Exhibit 99.1
ConocoPhillips Reports Fourth-Quarter Net
Income of $3.2 Billion or $1.91 Per Diluted Share
Results include $0.17 per share reduction due to previously
disclosed impairments
HOUSTON--(BUSINESS WIRE)--Jan. 24, 2007--ConocoPhillips
(NYSE:COP):
Earnings at a glance
Fourth Quarter Twelve Months
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2006 2005 2006 2005
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Income from continuing $3,197 3,782 $15,550 13,640
operations million million million million
Income (loss) from
discontinued operations $ - (15) $ - (23)
Cumulative effect of
changes in accounting
principles $ - (88) $ - (88)
Net income $3,197 3,679 $15,550 13,529
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Diluted income per share
Income from continuing
operations $1.91 2.69 $9.66 9.63
Net income $1.91 2.61 $9.66 9.55
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Revenues(a) $41.5 51.3 $183.7 179.4
billion billion billion billion
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(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 fourth-quarter net income
of $3,197 million, or $1.91 per share, which includes a $0.17 per
share reduction due to previously disclosed impairments. This compares
with $3,679 million, or $2.61 per share, for the same quarter in 2005.
Revenues were $41.5 billion, versus $51.3 billion a year ago.
"We continued to experience operational challenges in our upstream
business during the quarter. While operations at the Prudhoe Bay oil
field substantially recovered from third-quarter disruptions, we
experienced weather-related transportation delays in Alaska that
impacted fourth-quarter production. We also experienced unplanned
downtime related to compressor maintenance at the Britannia field in
the U.K. sector of the North Sea," said Jim Mulva, chairman and chief
executive officer. "With respect to our upstream operations, we
produced 2.49 million BOE per day, including an estimated 0.44 million
BOE per day from our LUKOIL Investment segment. In our downstream
business, the crude oil capacity utilization rate was 94 percent
during the quarter, but we were impacted by significantly lower
margins."
Fourth-quarter net income was negatively impacted $0.17 per share
by two previously disclosed impairments. Refining and Marketing
results were impacted by an after-tax impairment of $192 million
related to certain domestic marketing assets held for sale.
Exploration and Production results included an after-tax asset
impairment of $93 million due to declining well performance and
drilling results in the Canadian Rockies Foothills area.
"We ended the year with debt of $27.1 billion and a
debt-to-capital ratio of 24 percent," said Mulva. "During the quarter,
we generated $5.6 billion in cash from operations, funded $4.2 billion
for our capital program, reduced debt by $700 million, paid $600
million in dividends, and repurchased $250 million of outstanding
ConocoPhillips common stock.
"For the year, we funded $16.3 billion for our capital program,
reduced debt by $5.1 billion subsequent to the Burlington Resources
acquisition, paid $2.3 billion in dividends, and repurchased $925
million of outstanding ConocoPhillips common stock. This was
accomplished using $21.5 billion in cash from operations, $550 million
in proceeds from asset sales, and other available cash."
For the twelve months of 2006, net income was $15,550 million, or
$9.66 per share, versus $13,529 million, or $9.55 per share, for 2005.
Revenues were $183.7 billion, versus $179.4 billion a year ago.
The results for ConocoPhillips' business segments follow.
Exploration and Production (E&P)
Fourth-quarter financial results: E&P net income was $2,087
million, up from $1,904 million in the third quarter of 2006 and down
from $2,426 million in the fourth quarter of 2005. The increase from
the previous quarter primarily was due to the negative impact of tax
legislation on third-quarter results, higher crude oil sales volumes,
and lower depreciation, depletion and amortization (DD&A) expense in
the fourth quarter. This increase was partially offset by lower crude
oil prices, increased exploration expense, and the Canadian asset
impairment. The decrease from the fourth quarter of 2005 primarily was
due to lower realized natural gas prices, increased exploration
expense, and the Canadian asset impairment. The decrease from the
fourth quarter of 2005 was partially offset by the inclusion of
Burlington Resources' results and higher realized crude oil prices.
Daily production from the E&P segment, including Canadian Syncrude
and excluding the LUKOIL Investment segment, averaged 2.05 million
barrels of oil equivalent (BOE) per day, which was similar to the
average production in the previous quarter and up from 1.59 million
BOE per day in the fourth quarter of 2005. The increase from the
fourth quarter of 2005 primarily was due to the addition of 487,000
BOE per day from the Burlington Resources assets, which reflects
downtime of 13,000 BOE per day in the Irish Sea. Other increases of
81,000 BOE per day related to Libya and the Timor Sea. These increases
were partially offset by a decrease of 111,000 BOE per day, primarily
from Alaska (45,000 BOE per day), the United Kingdom (34,000 BOE per
day) and Vietnam (14,000 BOE per day). Before-tax exploration expenses
were $391 million in the fourth quarter of 2006, versus $197 million
in the previous quarter and $229 million in the fourth quarter of
2005.
