Exhibit 99.1
ConocoPhillips Reports Third-Quarter Net
Income of $3.9 Billion or $2.31 Per Diluted Share
Results include $0.37 per share reduction due to certain
previously disclosed items
HOUSTON--(BUSINESS WIRE)--Oct. 25, 2006--ConocoPhillips
(NYSE:COP):
Earnings at a glance
Third Quarter Nine Months
- ------------------------------------------------- --------------------
2006 2005 2006 2005
- -------------------------------------- ---------- ---------- ---------
Income from continuing
operations $ 3,876 3,804 $ 12,353 9,858
million million million million
Income (loss) from
discontinued operations $ - (4) $ - (8)
Net income $ 3,876 3,800 $ 12,353 9,850
- -------------------------------------- ---------- ---------- ---------
Diluted income per share
Income from continuing
operations $ 2.31 2.68 $ 7.78 6.94
Net income $ 2.31 2.68 $ 7.78 6.94
- -------------------------------------- ---------- ---------- ---------
Revenues(a) $ 48.4 48.7 $ 142.4 128.2
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 third-quarter net income
of $3,876 million, or $2.31 per share, compared to $3,800 million, or
$2.68 per share, for the same quarter in 2005. Revenues were $48.4
billion, versus $48.7 billion a year ago.
"Overall, we had consistent operations for the quarter. We
produced 2.47 million BOE per day, including an estimated 0.44 million
BOE per day from our LUKOIL Investment segment," said Jim Mulva,
chairman and chief executive officer. "Upstream results were
negatively impacted by the unexpected partial shut-down of the
partner-operated Prudhoe Bay oil field in Alaska, as well as planned
downtime in other areas.
"Our downstream crude oil capacity utilization rate improved to 95
percent, although we experienced downtime at our Wilhelmshaven and
Wood River refineries. The improvement in utilization came from an
overall decrease in turnaround activity and unplanned downtime during
the quarter."
Third-quarter net income was negatively impacted $0.37 per share
by the following previously disclosed items:
-- $400 million from new United Kingdom tax legislation impacting
Exploration & Production (E&P), including $270 million related
to the revaluation of deferred taxes and $130 million related
to the company's operations for the first six months of 2006.
-- $249 million impairment on certain Refining & Marketing (R&M)
assets held for sale.
-- $94 million from new Alaska tax legislation impacting the E&P
segment related to the company's operations for April through
June.
-- $121 million net benefit from business interruption insurance,
including $103 million related to the R&M segment.
"We ended the quarter with debt of $27.8 billion and a
debt-to-capital ratio of 25 percent," said Mulva. "During the quarter,
we generated $6.2 billion in cash from operations; funded $3.8 billion
in capital projects, investments and loans to affiliates; reduced debt
by $1.7 billion; paid $600 million in dividends; and repurchased $250
million of ConocoPhillips common stock."
For the first nine months of 2006, net income was $12,353 million,
or $7.78 per share, versus $9,850 million, or $6.94 per share, for the
same period a year ago. Revenues were $142.4 billion, versus $128.2
billion a year ago.
The results for ConocoPhillips' business segments follow.
Exploration and Production (E&P)
Third-quarter financial results: E&P net income was $1,904
million, including the $494 million in charges associated with the
U.K. and Alaska tax legislation noted above. Net income for the third
quarter was down from $3,304 million in the second quarter of 2006 and
$2,288 million in the third quarter of 2005. The decrease from the
second quarter of 2006 reflects the negative impact of the tax
legislation noted above and the absence of a $401 million
second-quarter benefit related to Canadian tax legislation. Lower
crude oil sales volumes and increased depreciation, depletion and
amortization expense from the application of purchase accounting for
the Burlington Resources acquisition at the operating-area level also
negatively impacted net income. The decrease from the third quarter of
2005 primarily was due to the negative impact of recent tax
legislation, partially offset by the inclusion of Burlington
Resources' results.
Daily production from the E&P segment, including Canadian Syncrude
and excluding the LUKOIL Investment segment, averaged 2.04 million
barrels of oil equivalent (BOE) per day, a decline from 2.13 million
BOE per day in the previous quarter and an increase from 1.52 million
BOE per day in the third quarter of 2005. The decrease from the second
quarter of 2006 primarily was due to the partial shut-down of the
Prudhoe Bay field and lower volumes from the United Kingdom and
Venezuela due to planned maintenance. The increase from the third
quarter of 2005 primarily was due to the addition of the Burlington
Resources assets and higher production from Libya and the Timor Sea,
partially offset by lower production from the Prudhoe Bay field.
