Exhibit 99.1
ConocoPhillips Reports Third-Quarter Net Income of $3.8 Billion
HOUSTON--(BUSINESS WIRE)--Oct. 26, 2005--ConocoPhillips (NYSE:COP)
Earnings at a glance
Third Quarter Nine Months
- ----------------------------------------------------------------------
2005 2004 2005 2004
- ----------------------------------------------------------------------
Income from
continuing
operations $3,804 million 2,011 million $9,858 million 5,627 million
Income from
discontinued
operations $ (4) (5) $ (8) 70
Net income $3,800 2,006 $9,850 5,697
- ----------------------------------------------------------------------
Diluted
income per
share
Income from
continuing
operations
(a) $2.68 1.43 $6.94 4.03
Net
income(a) $2.68 1.43 $6.94 4.08
- ----------------------------------------------------------------------
Revenues $49.7 billion 34.7 billion $131.2 billion 96.8 billion
- ----------------------------------------------------------------------
(a) Per-share amounts in all periods reflect the impact of a 2-for-1
stock split on June 1, 2005.
ConocoPhillips (NYSE:COP) today reported third-quarter net income
of $3,800 million, or $2.68 per share, compared with $2,006 million,
or $1.43 per share, for the same quarter in 2004. Total revenues were
$49.7 billion, versus $34.7 billion a year ago.
Income from continuing operations for the third quarter was $3,804
million, or $2.68 per share, compared with $2,011 million, or $1.43
per share, for the same period a year ago.
"During the quarter, our U.S. Gulf Coast operations were
significantly impacted by Hurricanes Katrina, Rita and Dennis. Despite
these impacts, our overall operating performance for the quarter was
good, and we continued to benefit from the strong commodity price
environment," said Jim Mulva, chairman and chief executive officer.
"We produced 1.79 million BOE per day, including 1.52 million BOE per
day from our Exploration and Production segment and an estimated 0.27
million BOE per day from our LUKOIL Investment segment. Worldwide
refining crude oil capacity utilization rate was 95 percent.
"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 21 percent. During the
quarter, we generated $6.1 billion in cash from operations, spent $3.6
billion in capital projects and investments, paid $430 million in
dividends, reduced debt by $516 million and repurchased $588 million
of ConocoPhillips common stock."
For the first nine months of 2005, net income was $9,850 million,
or $6.94 per share, versus $5,697 million, or $4.08 per share, for
2004. Income from continuing operations was $9,858 million, or $6.94
per share, compared with $5,627 million, or $4.03 per share, for the
same period a year ago. Total revenues were $131.2 billion, versus
$96.8 billion a year ago.
The results for ConocoPhillips' business segments follow.
Exploration & Production (E&P)
Third-quarter financial results: E&P income from continuing
operations was $2,288 million, up from $1,929 million in the second
quarter of 2005 and up from $1,420 million in the third quarter of
2004. The increase from the second quarter of 2005 and the third
quarter of 2004 primarily was the result of higher realized crude oil
and natural gas prices, partially offset by the impact of high natural
gas prices on inventory positions, higher depreciation, depletion and
amortization, hurricane impacts, and increased production taxes driven
by high commodity prices. Third-quarter results also benefited from
increased crude oil sales versus the same period last year.
Daily production, including Canadian Syncrude and excluding the
LUKOIL Investment segment, averaged 1.52 million barrels of oil
equivalent (BOE) per day, slightly lower than the prior quarter and
higher than the 1.48 million BOE per day in the third quarter of 2004.
Compared with the previous quarter, the company experienced
approximately 50,000 BOE per day of greater output from the Timor Sea,
Magnolia and Vietnam. These increases were more than offset by 30,000
BOE per day of planned and unplanned downtime in the United Kingdom,
20,000 BOE per day of downtime as a result of Hurricanes Katrina, Rita
and Dennis, and 10,000 BOE per day of normal seasonal decline as well
as planned and unplanned downtime in Alaska. In addition, the impacts
of production-sharing contracts in Indonesia, driven by higher prices,
continued to lower production volumes, compared with the second
quarter of 2005.
The increase from the third quarter of 2004 was primarily due to
less scheduled maintenance in Alaska and Norway, and greater output
from Australia, Venezuela, Lower 48 and Indonesia, despite the impact
of commodity prices on Indonesian production-sharing contracts. These
increases were partially offset by downtime in the United Kingdom.
Nine-months financial results: E&P income from continuing
operations for the first nine months of 2005 was $6,004 million, up
from $4,031 million in 2004, primarily due to higher realized crude
oil and natural gas prices and oil sales volumes, partially offset by
higher depreciation, depletion and amortization, the impact of higher
commodity prices on production taxes, and reduced income tax benefits.
