Exhibit 99.1
ConocoPhillips Reports First-Quarter Net Income
of $3.5 Billion or $2.12 Per Diluted Share
HOUSTON--(BUSINESS WIRE)--April 25, 2007--ConocoPhillips
(NYSE:COP):
Earnings at a glance
- ---------------------------------------------------------------------
First Quarter
- ---------------------------------------------------------------------
2007 2006
- ---------------------------------------------------------------------
Net income $3,546 million 3,291 million
- ---------------------------------------------------------------------
Diluted net income per share $2.12 2.34
- ---------------------------------------------------------------------
Revenues(1) $41.3 billion 46.9 billion
- ---------------------------------------------------------------------
(1) 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 first-quarter net income
of $3,546 million, or $2.12 per share. This compares with $3,291
million, or $2.34 per share, for the same quarter in 2006. Revenues
were $41.3 billion, versus $46.9 billion a year ago.
"Operating performance for the quarter was consistent with our
plans and we continued to progress the execution of our financial
strategy," said Jim Mulva, chairman and chief executive officer. "With
respect to our upstream operations, we produced 2.47 million BOE per
day, including an estimated 0.45 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.
"We continued to strengthen our financial position by lowering our
debt balance to $23.7 billion and improving our debt-to-capital ratio
to 22 percent. During the quarter, we funded $3 billion of our capital
program, reduced debt by $3.5 billion, repurchased $1 billion of
ConocoPhillips common stock, and paid $0.7 billion in dividends. This
was accomplished using $6.9 billion of cash generated from operations
and $1.3 billion in proceeds from asset dispositions."
First-quarter net income included a net benefit of $0.29 per share
associated with the company's asset disposition efforts.
The results for ConocoPhillips' business segments follow.
Exploration and Production (E&P)
First-quarter financial results: E&P net income was $2,329
million, up from $2,087 million in the fourth quarter of 2006 and down
from $2,553 million in the first quarter of 2006. The increase from
the previous quarter primarily was due to a $355 million net benefit
associated with first-quarter 2007 asset rationalization efforts,
lower asset impairments, and higher natural gas prices. The increased
net income was partially offset by lower sales volumes and crude oil
prices. The decrease from the first quarter of 2006 primarily was due
to lower commodity prices, higher taxes, and higher operating costs.
This decrease was partially offset by the current year net benefit
from asset rationalization efforts and higher volumes. The increase in
volumes reflected the inclusion of Burlington Resources' results,
partially offset by normal field decline and OPEC reductions.
Daily production from the E&P segment, including Canadian Syncrude
and excluding the LUKOIL Investment segment, averaged 2.02 million
barrels of oil equivalent (BOE) per day, a slight decline from 2.05
million BOE per day in the previous quarter and up from 1.61 million
BOE per day in the first quarter of 2006. Compared to the fourth
quarter of 2006, first-quarter 2007 production increased due to lower
unplanned downtime in Alaska and the U.K. North Sea and volumes from
the recently formed upstream business venture with EnCana. This
increase was more than offset by the effect of asset dispositions,
OPEC reductions in Venezuela and Libya, normal field decline,
completion of recovery of the company's underlift in Libya during the
previous quarter, and production sharing contract impacts.
The increase from the first quarter of 2006 primarily was due to
the addition of the Burlington Resources assets, Libya volumes and the
upstream business venture with EnCana. The increased production was
partially offset by normal field decline, production sharing contract
impacts, OPEC reductions, and the effect of asset dispositions.
Before-tax exploration expenses were $262 million in the first
quarter of 2007, versus $391 million in the previous quarter and $112
million in the first quarter of 2006.
Midstream
First-quarter financial results: The Midstream segment includes
the company's 50 percent interest in DCP Midstream, LLC. Midstream
first-quarter net income was $85 million, down from $89 million in the
previous quarter and $110 million in the first quarter of 2006. The
decrease from the previous quarter primarily was due to lower volumes,
partially offset by higher natural gas liquids prices. The decrease
from the first quarter of 2006 primarily was due to lower volumes and
natural gas liquids prices.
Refining and Marketing (R&M)
First-quarter financial results: R&M net income was $1,136 million
in the first quarter, up from $919 million in the previous quarter and
$390 million in the first quarter of 2006. Held-for-sale asset
impairments were $192 million in the previous quarter. In the first
quarter of 2007, previously reported held-for-sale asset impairments
were reduced to reflect asset values consistent with finalized sales
agreements. This resulted in a net benefit of $135 million in the
first quarter.
Operationally, first-quarter 2007 realized refining margins were
higher than the previous period. Although domestic WTI-based market
crack spreads improved significantly during the quarter, realized
margins only improved slightly. This primarily was due to narrowing
crude differentials, the periodic pricing of Brent and other crudes at
a premium to WTI during the quarter, and the company's refining
configuration. Internationally, the increase in market crack spreads
was offset by lower trading results. In addition, lower refining
volumes, largely due to fewer days in the quarter, and lower marketing
margins more than offset the benefit from higher realized refining
margins. The increase from the first quarter of 2006 primarily was due
to higher worldwide refining and marketing margins, higher worldwide
refining volumes, the first-quarter 2007 reduction in previously
reported impairments, and lower turnaround costs.
ConocoPhillips' crude oil refining capacity as of January 1, 2007,
was 2,729,000 barrels per day, down from 2,901,000 barrels per day at
year-end 2006, reflecting the contribution of the company's Wood River
(Roxana, Ill.) and Borger (Texas) refineries to the downstream
business venture with EnCana. The domestic refining crude oil capacity
utilization rate for the first quarter was 95 percent, compared with
96 percent in the previous quarter. The international crude oil
capacity utilization rate was 90 percent, compared with 87 percent in
the previous quarter.
