Exhibit 99.1
ConocoPhillips Reports Third Quarter Net Income of $2.0 Billion
HOUSTON--(BUSINESS WIRE)--Oct. 27, 2004--ConocoPhillips (NYSE:COP)
Earnings at a glance
Third Quarter Nine Months
- ----------------------------------------------------------------------
2004 2003 2004 2003
- ----------------------------------------------------------------------
Income
from
continuing
opera-
tions $2,011 million $1,249 million $5,627 million $3,608 million
Income
(loss)
from
discontinued
operations $ (5) $ 57 $ 70 $ 201
Cumulative
effect
of
changes
in
accounting
prin-
ciples $ - $ - $ - $ (95)
Net income $2,006 $1,306 $5,697 $3,714
- ----------------------------------------------------------------------
Diluted
income
per share
Income
from
continuing
opera-
tions $2.87 $1.82 $8.06 $5.28
Net
income $2.86 $1.90 $8.16 $5.43
- ----------------------------------------------------------------------
Revenues $34.7 billion $26.5 billion $96.8 billion $79.1 billion
- ----------------------------------------------------------------------
ConocoPhillips (NYSE:COP) today reported third quarter net income
of $2,006 million, an increase of 54 percent compared with $1,306
million for the same quarter in 2003. Net income per share for the
third quarter was $2.86, versus $1.90 for the same period a year ago.
Total revenues were $34.7 billion, versus $26.5 billion a year ago.
Income from continuing operations for the third quarter was $2,011
million, an increase of 61 percent compared with $1,249 million for
the same period a year ago. Income from continuing operations per
share for the third quarter of 2004 was $2.87, compared with $1.82 for
the third quarter of 2003.
"We had a good quarter," said Jim Mulva, chairman and chief
executive officer. "Upstream, we ran well, producing 1.48 million
barrels of oil equivalent per day. Downstream, our refineries ran at
94 percent of capacity, slightly higher than last quarter. At the same
time, we completed significant planned maintenance in our upstream
business and elected to accelerate turnarounds at two refineries.
During the quarter, we recognized higher exploration expenses, as well
as certain refining and marketing contingency accruals and
impairments. Our quarterly results continued to benefit from the
strong commodity price environment.
"Our financial position continues to steadily improve, and our
return on capital employed remains strong and competitive. We ended
the quarter with a debt-to-capital ratio of 28 percent. During the
quarter, we generated $4.4 billion in cash from operations, invested
$1.6 billion in capital projects, paid $296 million in dividends, and
increased our cash balance to approximately $3.3 billion in
anticipation of the capital investment in the LUKOIL strategic
alliance."
For the first nine months of 2004, net income was $5,697 million,
a 53 percent improvement when compared with $3,714 million for 2003.
Net income per share was $8.16 for the first nine months of 2004,
versus $5.43 for the 2003 period. Income from continuing operations
was $5,627 million, a 56 percent increase over $3,608 million for the
same period a year ago. Income from continuing operations per share
for the first nine months of 2004 was $8.06, compared with $5.28 for
the first nine months of 2003. Total revenues were $96.8 billion,
versus $79.1 billion a year ago.
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 $1,420 million, up from $1,354
million in the second quarter of 2004 and up from $967 million in the
third quarter of 2003. The increase from the second quarter was
primarily the result of higher crude oil prices, as the impact of
reduced production was mostly offset by sales volumes, which exceeded
production by 19,000 barrels per day. The increased earnings were
partially offset by the impact of reduced benefits from tax law
changes in the second quarter and reduced foreign exchange gains
during the third quarter. In addition, third quarter results were
impacted by higher pre-tax exploration expenses totaling $205 million,
which included the write-off of the Zafar-Mashal well, as well as
certain leasehold impairments. Improved results from the third quarter
of 2003 were primarily due to higher crude oil and natural gas prices,
partially offset by reduced gains on asset sales and lower volumes.
ConocoPhillips' daily production for the quarter averaged 1.48
million barrels of oil equivalent (BOE) per day, including Canadian
Syncrude. When compared with the second quarter, increased output from
Bayu-Undan in the Timor Sea was more than offset by the impact of
scheduled maintenance in Alaska and the North Sea, as well as normal
seasonal declines. While the company's production volumes declined by
5 percent from the prior quarter, sales volumes experienced only a
slight decline. When compared with the third quarter of 2003, volumes
were lower, primarily due to asset sales and scheduled maintenance,
partially offset by increased production from Bayu-Undan and Vietnam.