Midstream
Third-quarter financial results: Midstream income from continuing
operations was $88 million, up from $68 million in the prior quarter
and up from $38 million in the third quarter of 2004. The primary
reasons for the improvement over the previous quarter were higher
natural gas liquids prices and increased ownership interest in Duke
Energy Field Services, LLC (DEFS). These improvements were partially
offset by lower volumes due to the Canada Empress system disposition.
The increase over the third quarter of 2004 primarily was due to
higher natural gas liquids prices in both DEFS' and the company's
consolidated operations, increased ownership in DEFS and the absence
of impairments recorded in the third quarter of 2004. These
improvements were partially offset by the Canada Empress system
disposition.
Nine-months financial results: Midstream income from continuing
operations for the first nine months of 2005 increased to $541
million, from $135 million in 2004. The increase primarily was due to
a net gain of $300 million to ConocoPhillips in the first quarter of
2005 associated with the DEFS restructuring, as well as the company's
increased ownership in DEFS. In addition, natural gas liquids prices
in both DEFS and the company's consolidated operations were higher in
the first nine months of 2005, compared with the first nine months of
2004.
Refining and Marketing (R&M)
Third-quarter financial results: R&M income from continuing
operations was $1,390 million, up from $1,110 million in the previous
quarter and $708 million in the third quarter of 2004. The increase
from the second quarter of 2005 and the third quarter of 2004
primarily was the result of improved worldwide refining margins,
partially offset by lower worldwide marketing margins. Although
industry crack spreads improved significantly during the quarter,
realized margins do not reflect the full benefit of stronger gasoline
spot prices as the company's refining configuration yields less
gasoline than assumed in the market cracks.
In addition, downtime at the company's three Gulf Coast refineries
due to Hurricanes Katrina, Rita and Dennis resulted in lower U.S.
refining throughput. The impact of the heavy-light crude oil
differentials was similar to that of the second quarter of 2005, while
energy costs increased from both the second quarter of 2005 and the
third quarter of 2004. Worldwide marketing results declined sharply,
mainly because the company's domestic wholesale and retail prices did
not increase as rapidly as gasoline and diesel spot prices.
Domestically, third-quarter realized refining margins
significantly improved relative to the second quarter. U.S. refineries
operated at 93 percent of crude oil capacity as hurricane-related
downtime impaired third-quarter throughputs. Before-tax turnaround
costs were $53 million in the third quarter, compared with $65 million
in the previous quarter. In addition, realized U.S. wholesale
marketing margins were significantly lower. U.S. marketing earnings
were negatively affected by a $16 million impairment resulting from
the discontinuation of a marketing incentive program.
Internationally, third-quarter realized refining margins improved
over the second quarter, while the refining crude oil capacity
utilization rate increased by 7 percent. Lower marketing margins also
impacted international results.
Worldwide, R&M's refinery crude oil capacity utilization rate
averaged 95 percent, compared with 97 percent in the previous quarter
and 94 percent in the third quarter of 2004. Before-tax turnaround
costs were $53 million in the third quarter of 2005, versus $106
million in the second quarter.
Nine-months financial results: R&M income from continuing
operations for the first nine months of 2005 increased to $3,200
million, compared with $1,990 million in the first nine months of
2004. The increased earnings were driven by higher worldwide refining
margins, partially offset by higher utility costs, unfavorable
inventory impacts, lower worldwide marketing margins, and foreign
exchange losses.
LUKOIL Investment
Third-quarter financial results: Income from continuing operations
in the third quarter of 2005 was $267 million, up from $148 million in
the prior quarter. This represents ConocoPhillips' estimate of the
company's 14.2 percent weighted average equity share of LUKOIL's
income for the third quarter based on market indicators and historical
production trends for LUKOIL. The improvement from the prior quarter
was attributable to higher realized price estimates, an increased
equity ownership position and an increase based on LUKOIL's reported
second-quarter results. At the end of the third quarter, the company's
equity ownership in LUKOIL was 14.8 percent.
ConocoPhillips' equity share of LUKOIL's estimated BOE production
was 266,000 per day and its share of estimated daily refining crude
oil throughput was 138,000 barrels per day.
Chemicals
Third-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 $13 million, compared with $63 million in the second
quarter of 2005 and $81 million in the third quarter of 2004. The
decrease from the second quarter was largely due to lower margins from
olefins and polyolefins, the effects of hurricane-related plant
shutdowns, and higher utility costs. The decrease from the third
quarter of 2004 reflects higher utility and maintenance costs, the
effects of hurricane-related plant shutdowns, and lower margins from
aromatics and styrenics.
Nine-months financial results: During the first nine months of
2005, the Chemicals segment had income from continuing operations of
$209 million, compared with $166 million for the same period a year
ago. The improvement primarily was due to higher margins in olefins
and polyolefins, partially offset by higher utility costs, higher
maintenance costs and lower overall volumes.