Before-tax exploration expenses were $197 million in the third quarter
of 2006, versus $134 million in the previous quarter and $140 million
in the third quarter of 2005.
Nine months financial results: E&P net income for the first nine
months of 2006 was $7,761 million, up from $6,004 million in 2005,
primarily from higher realized crude oil prices and the inclusion of
Burlington Resources' results, partially offset by the net impact of
recent tax legislation.
Midstream
Third-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 $169 million, up from
$108 million in the previous quarter and up from $88 million in the
third quarter of 2005. The increase from the previous quarter reflects
the net impact of tax adjustments to gains on assets sold in 2005 and
higher natural gas liquids prices. The increase from the third quarter
of 2005 reflects a tax adjustment to the gain on assets sold in 2005
and higher natural gas liquids prices.
Nine months financial results: Midstream net income for the first
nine months of 2006 decreased to $387 million, from $541 million in
2005. The decrease primarily was due to the 2005 restructuring of
ConocoPhillips' ownership in DEFS, partially offset by higher natural
gas liquids prices.
Refining and Marketing (R&M)
Third-quarter financial results: R&M net income was $1,464
million, including a $249 million impairment on assets held for sale
and a net benefit of $103 million from business interruption
insurance, as noted above. Net income for the third quarter was down
from $1,708 million in the previous quarter and up from $1,390 million
in the third quarter of 2005. The decrease from the second quarter of
2006 primarily was the result of lower worldwide refining margins and
the impairment on assets held for sale. This decrease was partially
offset by higher worldwide marketing margins and domestic refining
volumes, the business interruption insurance benefit and lower
turnaround costs. The increase from the third quarter of 2005
primarily was due to higher worldwide marketing margins and domestic
refining volumes and the business interruption insurance benefit. This
increase was partially offset by lower worldwide refining margins, the
impairment on assets held for sale, and higher depreciation expense
and maintenance costs.
The domestic refining crude oil capacity utilization rate for the
third quarter was 96 percent, up from 91 percent in the previous
quarter. The improvement primarily was due to the return to normal
operations of the Trainer, Pa., refinery after an extended full plant
turnaround, as well as the Lake Charles refinery in Westlake, La.,
which had second-quarter unplanned downtime. This improvement was
partially offset by downtime at the Wood River refinery in Roxana,
Ill., due to damage sustained during a severe storm. The Wood River
refinery returned to normal operations during the quarter.
The international crude oil capacity utilization rate was 89
percent, down from 94 percent in the previous quarter. The decrease
primarily was due to planned downtime at the Wilhelmshaven, Germany,
refinery.
Worldwide, R&M's refining crude oil capacity utilization rate
averaged 95 percent, compared with 91 percent in the previous quarter
and 95 percent in the third quarter of 2005. Before-tax turnaround
costs were $42 million in the third quarter of 2006, versus $115
million in the previous quarter and $53 million in the third quarter
of 2005.
Nine months financial results: R&M net income for the first nine
months of 2006 increased to $3,562 million, compared with $3,200
million for the first nine months of 2005. The increased earnings were
due to higher domestic refining and worldwide marketing margins and
the business interruption insurance benefit. The increase was
partially offset by the impairment on assets held for sale, lower
domestic refining volumes and international refining margins, and
higher depreciation expense and maintenance costs. The nine-month
results for 2005 also included a gain on asset sales.
LUKOIL Investment
Third-quarter financial results: Net income was $487 million, up
from $387 million in the previous quarter and up from $267 million in
the third quarter of 2005. The results included ConocoPhillips'
estimated weighted-average equity share of OAO LUKOIL's (LUKOIL)
income for the third quarter, based on market indicators, historical
production trends for LUKOIL and an adjustment reflecting the
company's ownership interest based on shares outstanding in accordance
with U.S. GAAP (second-quarter average of 830 million). The company's
ownership interest in LUKOIL at the end of the third quarter was 19
percent of the 851 million authorized and issued shares.
The increase in net income from the previous quarter mainly was
due to the company's increased equity ownership and higher estimated
commodity prices. The increase from the third quarter of 2005
primarily was due to the company's increased equity ownership, higher
estimated volumes and commodity prices, and a net benefit from
alignment of the company's estimate of second-quarter net income to
LUKOIL's reported results.
For the third quarter of 2006, ConocoPhillips estimated its equity
share of LUKOIL production was 436,000 BOE per day and its share of
LUKOIL daily refining crude oil throughput was 164,000 barrels per
day.