Nine months financial results: E&P income from continuing
operations for the first nine months of 2004 was $4,031 million, up
from $3,169 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, higher exploration costs,
and reduced gains on asset sales.
Midstream
Third quarter financial results: Midstream income from continuing
operations was $38 million, down from $42 million in the second
quarter of 2004 and up from $31 million in the third quarter of 2003.
Contributing to the decrease from the prior quarter were $12 million
in impairment charges at Duke Energy Field Services, LLC (DEFS),
related to assets held for sale and certain other impairments. The
increase over the third quarter of 2003 was primarily due to higher
natural gas liquids prices for both DEFS and the company's
consolidated operations, partially offset by lower volumes in the
company's consolidated operations associated with asset sales and
increased impairments in DEFS.
Nine months financial results: Midstream operating results
increased to $135 million, from $87 million in 2003. The increase was
primarily the result of higher natural gas liquids prices in both DEFS
and the company's consolidated operations, partially offset by lower
volumes associated with asset sales and inventory impacts in the
company's consolidated operations.
Refining and Marketing (R&M)
Third quarter financial results: R&M income from continuing
operations was $708 million, down from $818 million in the previous
quarter and up from $485 million in the third quarter of 2003. The
decrease in third quarter R&M earnings, compared with the second
quarter of 2004, was primarily driven by lower U.S. refining margins,
and worldwide marketing margins, partially offset by improved
international refining volumes and margins, as well as favorable U.S.
inventory impacts. In addition, third quarter results were negatively
impacted approximately $40 million, after-tax, by certain contingency
and impairment charges.
Overall, the company's third quarter refinery crude oil capacity
utilization rate averaged 94 percent, compared with 93 percent last
quarter. Driving this increase was the improvement in international
utilization rates to 99 percent from 69 percent. The U.S. utilization
rate was 93 percent, despite the impact of accelerated turnarounds at
the Bayway and Sweeny refineries, and a planned crude unit turnaround
at the Lake Charles refinery. Third quarter turnaround costs of $57
million, before-tax, were higher than expected due to accelerated
turnarounds, but lower than the $78 million in the second quarter of
2004.
Contributing to the improved results over the third quarter of
2003 were higher worldwide refining margins, partially offset by lower
worldwide marketing margins, and increased contingency and impairment
charges, as well as turnaround and energy costs.
Nine months financial results: R&M income from continuing
operations for the first nine months of 2004 increased to $1,990
million, compared with $1,195 million in the same period a year ago.
Contributing to the increased earnings were higher worldwide refining
margins, partially offset by lower worldwide marketing margins, and
increased contingency and impairment charges, as well as turnaround
and energy costs.
Chemicals
Third quarter financial results: The Chemicals segment, which
includes the company's 50 percent interest in Chevron Phillips
Chemical Company LLC, reported income from continuing operations of
$81 million, compared with $46 million in the second quarter of 2004
and $7 million in the third quarter of 2003. The improvement from the
second quarter was largely due to improved margins, particularly in
the international aromatics and styrenics business line, as well as
lower maintenance costs. The increase from the third quarter of 2003
reflects improved margins and volumes in olefins and polyolefins, as
well as improved margins in the aromatics and styrenics business line.
Nine months financial results: During the first nine months of
2004, the Chemicals segment had income from continuing operations of
$166 million, compared with a loss of $4 million for the same period a
year ago. The increase is primarily attributable to higher margins and
volumes in the olefins and polyolefins business lines, as well as
improved margins in the aromatics and styrenics business line.
Emerging Businesses
The Emerging Businesses segment had a loss from continuing
operations of $27 million in the third quarter of 2004, compared with
losses of $29 million in the second quarter of 2004 and $18 million in
the third quarter of 2003. The higher losses from the third quarter of
2003 were primarily attributable to lower U.S. power margins and
increased costs associated with the commissioning and operation of the
Immingham combined heat and power plant in the United Kingdom.