Twelve-months financial results: E&P net income for 2006 was
$9,848 million, up from $8,430 million in 2005, primarily due to
higher realized crude oil prices and the inclusion of Burlington
Resources' results. This increase was partially offset by lower
realized natural gas prices, tax legislation impacts, higher DD&A and
operating expenses, asset impairments, and higher exploration expense.
Midstream
Fourth-quarter financial results: The Midstream segment includes
the company's 50 percent interest in Duke Energy Field Services, LLC
(DEFS), which effective January 1, 2007, changed its name to DCP
Midstream, LLC. Midstream fourth-quarter net income was $89 million,
down from $169 million in the previous quarter and $147 million in the
fourth quarter of 2005. The decrease from the previous quarter
primarily was due to lower natural gas liquids prices and the impact
of a third-quarter 2006 tax adjustment for assets sold in 2005. The
decrease from the fourth quarter of 2005 primarily was due to lower
natural gas liquids prices.
Twelve-months financial results: Midstream net income for 2006
decreased to $476 million, from $688 million in 2005. The decrease
primarily was due to the 2005 restructuring of ConocoPhillips'
ownership in DEFS, partially offset by higher 2006 natural gas liquids
prices.
Refining and Marketing (R&M)
Fourth-quarter financial results: R&M net income was $919 million
in the fourth quarter, down from $1,464 million in the previous
quarter and $973 million in the fourth quarter of 2005. The decrease
from the third quarter of 2006 primarily was due to lower worldwide
refining and marketing margins, partially offset by $57 million in
lower impairments on assets held for sale. In addition, third-quarter
results included a $111 million benefit related to business
interruption insurance.
The decrease from the fourth quarter of 2005 primarily was due to
lower worldwide refining and domestic marketing margins and the
fourth-quarter 2006 impairment, partially offset by higher domestic
refining volumes reflecting fourth-quarter 2005 hurricane impacts,
lower utility costs, and a lower effective tax rate in the fourth
quarter of 2006. Net income in the fourth quarter of 2005 also
included a charge related to the cumulative effect of a change in
accounting principle.
The domestic refining crude oil capacity utilization rate for the
fourth quarter remained at 96 percent. The international crude oil
capacity utilization rate was 87 percent, compared with 89 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 94 percent, compared with 95 percent in the previous quarter
and up from 88 percent in the fourth quarter of 2005. Before-tax
turnaround costs were $94 million in the fourth quarter of 2006,
versus $42 million in the previous quarter and $86 million in the
fourth quarter of 2005.
Twelve-months financial results: R&M net income during 2006 was
$4,481 million, compared with $4,173 million in 2005. The increase was
due to higher domestic refining and marketing margins and domestic
refining volumes, the business interruption insurance benefit, and the
fourth-quarter 2005 charge related to the cumulative effect of a
change in accounting principle. The increase was partially offset by
$441 million after-tax in impairments on assets held for sale
recognized in the third and fourth quarters of 2006, and higher
depreciation expense.
LUKOIL Investment
Fourth-quarter financial results: LUKOIL Investment segment net
income was $302 million, down from $487 million in the previous
quarter and up from $189 million in the fourth quarter of 2005. The
results include ConocoPhillips' estimated weighted-average equity
share of OAO LUKOIL's (LUKOIL) income for the fourth quarter based on
market indicators and historical production trends for LUKOIL. The
company's equity ownership interest in LUKOIL at the end of the fourth
quarter was 20 percent of LUKOIL's 851 million authorized and issued
shares and 20.6 percent based on an estimated 826 million shares
outstanding.
The decrease in net income from the previous quarter primarily was
due to lower estimated commodity prices, partially offset by a net
benefit from alignment of the company's estimate of net income to
LUKOIL's reported results. The increase from the fourth quarter of
2005 primarily was due to ConocoPhillips' increased equity ownership,
higher estimated volumes, and a net benefit from alignment of the
company's estimate of net income to LUKOIL's reported results.
For the fourth quarter of 2006, ConocoPhillips estimated its
equity share of LUKOIL production was 438,000 BOE per day and its
share of LUKOIL daily refining crude oil throughput was 220,000
barrels per day.
