Exhibit 99.1
ConocoPhillips Reports Second-Quarter Net Income of $5.2 Billion or
$3.09 Per Diluted Share;
Effectively Reinvested 97 Percent of Net Income Year-to-Date
HOUSTON--(BUSINESS WIRE)--July 26, 2006--ConocoPhillips
(NYSE:COP):
Earnings at a glance
Second Quarter Six Months
- ----------------------------------------------------------------------
2006 2005 2006 2005
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Income
from
continuing
operations $5,186 3,131 $8,477 6,054
million million million million
Income
(loss)
from
discontinued
operations $ - 7 $ - (4)
Net income $5,186 3,138 $8,477 6,050
- ----------------------------------------------------------------------
Diluted
income per
share
Income from
continuing
operations $ 3.09 2.21 $ 5.49 4.26
Net income $ 3.09 2.21 $ 5.49 4.26
- ----------------------------------------------------------------------
Revenues(a) $ 47.1 41.8 $ 94.1 79.4
billion billion billion billion
- ----------------------------------------------------------------------
a) Effective April 1, 2006, revenues no longer include the sales
portion of buy/sell contracts, reflecting the adoption of EITF No.
04-13, "Accounting for Purchases and Sales of Inventory with the Same
Counterparty."
ConocoPhillips (NYSE:COP) today reported second-quarter net income
of $5,186 million, or $3.09 per share, compared to $3,138 million, or
$2.21 per share, for the same quarter in 2005. Revenues were $47.1
billion, versus $41.8 billion a year ago. Year-to-date excluding the
first-quarter acquisition of Burlington Resources, the company
reinvested 97 percent of its net income into the growth and
development of oil and gas resources and its global refining business.
"We delivered solid results in the second quarter and are pleased
with the progress made integrating the Burlington Resources operations
with ConocoPhillips' global portfolio," said Jim Mulva, chairman and
chief executive officer. "However, we experienced unplanned downtime
in both our upstream and downstream businesses, which impacted our
operating performance.
"With respect to our upstream operating performance, we produced
2.54 million BOE per day, including an estimated 0.40 million BOE per
day from our LUKOIL Investment segment. In our downstream business,
the worldwide refining crude oil capacity utilization rate of 91
percent reflects the impact of an extended full plant turnaround at
the Trainer, Pa., refinery and other unplanned downtime.
"We ended the quarter with debt of $29.5 billion and a
debt-to-capital ratio of 27 percent. During the quarter, we generated
$4.8 billion in cash from operations; funded $3.6 billion in capital
projects, investments and loans to affiliates; paid $0.6 billion in
dividends; reduced debt by $2.7 billion; and repurchased $0.4 billion
of ConocoPhillips common stock."
For the first six months of 2006, net income was $8,477 million,
or $5.49 per share, versus $6,050 million, or $4.26 per share, for the
same period a year ago. Revenues were $94.1 billion, versus $79.4
billion a year ago.
The results for ConocoPhillips' business segments follow.
Exploration and Production (E&P)
Second-quarter financial results: E&P net income was $3,304
million, up from $2,553 million in the first quarter of 2006 and
$1,929 million in the second quarter of 2005. The increase from the
first quarter of 2006 primarily was due to the inclusion of Burlington
Resources' results and benefits associated with new tax legislation in
Canada, partially offset by a new production tax enacted in Venezuela.
Higher realized crude oil prices, partially offset by lower realized
natural gas prices, also contributed to higher earnings. Improved
results from the second quarter of 2005 primarily were due to higher
realized crude oil prices, the inclusion of Burlington Resources'
results and net benefits associated with recently enacted tax
legislation.