Corporate and Other
Third quarter after-tax Corporate expenses from continuing
operations were $209 million, compared with $218 million in the
previous quarter and $223 million in the third quarter of 2003. The
decrease over the second quarter was primarily driven by lower net
interest expense, and increased foreign exchange gains, partially
offset by approximately $43 million after-tax of increased early
retirement of debt premiums paid during the quarter. The decrease from
the third quarter of 2003 was primarily the result of reduced
merger-related costs and higher foreign exchange gains, partially
offset by the increased early retirement of debt premiums paid during
the third quarter of 2004.
Total debt at the end of the third quarter was $15.5 billion,
compared with $15.6 billion at the end of the previous quarter and
$2.3 billion below year-end 2003. At the end of the third quarter, the
company's debt-to-capital ratio was 28 percent, down from 29 percent
at the end of the second quarter. The company increased its cash
balance from $804 million to $3.3 billion in anticipation of the
capital investment in the LUKOIL strategic alliance.
The company's third quarter effective tax rate of 45 percent was
higher than that of the second quarter, primarily due to a higher
proportion of income in high-rate tax jurisdictions, generally
associated with the company's international upstream operations.
Discontinued Operations
Third quarter financial results: Third quarter losses from
discontinued operations were $5 million, compared with income of $62
million in the second quarter of 2004 and income of $57 million in the
third quarter of 2003. The decreases in both periods were primarily
related to the impacts of asset sales.
Nine months financial results: During the first nine months of
2004, income from discontinued operations was $70 million, compared
with $201 million for the same period a year ago. The decrease is
primarily attributable to the impacts of asset sales.
Outlook
Mr. Mulva concluded:
"Execution of the 2004 operating plan by our major business
segments during a period of high commodity prices resulted in another
quarter of strong earnings and cash flow. We have made significant
progress on our 2004 objectives and continue to apply capital and cost
discipline, regardless of the price environment. Capital spending
associated with our major projects continues as planned. In addition,
we recently announced a 16 percent increase in our quarterly dividend
rate.
"As we announced in late September, the strategic alliance with
LUKOIL, a leading international integrated oil and gas company in
Russia, represents an important step for our company. This transaction
is consistent with our E&P strategy of increasing reserves and
production growth in new legacy areas at attractive costs, and is
expected to provide access to possible substantial future reserve
additions.
"We expect our production in the fourth quarter to increase as
startup of the Hamaca upgrader has begun, and as the Magnolia project
begins production later in the quarter. We anticipate full-year daily
production to average about 1.56 million BOE.
"The size and scope of our downstream asset base allows us to
optimize planned downtime and stage projects to best use our
resources, which is particularly important in the environment of
strong margins. We have planned extensive crude unit turnaround
activity during the fourth quarter, but expect our overall refinery
crude oil capacity utilization rate to remain in the mid 90-percent
range. In addition, we will continue to focus on our five-year, $2
billion clean fuels program.
"We look forward to updating the financial community on the status
of our business and operating plans at our November 17 analyst meeting
in New York."
ConocoPhillips is an integrated petroleum company with interests
around the world. Headquartered in Houston, the company had
approximately 35,800 employees, $89 billion of assets, and $129
billion of annualized revenues as of Sept. 30, 2004. For more
information, go to www.conocophillips.com.
ConocoPhillips' quarterly conference call is scheduled for 10 a.m.
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/3q04earnings.html
For detailed supplemental information, go to
www.conocophillips.com/news/nr/earnings/detail/3q04summary.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
strategic alliance with LUKOIL) ... is expected to provide access to
possible substantial future reserve additions"; "we expect our
production in the fourth quarter to increase as startup of the Hamaca
upgrader has begun, and as the Magnolia project begins production
later in the quarter"; "we anticipate full-year daily production to
average about 1.56 million BOE"; and "we have planned extensive crude
unit turnaround activity during the fourth quarter, but expect our
overall refinery crude oil capacity utilization rate to remain in the
mid 90-percent range" 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, Houston, Texas 77079 or on the company's Web site at
www.conocophillips.com. This information can also be obtained from the
SEC by calling 1-800-SEC-0330 or on the SEC's Web site at www.sec.gov.
CONTACT: ConocoPhillips, Houston
Kristi DesJarlais, 281-293-4595 (media)
or
Clayton Reasor, 212-207-1996 (investors)