Nine months financial results: Net income for the first nine
months of 2006 increased to $1,123 million, from $525 million in 2005.
The increase primarily was due to the company's increased equity
ownership, higher estimated prices and volumes, and a benefit from
alignment of LUKOIL's estimated net income to actual results.
Chemicals
Third-quarter financial results: The Chemicals segment, which
includes the company's 50 percent interest in Chevron Phillips
Chemical Company LLC, reported net income of $142 million, compared
with $103 million in the second quarter of 2006 and $13 million in the
third quarter of 2005. The increase from the second quarter primarily
was attributed to higher margins, a business interruption insurance
benefit and the negative impact of tax legislation on the previous
quarter results. The increase from the third quarter of 2005 was
largely due to higher margins, lower utility costs, a business
interruption insurance benefit, and 2005 hurricane-related downtime.
Nine months financial results: Chemicals net income for the first
nine months of 2006 increased to $394 million, compared with $209
million in the first nine months of 2005. The increase primarily was
due to higher olefins and polyolefins margins and volumes and a
business interruption insurance benefit.
Emerging Businesses
The Emerging Businesses segment had net income of $11 million in
the third quarter of 2006, compared with a net loss of $12 million in
the second quarter of 2006 and slightly positive results in the third
quarter of 2005. The increase from the previous quarter primarily was
due to the second-quarter write-down of a domestic power asset. The
increase from the third quarter of 2005 was due to improved
international power generation results.
Corporate and Other
Third-quarter Corporate expenses, after tax, were $301 million,
down from $412 million in the previous quarter and up from $246
million in the third quarter of 2005. The decrease from the second
quarter of 2006 primarily was due to favorable foreign exchange
impacts and lower interest expense. The increase from the third
quarter of 2005 is attributed to higher interest expense and
acquisition-related charges. This increase was partially offset by
favorable foreign exchange impacts and the absence in 2006 of premiums
incurred in 2005 on the early retirement of debt.
Total debt at the end of the third quarter was $27.8 billion, a
reduction of $1.7 billion from the end of the second quarter. The
company's debt-to-capital ratio was 25 percent, compared to 27 percent
at the end of the second quarter. The cash balance was $0.7 billion at
the end of the third quarter.
The company's third-quarter tax provision included the $400
million charge from the U.K. tax legislation. Excluding this item, the
tax provision was $3.7 billion, resulting in an effective tax rate of
46.1 percent, versus 51.2 percent including this item. This is
compared with 45.1 percent in the previous quarter excluding
second-quarter tax legislation impacts in Canada and Texas, and 40.3
percent including such impacts.
Outlook
Mr. Mulva concluded:
"We continue to progress our long-term strategic investment plans.
Our 2006 capital program remains on course, including the completion
of our planned equity investment in LUKOIL.
"Our asset rationalization program, anticipated to generate
proceeds of approximately $3 billion to $4 billion when it is
completed next year, is advancing as planned. We are actively
marketing a number of assets identified for disposition. For example,
in the third quarter we sold our remaining interest in the Permian
Basin Royalty Trust.
"We are pleased to have reached an agreement with EnCana
Corporation (EnCana) to create an integrated, North American heavy oil
business. This venture builds on our current and planned heavy-oil
expansion work in our Wood River and Borger refineries and makes
available a stable, long-term supply of bitumen. The venture also is
expected to enhance ConocoPhillips' near- and long-term production
growth, providing a steady, stable source of resource additions. We
look forward to working closely with EnCana to make this venture a
success.
"Looking ahead to the fourth quarter, we expect our upstream
production to increase, reflecting the resumption of operations at
Prudhoe Bay, normal seasonality, and less scheduled downtime in the
United Kingdom and Venezuela, partially offset by production sharing
contract impacts in the Timor Sea. Downstream, we expect crude oil
capacity utilization to be similar to the third quarter.
"Our full-year exploration expense is expected to be approximately
$800 million. Downstream, we expect full-year turnaround costs to be
approximately $400 million."
ConocoPhillips is an integrated petroleum company with interests
around the world. Headquartered in Houston, the company had
approximately 38,300 employees, $164 billion of assets, and $190
billion of year-to-date annualized revenues as of September 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; our ability to successfully negotiate and execute final
definitive agreements with EnCana; 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," and "resources" 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
Becky Johnson, 281-293-6743 (media)
or
Gary Russell, 212-207-1996 (investors)