Daily production from the E&P segment, including Canadian Syncrude
and excluding the LUKOIL Investment segment, averaged 2.13 million
barrels of oil equivalent (BOE) per day, improved from 1.61 million
BOE per day in the previous quarter and 1.54 million BOE per day in
the second quarter of 2005. The increase from the first quarter of
2006 primarily was due to the addition of the Burlington Resources
assets and initial crude oil liftings from Libya, partially offset by
lower volumes from the United Kingdom due to planned maintenance. The
increase from the second quarter of 2005 primarily was due to the
addition of the Burlington Resources assets, initial crude oil
liftings from Libya and higher production from the Timor Sea,
partially offset by lower production in Alaska due to unplanned
downtime at Prudhoe Bay. Before-tax exploration expenses were $134
million in the second quarter of 2006, versus $112 million in the
previous quarter and $121 million in the second quarter of 2005.
Six months financial results: E&P net income for the first six
months of 2006 was $5,857 million, up from $3,716 million in 2005,
primarily from higher realized crude oil and natural gas prices, the
inclusion of Burlington Resources' results and net benefits associated
with recently enacted tax legislation.
Midstream
Second-quarter financial results: The Midstream segment, which
includes the company's 50 percent interest in Duke Energy Field
Services, LLC (DEFS), reported net income of $108 million, down from
$110 million in the previous quarter and up from $68 million in the
second quarter of 2005. The decrease from the previous quarter
primarily was due to a reduction of the gain on a third-quarter 2005
Canadian asset sale and negative impacts from recent tax legislation,
partially offset by higher natural gas liquids prices. The increase
from the second quarter of 2005 primarily was due to higher natural
gas liquids prices and increased ownership in DEFS, partially offset
by a reduction of the gain on a third-quarter 2005 Canadian asset sale
and negative impacts from recent tax legislation.
Six months financial results: Midstream net income for the first
six months of 2006 decreased to $218 million, from $453 million in
2005. The decrease primarily was due to the 2005 restructuring of
ConocoPhillips' ownership in DEFS and negative impacts from recent tax
legislation, partially offset by higher natural gas liquids prices.
Refining and Marketing (R&M)
Second-quarter financial results: R&M net income was $1,708
million, up from $390 million in the previous quarter and $1,110
million in the second quarter of 2005. The increase from the first
quarter of 2006 primarily was the result of higher worldwide refining
margins, higher domestic refining volumes due to lower turnaround
activity and unplanned downtime, lower turnaround costs and benefits
associated with tax law changes recently enacted by the state of
Texas. The increase from the second quarter of 2005 primarily was the
result of higher domestic refining margins, partially offset by lower
worldwide marketing margins.
The domestic refining crude oil capacity utilization rate for the
second quarter was 91 percent, 8 percentage points higher than the
previous quarter primarily due to significant turnaround activity and
unplanned downtime in the first quarter, as well as the mid-April
return to normal operations of the Alliance refinery in Belle Chasse,
La. Crude oil capacity utilization for the second quarter was impacted
by an extended full plant turnaround at the Trainer, Pa., refinery and
unplanned downtime at the Lake Charles refinery in Westlake, La.
International crude oil capacity utilization, which was impacted
by unplanned downtime at the Humber refinery in the United Kingdom,
was 94 percent, the same as the previous quarter.
Worldwide, R&M's refining crude oil capacity utilization rate
averaged 91 percent, compared with 85 percent in the previous quarter
and 97 percent in the second quarter of 2005. Before-tax turnaround
costs were $115 million in the second quarter of 2006, versus $163
million in the previous quarter and $106 million in the second quarter
of 2005.
Six months financial results: R&M net income for the first half of
2006 increased to $2,098 million, compared with $1,810 million for the
first half of 2005. The increased earnings were due to higher domestic
refining margins, partially offset by lower domestic refining volumes,
lower worldwide marketing margins, higher turnaround and utility
costs, and higher routine and hurricane-related maintenance. Results
for the first six months of 2006 also did not benefit from the gain on
asset sales that improved the results for the first six months of
2005.