Emerging Businesses
The Emerging Businesses segment results from continuing operations
were slightly positive in the third quarter of 2005, compared with
losses of $8 million in the second quarter of 2005 and $27 million in
the third quarter of 2004. Improved results from international and
domestic power operations contributed to the improvement from second
quarter and the reduced operating losses, compared with the third
quarter of 2004.
Corporate and Other
Third-quarter after-tax Corporate expenses from continuing
operations were $242 million, compared with $179 million in the
previous quarter and $209 million in the third quarter of 2004. The
increased charges in the third quarter primarily were driven by $42
million in after-tax premiums incurred on the early retirement of
debt, as well as increased benefit-related charges and unfavorable
foreign exchange impacts. The increase from the third quarter of 2004
primarily was the result of negative foreign exchange impacts and
increased benefit-related charges, partially offset by lower net
interest expense.
Total debt at the end of the third quarter was $13.5 billion, down
approximately $0.5 billion from the previous quarter and $1.5 billion
below the year-end 2004 level. At the end of the third quarter, the
company's debt-to-capital ratio was 21 percent, down from 22 percent
at the end of the second quarter.
The company's tax provision for the third quarter of 2005 was $2.8
billion, resulting in an effective tax rate of 42.0 percent. This is
compared with 42.4 percent in the previous quarter and 45.1 percent in
the third quarter of 2004.
Discontinued Operations
Third-quarter financial results: Third-quarter losses from
discontinued operations were $4 million, compared with income of $7
million in the second quarter and losses of $5 million in the third
quarter of 2004.
Nine-months financial results: During the first nine months of
2005, discontinued operations had a loss of $8 million, compared with
income of $70 million for the same period a year ago. The decrease is
attributable primarily to 2004 asset sales.
Outlook
Mr. Mulva concluded:
"Efforts to restore operations impacted by Hurricanes Katrina and
Rita continue. The company-operated Magnolia field and the Sweeny
refinery have returned to normal operations. The Lake Charles refinery
is expected to return to normal operations by next week. The
company-operated Green Canyon and partner-operated Ursa fields remain
shut-in, pending full assessment and infrastructure coming back
online. The company's Alliance refinery is expected to begin partial
operation in December and return to full operation in early 2006.
"We expect our production in the fourth quarter to increase and
anticipate full-year daily BOE production to average about the same as
2004, excluding LUKOIL.
"With respect to downstream, some turnaround activity has been
rescheduled in an effort to help stabilize U.S. supply. Near-term Gulf
Coast utilization rates are expected to return to pre-hurricane levels
once operations are restored at the Alliance refinery. During the
Alliance downtime, we will complete turnaround activity previously
scheduled for 2006. Full-year turnaround costs are anticipated to be
approximately $380 million.
"We are facing significant short-term and long-term energy
challenges in the United States. Industry must work proactively with
consumers and the government to find solutions. ConocoPhillips
continues to pursue opportunities for increasing domestic energy
supply through various liquefied natural gas projects, Canadian Oil
Sands projects and projects aimed at developing Alaska and Mackenzie
Delta natural gas resources. Specifically, the company and the state
of Alaska recently announced an agreement in principle on base fiscal
terms for a natural gas pipeline contract that progresses the
development of Alaska North Slope gas. Additionally, we are advancing
our plans to expand our overall refining capacity and clean fuels
capabilities.
"We look forward to updating the financial community on the status
of our business and operating plans at our November 16 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, $104 billion of assets, and $175
billion of annualized revenues as of September 30, 2005. For more
information, go to www.conocophillips.com.
ConocoPhillips' quarterly conference call is scheduled for 11 a.m.
Eastern today. To listen to the conference call and to view related
presentation materials, go to www.conocophillips.com and click on the
"Investor Information" link.
For financial and operational tables and detailed supplemental
information, go to
http://www.conocophillips.com/investor/reports/index.htm
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 "Lake
Charles is expected to return to normal operations by next week"; "the
Company's Alliance refinery is expected to begin partial operation in
December and return to full operation in early 2006"; "we expect our
production in the fourth quarter to increase and anticipate full-year
daily BOE production to average about the same as 2004, excluding
LUKOIL"; "near-term Gulf Coast utilization rates are expected to
return to pre-hurricane levels once operations are restored at the
Alliance refinery"; "during the Alliance downtime, we will complete
turnaround activity previously scheduled for 2006"; "full-year
turnaround costs are anticipated to be approximately $380 million",
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). Unless
legally required, ConocoPhillips undertakes 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 and the company's Web site at
www.conocophillips.com/investor/sec. This information also can be
obtained from the SEC by calling 1-800-SEC-0330.
CONTACT: ConocoPhillips, Houston
Laura Hopkins, 281-293-6030 (media)
or
Gary Russell, 212-207-1996 (investors)