that of the second quarter due to scheduled maintenance
and seasonality, we still anticipate full-year daily production to
average 1.56 million BOE.
"With respect to downstream, we are in year two of a five-year, $2
billion clean fuels program. While we expect a strong margin
environment in the near term, we will maintain our focus on continuous
improvement."
ConocoPhillips is an integrated petroleum company with interests
around the world. Headquartered in Houston, the company had
approximately 35,800 employees, $86 billion of assets, and $124
billion of annualized revenues as of June 30, 2004. 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 "Second
Quarter Earnings" link.
For financial and operational tables, go to
www.conocophillips.com/news/nr/earnings/highlights/2q04earnings.html.
For detailed supplemental information, go to
www.conocophillips.com/news/nr/earnings/detail/2q04summary.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 "the
company continues to grow its asset base through disciplined capital
spending while controlling our operational costs and improving our
financial flexibility"; "liquids production from the Bayu-Undan
project continues to ramp up toward the expected net peak production
rate of 62,000 BOE per day"; "startup of the Hamaca upgrader later
this year is progressing on schedule"; "although we expect third
quarter production to be below that of the second quarter due to
scheduled maintenance and seasonality, we still anticipate full-year
daily production to average 1.56 million BOE"; and "while we expect a
strong margin environment in the near term, we will maintain our focus
on continuous improvement" 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)