LUKOIL Investment
Second-quarter financial results: Net income was $387 million, up
from $249 million in the previous quarter and $148 million in the
second quarter of 2005. This included ConocoPhillips' estimated 17.5
percent weighted-average equity share of OAO LUKOIL's (LUKOIL) income
for the second quarter, based on market indicators and historical
production trends for LUKOIL. The increase from the previous quarter
and the second quarter of 2005 was mainly due to a $78 million benefit
recognized in the second quarter of 2006 that aligned the company's
estimate of LUKOIL's fourth-quarter 2005 and first-quarter 2006 net
income to actual results. In addition, higher estimated prices and
volumes and the company's increasing equity ownership position
contributed to the improved results.
For the second quarter of 2006, ConocoPhillips estimated its
equity share of LUKOIL production was 403,000 BOE per day and its
share of LUKOIL daily refining crude oil throughput was 168,000
barrels per day.
Six months financial results: Net income for the first six months
of 2006 increased to $636 million, from $258 million in 2005. The
increase primarily was due to the company's increasing equity
ownership, higher estimated prices and volumes, and a $78 million
benefit recognized in the first half of 2006 that aligned the
company's estimate of LUKOIL's fourth-quarter 2005 net income to
actual results.
ConocoPhillips' ownership in LUKOIL was 18.0 percent at the end of
the second quarter based on the company's holdings of 153 million of
LUKOIL's 850 million total shares issued.
Chemicals
Second-quarter financial results: The Chemicals segment, which
includes the company's 50 percent interest in Chevron Phillips
Chemical Company LLC (CPChem), reported net income of $103 million,
compared with $149 million in the first quarter of 2006 and $63
million in the second quarter of 2005. The decrease from the previous
quarter primarily was attributed to lower olefins and polyolefins
margins, a first-quarter accrual related to a payment commitment on a
business interruption claim and negative impacts in the second quarter
from recent tax legislation, partially offset by lower utility costs.
The increase from the second quarter of 2005 was largely due to higher
olefins and polyolefins margins and volumes, partially offset by
negative impacts from recent tax legislation.
Six months financial results: Chemicals net income for the first
six months of 2006 increased to $252 million, compared with $196
million in the first half of 2005. The increased earnings primarily
were due to higher olefins and polyolefins margins and volumes, and
payments received in 2006 related to a business interruption claim,
partially offset by lower margins from aromatics and styrenics, higher
utility costs, and negative impacts from recent tax legislation.
Emerging Businesses
The Emerging Businesses segment had a net loss of $12 million in
the second quarter of 2006, compared with net income of $8 million in
the first quarter of 2006 and a net loss of $8 million in the second
quarter of 2005. The second quarter of 2006 was impacted by a domestic
power asset write-down and decreased international power margins,
partially offset by the early-May return to normal operations of the
Immingham combined heat and power plant in the United Kingdom.
Corporate and Other
Second-quarter Corporate expenses, after tax, were $412 million,
up from $168 million in the previous quarter and $172 million in the
second quarter of 2005. The second quarter of 2006 reflected higher
interest expense, higher acquisition-related charges and negative
foreign exchange impacts.
Total debt at the end of the second quarter was $29.5 billion, a
reduction of $2.7 billion from the end of the first quarter. The
company's debt-to-capital ratio was 27 percent, compared to 30 percent
at the end of the first quarter. The cash balance was $0.7 billion at
the end of the second quarter.
The company's tax provision, excluding the $0.4 billion favorable
impact from new tax legislation in Canada and Texas, was $3.9 billion,
resulting in an effective tax rate of 45.1 percent without the new
legislation and 40.3 percent with such changes. This is compared with
43.2 percent in the previous quarter and 42.4 percent in the second
quarter of 2005.