Twelve-months financial results: Net income for 2006 increased to
$1,425 million, from $714 million in 2005. The increase primarily was
due to ConocoPhillips' increased equity ownership, higher estimated
prices and volumes, and a net benefit from alignment of the company's
estimate of net income to LUKOIL's reported results.
Chemicals
Fourth-quarter financial results: The Chemicals segment, which
includes the company's 50 percent interest in Chevron Phillips
Chemical Company LLC, reported net income of $98 million, compared
with $142 million in the third quarter of 2006 and $114 million in the
fourth quarter of 2005. The decrease from the third quarter primarily
was attributed to lower olefins and polyolefins margins and volumes
and a $16 million asset retirement, partially offset by an increased
business interruption insurance benefit. The decrease from the fourth
quarter of 2005 was largely due to lower olefins and polyolefins
margins and the asset retirement, partially offset by lower utility
costs and a business interruption insurance benefit.
Twelve-months financial results: Chemicals 2006 net income
increased to $492 million, compared with $323 million in 2005. The
increase primarily was due to higher olefins and polyolefins margins
and volumes, lower utility costs, and business interruption insurance
benefits.
Emerging Businesses
The Emerging Businesses segment had net income of $8 million in
the fourth quarter of 2006, compared with $11 million in the third
quarter of 2006 and a net loss of $5 million in the fourth quarter of
2005.
Corporate and Other
Fourth-quarter Corporate expenses, after tax, were $306 million,
compared with $301 million in the previous quarter and up from $165
million in the fourth quarter of 2005. The increase from the fourth
quarter of 2005 was largely attributed to higher interest expense due
to higher debt, partially offset by favorable foreign exchange
impacts.
Total debt at the end of the fourth quarter was $27.1 billion, a
reduction of $700 million from the end of the third quarter. The
company's debt-to-capital ratio was 24 percent, compared to 25 percent
at the end of the third quarter.
The company's fourth-quarter tax provision was 46.0 percent. This
is compared with 46.1 percent in the third quarter, excluding the
one-time impact of U.K. tax legislation enacted in the same period,
and 51.2 percent including this item.
Outlook
Mr. Mulva concluded:
"We achieved another year of strong financial results that allowed
us to provide value to our shareholders by selectively investing in
projects to deliver energy to consumers worldwide, reducing debt,
increasing dividends, and repurchasing our shares.
"We are pleased to start 2007 with the closing of the transaction
to create an integrated North American heavy oil business with EnCana.
Integration efforts are progressing well, in line with our
expectations.
"Having completed our LUKOIL share purchase, we look forward to
further strengthening our strategic relationship and continuing to
develop joint opportunities beneficial to both companies.
"Looking ahead to the first quarter, we anticipate the company's
E&P segment production to be lower than the fourth quarter. Increased
production from the upstream EnCana joint venture is expected to be
offset by the effect of U.S. and Canadian asset dispositions.
Continued improvement in production at Prudhoe Bay is expected to be
offset by downtime in the North Sea and the early fourth-quarter
completion of the recovery of underlifts in Libya. In addition, OPEC
production quota reductions impacting Venezuela and Libya are expected
to reduce first-quarter production. If the currently announced quotas
continue through the first quarter, we anticipate first-quarter
production will be negatively impacted by approximately 30,000 BOE per
day.
"In our downstream refining business, we expect crude oil capacity
utilization to be in the mid-90-percent range in the first quarter.
Our crude oil refining capacity as of January 1, 2007, is 2,729,000
barrels per day, down from 2,901,000 barrels per day, reflecting the
contribution of our Wood River and Borger refineries to the downstream
joint venture with EnCana. Turnaround costs are anticipated to be
approximately $60 million for the quarter.
"We recently announced a new $1 billion share repurchase program
and anticipate first-quarter 2007 share repurchases to be
approximately $750 million. The company expects to announce its total
share repurchase plan for 2007 before the end of the first quarter.
"Our asset rationalization efforts generated proceeds of
approximately $0.5 billion in 2006 and a further $1 billion this
month. The balance of our rationalization efforts remains on target.
"We look forward to updating the investment community on the
status of our financial and operating plans, as well as our continuing
asset rationalization efforts, at our March 14 meeting in New York."
ConocoPhillips is an integrated petroleum company with interests
around the world. Headquartered in Houston, the company had
approximately 38,400 employees, $165 billion of assets, and $184
billion of revenues as of December 31, 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," 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)