Worldwide, R&M's refining crude oil capacity utilization rate of
94 percent remained unchanged from the previous quarter and was up
from 85 percent in the first quarter of 2006. The first-quarter 2006
rate was impacted by turnaround activity and unplanned downtime at a
number of the company's domestic refineries. Before-tax turnaround
costs were $75 million in the first quarter of 2007, versus $94
million in the previous quarter and $163 million in the first quarter
of 2006.
LUKOIL Investment
First-quarter financial results: LUKOIL Investment segment net
income was $256 million, down from $302 million in the previous
quarter and up from $249 million in the first quarter of 2006. The
results include ConocoPhillips' estimated equity share of OAO LUKOIL's
(LUKOIL) income for the first quarter based on market indicators and
historical production trends for LUKOIL. The company's equity
ownership interest in LUKOIL at the end of the first quarter was 20.6
percent based on an estimated 826 million shares outstanding.
The decrease in net income from the previous quarter primarily was
due to a fourth-quarter net benefit from alignment of the company's
estimate of net income and ownership interest to LUKOIL's reported
results, partially offset by estimated price and volume impacts. The
increase from the first quarter of 2006 primarily was due to higher
estimated volumes and ConocoPhillips' increased equity ownership,
partially offset by the net impact from the alignment of estimated net
income to LUKOIL's reported results and lower estimated commodity
prices.
For the first quarter of 2007, ConocoPhillips estimated its equity
share of LUKOIL production was 445,000 BOE per day and its share of
LUKOIL daily refining crude oil throughput was 219,000 barrels per
day.
Chemicals
First-quarter financial results: The Chemicals segment, which
includes the company's 50 percent interest in Chevron Phillips
Chemical Company LLC, reported net income of $82 million, down from
$98 million in the fourth quarter of 2006 and $149 million in the
first quarter of 2006. The decrease from the previous quarter
primarily was due to a business interruption insurance benefit
recognized in the fourth quarter of 2006, lower margins, and higher
turnaround costs. The decrease in net income was partially offset by a
fourth-quarter 2006 asset retirement expense that did not recur in the
first quarter. The decrease from the first quarter of 2006 was largely
due to lower olefins and polyolefins margins and a business
interruption insurance benefit recorded in the first quarter of 2006.
Emerging Businesses
The Emerging Businesses segment had a net loss of $1 million in
the first quarter of 2007, compared with net income of $8 million in
the previous quarter and net income of $8 million in the first quarter
of 2006. Results were impacted by lower power generation earnings
during the first quarter of 2007.
Corporate and Other
First-quarter Corporate expenses were $341 million, after tax, up
from $306 million in the previous quarter and $168 million in the
first quarter of 2006. The increase from the previous quarter was
largely attributable to a $14 million foreign exchange loss in the
first quarter of 2007, compared to a $61 million foreign exchange gain
in the fourth quarter of 2006 and a $14 million premium on the early
retirement of debt paid in the first quarter of 2007. The increase in
Corporate expenses was partially offset by lower net interest expense
and Burlington Resources acquisition-related charges. The increase
from the first quarter of 2006 primarily was due to higher net
interest expense, acquisition-related charges, and the premium paid on
the early retirement of debt.
Total debt at the end of the first quarter was $23.7 billion, a
reduction of $3.5 billion during the quarter. The company's
debt-to-capital ratio was 22 percent, compared to 24 percent at the
end of 2006.
ConocoPhillips' first-quarter effective tax rate was 41.5 percent.
This is compared with 46.0 percent in the fourth quarter of 2006. The
lower effective tax rate for the first quarter of 2007 was primarily
the result of the company's asset rationalizations.
Outlook
Mr. Mulva concluded:
"We achieved another quarter of strong financial results, and we
continue to build shareholder value through operating excellence and
project execution, capital discipline, debt reduction, and increased
share repurchases and dividends.
"We are continuing to advance our Canadian heavy oil projects with
the implementation of the business ventures with EnCana in the first
quarter and the ongoing development of Surmont Phase I. In our
downstream business, we continue to make progress on the capital
investments in the Wood River and Borger refineries.
"Consistent with our plans, we anticipate the company's
second-quarter E&P segment production to be lower due to scheduled
maintenance, normal seasonality in Alaska, our exit from Dubai and
asset dispositions.
"In our downstream refining business, we expect crude oil capacity
utilization to be in the mid-90-percent range in the second quarter.
Turnaround costs are anticipated to be approximately $60 million for
the quarter.
"ConocoPhillips recently announced its support for a mandatory
national framework to address greenhouse gas emissions and has joined
the U.S. Climate Action Partnership. The company also announced the
formation of a strategic alliance with Tyson Foods, Inc. to produce
and market the next generation of renewable diesel fuel. In addition,
ConocoPhillips established an eight-year, $22.5 million research
program at Iowa State University dedicated to developing technologies
that produce biorenewable fuels.
"Meeting the twin challenges of taking action on climate change
and providing adequate and reliable supplies of energy will require
technical innovation, resource commitments and responsible stewardship
by energy producers and consumers alike. ConocoPhillips intends to
meet these challenges."
ConocoPhillips is an integrated petroleum company with interests
around the world. Headquartered in Houston, the company had
approximately 38,700 employees, $173 billion of assets, and $165
billion of annualized revenues as of March 31, 2007. 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 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, Houston
Gary Russell, 212-207-1996 (investors)
or
Becky Johnson, 281-293-6743 (media)