Outlook
Mr. Mulva concluded:
"We recently signed an agreement with the Saudi Arabian Oil
Company to conduct a detailed evaluation for the proposed development
of a 400,000 barrel-per-day, full-conversion refinery in Yanbu, Saudi
Arabia. In addition, we recently signed an agreement with the
International Petroleum Investment Company (IPIC) to study the
development of a 500,000 barrel-per-day refinery in Fujairah, United
Arab Emirates. Both ventures fit well with the company's overall
strategy to invest in projects that expand our global refining
presence, and provide significant new supplies of refined products to
help meet growing requirements around the world. A second agreement
signed with IPIC allows us to work together in identifying new
downstream, as well as upstream, opportunities for joint investment.
"Looking ahead to the third quarter, upstream production will be
impacted by seasonal maintenance scheduled in Alaska, the United
Kingdom and Venezuela. Downstream, we expect lower turnaround
activity, with turnaround costs of approximately $50 million, before
tax.
"In July, the United Kingdom enacted higher income tax rates
retroactive to the beginning of the year. In addition to the ongoing
impact of the rate change, we anticipate a one-time, third-quarter
charge of about $400 million, which includes approximately $125
million related to the company's operations for the first six months
of 2006.
"Our recently announced asset rationalization program is
progressing as planned. We expect to finalize the listing of assets to
be sold and to begin actively marketing them in the third quarter.
"ConocoPhillips is committed to working proactively with consumers
and governments around the world to find solutions to both short-term
and long-term energy challenges. During the past three years, we have
invested more capital into energy development than we have earned in
net income. Our 2006 $18 billion capital program represents a 50
percent increase from last year, and it is three times what we spent
just three years ago. This level of capital investment will enable us
to develop new oil and natural gas supplies, expand our refining
capabilities, and bring to fruition such major new projects as Arctic
gas pipelines and liquefied natural gas production and transportation
- -- projects that will help address the world's future energy needs."
ConocoPhillips is an integrated petroleum company with interests
around the world. Headquartered in Houston, the company had
approximately 38,000 employees, $162 billion of assets, and $188
billion of annualized revenues as of June 30, 2006. For more
information, go to www.conocophillips.com.
ConocoPhillips' quarterly conference call is scheduled for 11 a.m.
Eastern time 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 press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and
Section 21E of the Securities Exchange Act of 1934, as amended, which
are intended to be covered by the safe harbors created thereby.
Forward-looking statements relate to future events and anticipated
results of operations, business strategies, and other aspects of our
operations or operating results. In many cases you can identify
forward-looking statements by terminology such as "anticipate,"
"estimate," "believe," "continue," "could," "intend," "may," "plan,"
"potential," "predict," "should," "will," "expect," "objective,"
"projection," "forecast," "goal," "guidance," "outlook," "effort,"
"target" and other similar words. However, the absence of these words
does not mean that the statements are not forward-looking. 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 including, but not limited to,
crude oil and natural gas prices; refining and marketing margins;
potential failure to achieve, and potential delays in achieving
expected reserves or production levels from existing and future oil
and gas development projects due to operating hazards, drilling risks,
and the inherent uncertainties in interpreting engineering data
relating to underground accumulations of oil and gas; unsuccessful
exploratory drilling activities; lack of exploration success;
potential disruption or unexpected technical difficulties in
developing new products and manufacturing processes; potential failure
of new products to achieve acceptance in the market; unexpected cost
increases or technical difficulties in constructing or modifying
company manufacturing or refining facilities; unexpected difficulties
in manufacturing, transporting or refining synthetic crude oil;
international monetary conditions and exchange controls; potential
liability for remedial actions under existing or future environmental
regulations; potential liability resulting from pending or future
litigation; general domestic and international economic and political
conditions, as well as changes in tax and other laws applicable to our
business. Other factors that could cause actual results to differ
materially from those described in the forward-looking statements
include other economic, business, competitive and/or regulatory
factors affecting our business generally as set forth in our filings
with the Securities and Exchange Commission (SEC). Unless legally
required, ConocoPhillips undertakes no obligation to update publicly
any 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. The company uses 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 disclosures 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
Kristi DesJarlais, 281-293-4595 (media)
or
Gary Russell, 212-207-1996 (investors)